These past few months, many people that regularly follow the agricultural marketplace have been preoccupied with the numerous merger proposals being considered. If these go through, the crop protection products industry will be reduced to a handful of dominant players.
However, at least a few of these deals are reportedly already in jeopardy because regulators around the globe are seemingly reluctant to approve them (Dow-DuPont and Bayer-Monsanto). This has many folks asking a simple question: Will they ultimately happen? Perhaps an answer of sorts lies in the past, specifically what took place in the soft drink business in the mid-1980s.
At that time, the soft drink business landscape was dominated by two players — Coca-Cola and Pepsi, along with myriad brands spread across multiple product segments. With new market growth becoming harder to come by, both companies turned their attentions to expanding market share by buying up smaller, single “Big Brand” players. In short order, Pepsi sought to buy The 7UP Co., the No. 4 soft drink manufacturer at the time. Within a few weeks of this proposed merger, Coke agreed to acquire the Dr Pepper Co., which held the No. 3 slot among soft drink makers. If approved, each merger would have effectively created a very “top-heavy” marketplace, with the newly merged Pepsi/7UP and Coke/Dr Pepper controlling approximately 87% of the entire soft drink marketplace. Other smaller players with single best-selling brands such as Royal Crown Cola, Canada Dry, and A&W would have been left with single-digit market shares at best.
For a time, it looked as if even with the market share numbers now heavily favoring only two companies, the proposed mergers would come about. However, in the end, members of the Federal Trade Commission (FTC) stepped in and nixed both deals.
What happened next is why I bring up this example. After being jilted at the altar, so to speak, 7UP and Dr Pepper went to a “Plan B” and decided to join forces to create a brand new, and stronger, No. 3 soft drink maker. Over the next few years, the other large players such as A&W and Canada Dry eventually became part of this new entity, all with the FTC’s blessings. Today, Dr Pepper Snapple Group (yes, the company even purchased this once hot brand in the late 1990s) is a stable No. 3 behind Coke and Pepsi.
If the current “Plan As” for both Dow-DuPont and Bayer-Monsanto end up being rejected by regulators, could we see different sets of crop protection product manufacturers angling to merge instead? Many market watchers have already wondered when the large crop protection companies not currently being mentioned in any merger discussions (such as FMC and BASF) might step up. If some new “Plan Bs” materialize, perhaps the answer to this question is one simple word: Soon.