Monsanto Company

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Monsanto Company

800 N. Lindbergh Blvd.
St. Louis, Missouri 63167
U.S.A.
(314) 694-1000
Fax: (314) 694-7571

Public Company
Incorporated: 1933 as Monsanto Chemical Company
Employees: 33,797
Sales: $7.8 billion
Stock Exchanges: New York Amsterdam Brussels Chicago Frankfurt Geneva London Paris Tokyo Zurich
SICs: 2821 Plastics Materials & Resins; 2834 Pharmaceutical Preparations; 3823 Process Control Instruments; 2833 Medicinals & Botanicals

Monsanto is one of the largest corporations and most important agrichemical concerns in the United States. Innovative products for the agricultural industry—such as bovine somatotropin (BST), used in milk production—as well as for consumer use— such as the fat substitute Simplesse and the artificial sweetener NutraSweet—have contributed to Monsanto’s profits and renown for research and development.

Monsanto traces its roots to John Francisco Queeny, a purchaser for a wholesale drug house at the turn of the century, who formed the Monsanto Chemical Works in St. Louis, Missouri, in order to produce the artificial sweetener saccharin. By 1905 John Queeny’s company was also producing caffeine and vanillin and was beginning to turn a profit. In 1908 Queeny felt confident enough about his firm’s future to leave his part-time job with another drug house to work full time as Monsanto’s president. The company continued to grow, with sales surpassing the $1 million mark for the first time in 1915.

While prior to World War I America relied heavily on foreign supplies of chemicals, the increasing likelihood of U.S. intervention meant that the country would soon need its own domestic producer of chemicals. Looking back on the significance of the war for Monsanto, Queeny’s son Edgar remarked, ‘There was no choice other than to improvise, to invent and to find new ways of doing all the old things. The old dependence on Europe was, almost overnight, a thing of the past.” Monsanto was forced to rely on its own knowledge and nascent technical ability. Among other problems, Monsanto researchers discovered that pages describing German chemical processes had been ripped out of library books. Monsanto developed several strategic products, including phenol as an antiseptic, in addition to acetylsalicyclic acid, or aspirin.

With the purchase of an Illinois acid company in 1918, Monsanto began to widen the scope of its factory operations. A postwar depression during the early 1920s affected profits, but by the time John Queeny turned over the company to Edgar in 1928 the financial situation was much brighter. Monsanto had gone public, a move that paved the way for future expansion. At this time, the company had 55 shareholders and 1,000 employees and owned a small company in Britain.

Under Edgar’s direction Monsanto, now the Monsanto Chemical Company, began to substantially expand and enter into an era of prolonged growth. Acquisitions expanded Monsanto’s product line to include the new field of plastics and the manufacture of phosphorus.

By the time the United States entered World War II in 1941, the domestic chemical industry had attained far greater independence from Europe. Monsanto, strengthened by its several acquisitions, was also prepared to produce such strategic materials as phosphates and inorganic chemicals. Most important was the company’s acquisition of a research and development laboratory called Thomas and Hochwalt. The well-known Dayton, Ohio, firm strengthened Monsanto at the time and provided the basis for some of its future achievements in chemical technology. One of its most important discoveries was styrene monomer, a key ingredient in synthetic rubber and a crucial product for the armed forces during the war.

Largely unknown by the public, Monsanto experienced difficulties in attempting to market consumer goods. However, attempts to refine a low quality detergent led to developments in grass fertilizer, an important consumer product since the postwar housing boom had created a strong market of homeowners eager to perfect their lawns.

In the mid-1950s Monsanto began to produce urethane foam, which was flexible and easy to use; it later became crucial in making automobile interiors. In 1955 Monsanto acquired Lion Oil, increasing its assets by more than 50 percent. Stockholders during this time numbered 43,000.

Having finally outgrown its headquarters in downtown St. Louis, Monsanto moved to the suburban community of Creve Coeur in 1957. Three years later Edgar Queeny turned over the chair of Monsanto to Charles Thomas, one of the founders of the research and development laboratory so important to Monsanto. Charlie Sommer, who had joined the company in 1929, became president. Under their combined leadership Monsanto saw several important developments, including the establishment of the Agricultural Chemicals division, created to consolidate Monsanto’s diverse agrichemical product lines. Monsanto’s European expansion continued, with Brussels becoming the permanent overseas headquarters in 1962.

In 1964 Monsanto changed its name to Monsanto Company in acknowledgment of its diverse product line. The company consisted of eight divisions, including petroleum, fibers, building materials, and packaging.

According to Monsanto historian Dan Forrestal, “Leadership during the 1960s and early 1970s came principally from … executives whose Monsanto roots ran deep.” In 1964 Edward O’Neal became chairperson. O’Neal, who had come to Monsanto in 1935 with the acquisition of the Swann Corporation, was the first chair in company history who had not first held the post of president. Another company leader was Edward J. Bock, who had joined Monsanto in 1941 as an engineer. He rose through the ranks to become a member of the board of directors in 1965 and president in 1968. Edgar Queeny, who left no heirs, died in 1968.

