Seminis, Inc.

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Seminis, Inc.

1905 Lirio Avenue
Saticoy, California 93004-4206
U.S.A.
(805) 647-1572
(800) 927-4769
Fax: (805) 647-8963
Web site: http://www.seminis.com

68% Owned Subsidiary of Savia S.A. de C.V.
Incorporated: 1995
Employees: 3,000
Sales: $428.42 million (1998)
Stock Exchanges: NASDAQ
Ticker Symbol: SMNS
NAIC: 115114 Postharvest Crop Activities (Except Cotton Ginning); 54171 Research & Development in the Physical, Engineering & Life Sciences

Seminis, Inc. is the world’s largest producer of vegetable and fruit seeds, best known under the brand names of Asgrow, Petoseed, and Royal Sluis. The California-based company develops vegetable and fruit hybrids and varieties with desirable traits that result in advantages such as higher crop yields, superior disease resistance, and tolerance to environmental stress. The company also maintains biotechnology research laboratories, principally in California, France, and the Netherlands, in which it reinvests some 12 percent of the money generated by sales. Seminis is 68 percent-owned by the Mexican agricultural leader Savia S.A. de C.V., formerly known as Empresas La Moderna or ELM. The remaining stock was made public on the NASDAQ exchange in June 1999.

Seminis’s Predecessor Companies

Seminis was founded in 1995 by the merger of Asgrow Seed Co. with Petoseed Co. Inc. and Royal Sluis. Asgrow had been acquired by Empresas La Moderna from the Upjohn Co. the previous year, a purchase that consisted of a product line of more than 16 major species of vegetable seeds, principally peas, beans, processing tomatoes, cucumbers, and lettuce seeds, and agronomic (field crop) seeds for corn, soybeans, sorghum, sunflowers, and other varieties. Asgrow had revenues of $306 million in 1994.

The business that developed into Asgrow was founded as the Everett B. Clark Seed Co. in 1856 on a half acre in Orange, Connecticut. In 1927 Arthur B. Clark, the founder’s son, merged the company with two others to form Associated Seed Growers, Inc. for the development, production, and wholesale distribution of vegetable seed in the United States. In 1956, when it celebrated its centennial, the company had its headquarters in New Haven, Connecticut, and its eastern breeding station in Orange, but 90 percent of its output was being grown west of the Rocky Mountains, mainly in California and southern Idaho. Associated Seed had six other breeder stations and, with four million acres planted each year, was the largest breeder and grower of vegetable seed in the world. Its biggest customers were vegetable freezers and canners.

Commonly called Asgrow, Associated Seed officially took as its name Asgrow Seed Co. in 1959. By 1962 it was operating 28 retail farm-supply stores in the United States and had subsidiaries in Argentina, Canada, Germany, Italy, and Mexico. Asgrow’s research, which since 1870 had resulted in more than 300 new strains of vegetables, had as its focal point a research center in Twin Falls, Idaho. In 1965 (the fiscal year ended June 30, 1965) agricultural chemicals and lawn- and garden-care products were almost as important to Asgrow as seeds, accounting for 45 percent of the company’s record revenues of $24.4 million. The company was sold to Upjohn in 1968. In 1967, its last full year as an independent company, Asgrow had net sales of $27.5 million and net income of $1 million.

Asgrow, at the time of its acquisition by ELM, had about 1,100 employees around the world and was producing and marketing more than 600 varieties of more than 20 different species of crops. It had 23 agronomic research stations and 14 vegetable research facilities, including 23 in the United States and other Latin American and European nations. Of its $306 million in annual sales, 68 percent was derived from North America and 24 percent from Europe.

In October 1995 ELM also purchased the Petoseed and Royal Sluis brands from Chicago-based George J. Ball Inc. in a stock exchange valued at $320 million. ELM took ownership of 60 percent of the new company, called Seminis, with an option to increase its share over the next few years. ELM raised its stake in Seminis in January 1998 to 92 percent.

