12. When Bayer Met Microsoft
How to make sense of the recently announced Bayer<>MIcrosoft partnership from India and other large smallholder farming countries' context?
Few weeks ago, Bayer announced their strategic partnership with Microsoft to “optimize and advance digital capabilities” across food, feed, fuel, fiber value chains.
This partnership isn’t the stuff of destined-to-happen romcom kinds we see in movies like Harry Met Sally. As I had poetically argued in greater depth earlier, drawing parallels of corporate partnerships with rom-com movies, you could say that this is indeed the case, if you are talking of Bayer’s Partnership with Agrostar, which recently raised $70 Million.
In the case of Microsoft, we are talking of a partnership that is more of the well-established “Let’s see where this goes” Brangelina kind. I mean, before they went on their own ways.
Although I am half-serious, I am not being flippant here to simply jazz up and add “colour” (as one reader quipped in a long, heartwarming anonymous feedback) to mundane agritech partnership developments.
We are living in the era of Studio Agriculture where full stackers inside agriculture and outside agriculture (Hello Farmbeats!) are building digital infrastructure to mobilize large numbers of participants in agriculture value chains to change the prevailing dynamics and structures of the agricultural markets.
To use a boxing metaphor: Now is the perfect time for agritech players, big or small, to punch above their weight category.
When I look at the ascent of Pinduoduo in China, the audacious vision
execution of IDEA ecosystem in India, and strategic partnerships like this, I am reminded of Hollywood in its golden age during the 1920s and 30s.
“The studio era was a period of vertical integration and control of the industry by a few large studios, such as Fox, MGM, Paramount, and Warner Brothers. These were comprehensive, end-to-end production entities. On one end, they signed on actors and writers via long-term contracts decoupled from specific projects, and on the other end, they controlled distribution.” - Venkatesh Rao
Replace Fox, MGM, Paramount, Warner Brothers with Bayer, Cargill, Pinduoduo, Corteva and reread the paragraph above with necessary contextualization. You will understand the scale and importance of the Bayer-Microsoft partnership in times like these when agriculture is in the nick of transformation.
My agritech analyst colleagues Rhishi and Shane did an excellent job covering this partnership from a technological angle (tools vs application) and agri-input manufacturer angle respectively.
I found Shane’s analysis particularly very interesting, for it throws more light into Bayer’s side of the partnership. Drawing inferences from an earlier investor presentation in October, we draw interesting insights about Bayer’s foray into the world of digital agriculture platforms.
Bayer has realized over time that farmer-driven subscription models are not working well for them, and therefore, they have been focusing on three value streams:
‘Sell More of their Portfolio’ through disintermediation and transparency in data through platforms like Climate Field View.
Catalyze New Business Models (Carbon Marketplaces, Sustainability) through Digital Ag Platforms.
Elaborating the Partnership model, Liam Condon, CEO, Crop Science division, Bayer, shared the following:
“A third value stream is ultimately going to be – we have a partnership model. We have over 70 partner companies, and depending on services provided to the grower, we can also take a portion of the value that we help create on the farm. That’s the part of the model that I would say is probably least developed today, but the potential is there.”
The partnership model makes much more sense, given what they have written in their press release, outlining Bayer-Microsoft collaboration.
I want you to pay attention to this paragraph if you know to read between the lines.