Although Bock had a reputation for being a committed company executive, several factors contributed to his volatile term as president. High overhead costs and a sluggish national economy led to a dramatic 29 percent decrease in earnings in 1969. Sales were up the following year, but Bock’s implementation of the 1971 reorganization caused a significant amount of friction among members of the board and senior management. In spite of the fact that this move, in which Monsanto separated the management of raw materials from the company’s subsidiaries, was widely praised by security analysts, Bock resigned from the presidency in February 1972. After a nine month search, John W. Hanley, a former executive with Procter and Gamble, was chosen as president. Hanley also took over as chairperson in 1975.

Under Hanley, Monsanto more than doubled its sales and earnings between 1972 and 1983. Toward the end of his tenure, Hanley put into effect a promise he had made to himself and to Monsanto when he accepted the position of president, namely, that his successor would be chosen from Monsanto’s ranks. Hanley and his staff chose approximately 20 young executives as potential company leaders and began preparing them for the head position at Monsanto. Among them was Richard J. Mahoney. When Hanley joined Monsanto, Mahoney was a young sales director in agricultural products. In 1983 Hanley turned the leadership of the company over to Mahoney. Wall Street immediately approved this decision with an increase in Monsanto’s share prices.

During this time, public concern over the environment began to escalate. Ralph Nader’s activities and Rachel Carson’s book Silent Spring had been influential in increasing the U.S. public’s awareness of activities within the chemical industry in the 1960s, and Monsanto had responded in several ways to the pressure. In 1964 the company introduced biodegradable detergents, and in 1976, Monsanto announced plans to phase out production of polychlorinated biphenyl (PCB).

In 1979 a lawsuit was filed against Monsanto and other manufacturers of agent orange, a defoliant used during the Vietnam War. Agent orange contained a highly toxic chemical known as dioxin, and the suit claimed that hundreds of veterans had suffered permanent damage because of the chemical. In 1984 Monsanto and seven other manufacturers agreed to a $180 million settlement just before the trial began. With the announcement of a settlement Monsanto’s share price, depressed because of the uncertainty over the outcome of the trial, rose substantially.

Also in 1984, Monsanto lost a $10 million antitrust suit to Spray-Rite, a former distributor of Monsanto agricultural herbicides. The U.S. Supreme Court upheld the suit and award, finding that Monsanto had acted to fix retail prices with other herbicide manufacturers.

In August 1985, Monsanto purchased G. D. Searle, the “Nutra-Sweet” firm. NutraSweet, an artificial sweetener, had generated $700 million in sales that year, and Searle could offer Monsanto an experienced marketing and a sales staff as well as real profit potential. Since the late 1970s the company had sold nearly 60 low margin businesses and, with two important agriculture product patents expiring in 1988, a major new cash source was more than welcome. What Monsanto didn’t count on, however, was the controversy surrounding Searle’s intrauterine birth control device called the Copper-7.

Soon after the acquisition, disclosures about hundreds of lawsuits over Searle’s IUD surfaced and turned Monsanto’s takeover into a public relations disaster. The disclosures, which inevitably led to comparisons with those about A. H. Robins, the Dalkan Shield manufacturer that eventually declared Chapter 11 bankruptcy, raised questions as to how carefully Monsanto management had considered the acquisition. In early 1986 Searle discontinued IUD sales in the United States. By 1988 Monsanto’s new subsidiary faced an estimated 500 lawsuits against the Copper-7 IUD. As the parent company, Monsanto was well insulated from its subsidiary’s liabilities by the legal “corporate veil.”

As Monsanto entered the 1990s, it faced continued challenges from a variety of sources, including government and public concern over hazardous wastes, fuel and feedstock costs, and import competition. At the end of the 99th Congress, then-President Ronald Reagan signed a $8.5 billion, five-year cleanup superfund reauthorization act. Built into the financing was a surcharge on the chemical industry created through the tax reform bill. Biotechnology regulations were just being formulated, and Monsanto, which already had types of genetically engineered bacteria ready for testing, was poised to be an active participant in that field.

In keeping with its strategy to become a leader in the health field, Monsanto and the Washington University Medical School entered into a five-year research contract in 1984. Two-thirds of the research was to be directed into areas with obviously commercial applications, while one-third of the research was to be devoted to theoretical work. One particularly promising discovery involved the application of the bovine growth factor, a way to greatly increase milk production.

In the burgeoning low-calorie sweetener market, challengers to NutraSweet were putting pressure on Monsanto. Pfizer Inc., a pharmaceutical company, was preparing to market its product, called alitame, which it claimed was far sweeter than NutraSweet and better suited for baking.

In an interview with Business Week, senior vice-president for research and development Howard Schneiderman commented, “To maintain our markets—and not become another steel industry—we must spend on research and development.” Monsanto, which has committed eight percent of its operating budget to research and development, far above the industry average, may emerge in the 1990s as one of the leaders in the fields of biotechnology and Pharmaceuticals that are only now emerging from their nascent stage.