Seminis based itself at Petoseed’s headquarters in Saticoy, California. Petroseed had originated from the partnership of Howard Peto and Vic Hollar, who bought a Colorado company, R.H. James Seed Co., in 1950. They renamed the business PetoHollar and opened a unit in Ventura, California, for the production of tomato seeds. This partnership was dissolved in 1953, and the California branch became Petoseed. Head offices were established in Saticoy in 1958.

At this time much of the basic research into new vegetable hybrids was being performed at universities with government money, but federal budget cuts subsequently opened up an opportunity for private companies such as Petoseed, which developed tomatoes, peppers, squash, and onions with such desirable traits as resistance to disease and insects. It became the world’s leading tomato seed company and in 1995 was producing more than 20 major species of vegetable seeds, including peppers, onions, tomatoes, melons, cauliflower, and cucumbers, in about 110 countries. Its research facilities, stretching from Chile to as far east as Thailand, were designing hybrid vegetables with each country’s climate and diet in mind.

Royal Sluis, a financially troubled Dutch company founded in 1870, had been acquired by George J. Ball in July 1994. Royal Sluis accounted for nearly half of Petoseed’s revenues of $229.6 million in 1995.

Focusing on Genetic Engineering in the 1990s

The combined company ranked itself among the leading vegetable and agronomic seed producers in the world, with 22 percent of the global market, annual revenues of $535 million, and 1,500 employees. In vegetable seed, Seminis claimed to be number one. Among its holdings was the world’s largest privately held collection of vegetable and fruit germplasms. Approximately 63 percent of Seminis’s sales in 1995 were from vegetable seeds, with the balance agronomic. About one-half of its seed sales were in Canada, Mexico, and the United States, and about 45 percent in Europe. The company was providing commercial growers and food processors with an extensive selection of proprietary hybrid seeds capable of growing under different climate and soil conditions and meeting the individual needs of its customers around the world.

The company was, in 1996, employing genetic engineering in tomatoes, peppers, melons, cucumbers, carrots, and other crops. That year Seminis Vegetable Seeds Inc., a wholly owned subsidiary, established research headquarters at Petoseed’s Woodland, California, research site. This subsidiary was coordinating research by 500 employees at 36 stations around the world and marketing five seed brands in 110 countries.

In its first year of operation, Seminis (through the vegetable-seeds subsidiary) marketed its first genetically engineered product, a tomato used in sauces, pastes, and other processed products. Developed by researchers of Petoseed, Zeneca Plant Science of London (a unit of British chemicals giant Zeneca Group PLC), and England’s University of Nottingham, this tomato had been genetically modified to maintain its natural pectin level as it ripened, reducing spoilage after harvesting. Processed products from this new tomato variety became available in United Kingdom supermarkets in 1996. The tomatoes, grown and processed in Mexico and the United States, had received U.S. Department of Agriculture approval.

Seminis, through ELM, formed a partnership with Monsanto Co. in 1996 that enabled it to acquire access to Monsanto’s patented genetic technology and gene library in order to create a broad range of disease- and insect-resistant and otherwise enhanced fruits and vegetables. The agreement gave ELM and its Seminis subsidiaries access to all Monsanto’s genes at no initial cost, with revenues derived from commercialized products to be shared with Monsanto. Ed Green, Seminis Vegetable’s director of plant biotechnology, told Leo Smith of the Los Angeles Times, “This radically improves the ability of SVS to develop and commercialize new products.... Monsanto has done a good job developing a number of new traits in biotechnology—like insect resistance, herbicide resistance, increased sugar and others—which are going to be easy for us to test and move into products.”

In January 1997 Monsanto acquired Asgrow Agronomics, Seminis’s less-profitable corn- and soybean-seed division based in Michigan, for $240 million. Seminis was now focused solely on vegetable and fruit seeds. Excluding the agronomic business sold to Monsanto, Seminis had sales of $385 million in 1996, with Europe representing 43 percent and North America 36 percent. Its sales slumped to $383 million in 1997 but advanced to $428.4 million in 1998 (the fiscal year ended September 30, 1998). Operating income dropped from $64 million in 1996 to $47 million in 1997. In 1998 Monsanto sold the vegetable-seed division of Agroceres, a Brazilian company, to Seminis Vegetable Seeds, which thereby gained three seed production units, two research stations, and 160 employees. In order to accommodate its increased staff, Seminis Vegetable Seeds, in 1997, purchased a 32-acre parcel in an Oxnard, California, business park. It was planning to build a 300,000-square-foot facility on the site for its corporate office and its Saticoy processing and distribution facility.

