The news Syngenta was welcoming a $43 billion acquisition by ChemChina caused more of a gentle ripple than a tsunami around our industry. Superintendents, long used to consolidation and mergers, kind of shrugged and resigned themselves to taking a wait-and-see approach.
That said, the company’s business partners (like distributors, vendors, associations and media folks like us at GIE Media) were probably far more alarmed. I’ll return to that in a bit.
The deal is in “quiet time,” so nobody is saying much, but here’s what I think:
There’s little doubt the company will continue to be a first-class supplier of plant protection products. I’m convinced they will maintain their current level of customer support as long as that investment is rewarded. I think the Chinese will – as always – take the long view on this rather than clamoring for short-term profits and cutting costs to the bone. Remember, a big part of the attraction for them was getting the Syngenta ag technology and intellectual property they need to feed 1.4 billion people. This seems less about Wall Street shenanigans and more about the agricultural viability of the largest nation on the planet.
There’s not much risk of enormous consolidation of sales forces and management as is often the disastrous case when two competing companies combine. As far as anyone knows, they aren’t even going to change the name or the logo. ChemChina bought Pirelli Tire last year in a similar move to have a quality global brand to supplement their domestic tire brands. Pirelli hasn’t changed much thus far, according to reports. Finally, compared to the complexities they would have faced integrating with Monsanto, this is a walk in the park.
By the way, I’ve heard a few folks float the idea that the ChemChina leadership might walk away from the golf market because it’s a decadent western thing and the Communists don’t like it. That’s hilarious! About half of the Chinese economy is devoted to selling decadent things to Americans. They could eventually spin the specialty division off, but it won’t be on political grounds.
Assuming the deal goes through – and all indications are it will – it’s likely the standard post-merger mantra of “business as usual” will actually be true for the immediate future.
This is good because it gives us pause to consider what could have happened.
At the national level, about 30 leading suppliers pay for 75 percent of the stuff we enjoy. What stuff, you ask? They sponsor the education. They keep experts in the field to solve problems. They contribute to the vast majority of turf research in one shape or form. They buy trade show space they don’t even necessarily want to support national and local associations. They buy ads in GCI and GCM. They underwrite local events through support for distributors. They write a lot of checks to support you, their customers.
I can tell you with great certainty they’re not writing as many of those checks as they used to. Marketing dollars are shrinking because sales in the golf market are relatively stagnant, costs go up and they still need to make a profit. The result is smaller trade shows, fewer big events, thinner magazines and tighter budgets at the chapter level. And consider that many of our biggest brands are tied to agriculture, which is currently in a slump due to historically low corn prices. When the giant ag business sneezes, the tiny turf segment catches a cold and spending gets even tighter.
Few, if any, companies do more to support superintendents than Syngenta. They were named the most trusted and most admired chemical company in our 2011 “Ranking the Industry” report (they were second overall industrywide behind Toro) and I doubt their reputation has diminished in the intervening years. If anything, they’ve added products and resources via the DuPont deal a few years ago and made additional hires on their science team. This despite the fact a good chunk of the value of the turf fungicide market went away because of post-patent competition in the past decade.
Remember when George Bailey ponders suicide in “It’s a Wonderful Life” and Clarence shows him what life in Bedford Falls would have been like without him? Imagine life in our world without committed companies who invest in all of us.
And, speaking of movie analogies, almost a decade ago, I wrote a column called “Hello! McFly!” (bit.ly/1OTu9qv) that was meant to remind us that good companies continue to invest because they feel confident discerning supers will return the favor by buying their stuff. That hasn’t changed one iota. In fact, in the smaller, smarter golf market of the future, great supply and distribution partners may be the most important ingredient in your formula for success.