By the end of the 1980s, Monsanto had restructured itself and become a producer of specialty chemicals, with a focus on biotechnology products. Monsanto enjoyed consecutive record years in 1988 and 1989—sales were $8.3 billion and $8.7 billion, respectively. In 1988 the Food and Drug Administration approved Cytotec, a drug that prevents gastric ulcers in high-risk cases. Sales of Cytotec in the United States reached $39 million in 1989.

The Monsanto Chemical Co. unit prospered with products like Saflex, a type of nylon carpet fiber. The NutraSweet Company held its own in 1989, contributing $180 million in earnings, with growth in the carbonated beverage segment. Almost 500 new products containing NutraSweet were introduced in 1989, for a total of 3,000 products.

Monsanto continued to invest heavily in research and development, with seven percent of sales allotted for this area. The investment began to pay off when the research and development department developed an all-natural fat substitute called Simplesse. The FDA declared in early 1990 that the product was “generally recognized as safe” for use in frozen desserts. That year, the NutraSweet Company introduced Simple Pleasures frozen dairy dessert. Monsanto hoped to see Simplesse used eventually in salad dressings, yogurt, and mayonnaise.

Despite these successes, Monsanto remained frustrated by delays in obtaining FDA approval for bovine somatotropin (BST), a chemical used to increase milk production in cows. Opponents to BST said it would upset the balance of supply and demand for milk, but Monsanto countered that BST would provide high-quality food supplies to consumers worldwide.

The final year of the 1980s also marked Monsanto’s listing for the first time on the Tokyo Stock Exchange. Monsanto officials expected the listing to improve opportunities for licensing and joint venture agreements.

Monsanto had expected to celebrate 1990 as its fifth consecutive year of increased earnings, but numerous factors—the increased price of oil due to the Persian Gulf War, a recession in key industries in the United States, and droughts in California and Europe—prevented the company from achieving this goal. Net income was $546 million, a dramatic drop from the record of $679 the previous year. Nonetheless, Searle, which had caused considerable public relations scandals and headaches in the 1980s, had a record financial year in 1990. The subsidiary had established itself in the global pharmaceutical market and was beginning to emerge as an industry leader. The Monsanto Chemical Co., meanwhile, was a $4 billion business that made up the largest percentage of Monsanto’s sales.

Monsanto continued to work at upholding ‘The Monsanto Pledge,” a 1988 declaration to reduce emissions of toxic substances. By its own estimates, the company devoted $285 million annually to environmental expenditures. Furthermore, Monsanto and the Environmental Protection Agency agreed to a cleanup program at the company’s detergent and phosphate plant in Richmond County, Georgia.

The company restructured during the early 1990s to help cut losses during a difficult economic time. Net income in 1991 was only $296 million, $250 million less than the previous year. Despite this showing, 1991 was a good year for some of Monsanto’s newest products. Bovine somatotropin finally gained FDA approval and was sold in Mexico and Brazil, and Monsanto received the go-ahead to use the fat substitute, Simplesse, in a full range of food products, including yogurt, cheese and cheese spreads, and other low-fat spreads. In addition, the herbicide Dimension was approved in 1991, and scientists at Monsanto tested genetically improved plants in field trials.

Furthermore, Monsanto expanded internationally, opening an office in Shanghai and a plant in Beijing, China. The company also hoped to expand in Thailand, and entered into a joint venture in Japan with Mitsubishi Chemical Co.

Monsanto’s sales in 1992 hit $7.8 million. However, as net income dropped 130 percent from 1991 due to several one-time aftertax charges, the company prepared itself for challenging times. The patent on NutraSweet brand sweetener expired in 1992, and in preparation for increased competition, Monsanto launched new products, such as the NutraSweet Spoonful, which came in tabletop serving jars, like sugar. The company also devoted ongoing research and development to Sweetener 2000, a high-intensity product.

In 1992, Monsanto denied that it planned to sell G. D. Searle and Co., pointing out that Searle was a profitable subsidiary that launched many new products. However, to decrease losses, Monsanto did sell Fisher Controls International Inc., a subsidiary that manufactures process control equipment. Profits from the sale were used to buy the Ortho lawn-and-garden business from Chevron Chemical Co.

In the 1990s, Monsanto expected to see growth in its agricultural, chemical, and biotechnological divisions. In 1993, Monsanto and NTGargiulo joined forces to produce a genetically-altered tomato. The companies expected that the new tomato would be on the market in three to five years.

Principal Subsidiaries

Bolgen NV Collagen Corp.; Monsanto PLC; Monsanto Canada Inc.; Monsanto Electronic Materials Co.; Monsanto Enviro-Chem Systems Inc.; Monsanto Europe S.A.; Monsanto International Sales Co., Inc.; Monsanto Oil Co.; Monsanto (Suisse) S.A.; Nutra Sweet Co.; Ortho Chemical Co.; Polyamide Intermediaries Ltd. (50%); RDI Inc.; G. D. Searle &Co.