The Late 1990s and Beyond

Seminis, as of 1997, oversaw the Asgrow and Petoseed/Royal Sluis businesses, as well as its own distinct operations. Asgrow’s principal markets were in North America and Europe, targeting commercial fresh-market vegetable producers and commercial vegetable food processors. Petoseed/Royal Sluis had its own research and development stations in the United States, the Netherlands, and France, its own subsidiaries and joint ventures, and its own networks of independent dealers and commercial food processors. The Asgrow, Petoseed, and Royal Sluis brands had separate breeding, product development, marketing, and sales teams. The Seminis brands—principally Bruinsma and Genecorp—also had these separate teams for operation on a regional or specialized basis.

In all, Seminis was maintaining 39 research and development centers in 1997, of which 20 were in the Americas, 17 in Europe, and Africa, and two in Asia. Significant programs were being maintained for more than 20 major vegetable species, yielding over 1,300 different varieties, plus ten minor species. Seminis’ breeding strategy was to create fruit and vegetable hybrids and varieties that were economic to produce, had high field and marketable yields, possessed superior disease resistance, environmental tolerance and nutritional traits, and had superior external appearance and processing characteristics. New product introduction generated 24 percent of total sales in 1997.

Seminis’s biotechnology programs, principally in laboratories in California, the Netherlands, and France, conducted DNA research to examine the organization and functions of plant genes in order to enable researchers to clone these genes for their reintroduction into germplasm that would be transformed into viable plants for breeding. At plant-pathology laboratories in the United States, France, Italy, the Netherlands, and Spain, Seminis scientists were targeting more than 90 different diseases that had the greatest impact on commercial vegetable production. As a result, the company was leading its industry with the widest range of disease-resistant hybrids requiring reduced or no chemical applications.

Seminis ensured distribution of quality products throughout the world by maintaining production capabilities for each variety in two locations in each hemisphere. This enabled the company to capitalize on low labor costs in certain locations by producing labor-intensive products in those areas. In the United States, seeds were being produced in Arizona, California, Idaho, Oregon, and Washington through contract production. Internationally, seeds were being produced through subsidiaries in Chile, China, France, Guatemala, Hungary, Russia, South Africa, and Thailand, and through exclusive agents using Seminis technology in Australia, Denmark, India, the Netherlands, New Zealand, and Tanzania. The four biggest production facilities were (in order of size) in Warden, Washington; Filer, Idaho; Erkhuizen, the Netherlands; and Nampa, Idaho.

Seminis marketed its five major brands worldwide both directly and through dealers. Its North American sales were mainly in the Asgrow and Petoseed brands, with Asgrow sold both directly and through dealers and Petoseed primarily through dealers. Royal Sluis was the company’s dominant brand in northern Europe. All three were strong brands in southern Europe. Petoseed was the top brand in the dealer-oriented Middle East.

Asgrow and Petoseed also had strong sales in South America, where Seminis used both the direct and dealer approach. Bruinsma was sold primarily in northern Europe and the Middle East, and Genecorp was sold in the United States.

Seminis maintained, in 1997, a market share of 42 percent in South America, 38 percent in North America, and 22 percent in Europe. In the United States, it was supplying the seeds producing more than 40 percent of the commercial fruits and vegetables grown.

In 1999, ELM, now known as Savia following a merger with financial services company Segcoam, spun off a large portion of Seminis in a public stock offering in which 13 million shares were offered on the NASDAQ exchange for $15 per share. The proceeds Savia garnered were used to help pay down its own liabilities which had grown considerably following aggressive acquisitions. With a presence in more than 120 countries, Seminis was becoming an increasingly international operation as it moved into a new century.