In an exclusive interview Cargill's new CEO, David MacLennan, outlines his plans to make the world's biggest agribusiness bigger. Not that it needs help
If David MacLennan were CEO of any company but Cargill, he’d be in trouble right now. Since taking over the top job last December, earnings are down 22 percent to $1.2 billion over his first three quarters. His aggressive plan to build a $370 million new chicken-processing plant in China has been a bust, running directly into an avian flu scare and heightened competition. And the company has become entangled in the global hysteria over the safety of genetically modified foods, losing more than $90 million when Chinese officials started rejecting Cargill’s shipments of corn containing a yet-to-be-approved GMO.
Yet when MacLennan, 55, decked out in a crisp checked suit with no tie, leans forward on a conference table at Cargill’s headquarters 20 minutes outside of Minneapolis, he’s not justifying his existence but laying out opportunities, which include a new $100 million cocoa plant in Indonesia, a $91 million livestock feed factory in Korea and a dairy feed mill in India, the doubling of a food innovation hub near headquarters and the $10 million face-lift of its European equivalent. All in all, Cargill has poured more than $3 billion into upgraded facilities, acquisitions and new projects around the world over the last year.
At one level that’s pocket change for Cargill, the $135 billion (fiscal year 2014 sales) family-owned food behemoth that dominates all roads between the world’s farms and your dinner plate. But it is important, insists MacLennan. Since the company was founded in 1865, the core of its business has always been trading commodities—buying, storing, shipping and selling the crops farmers grow around the world. In 1998 Cargill assured its dominance at the heart of the global food market by acquiring the grain storage and transportation assets of competitor Continental Grain, at the time the fifth-largest private company in America, for an estimated $300 million. Today Cargill operates the world’s largest fleet of ships transporting dry bulk commodities, some 550 boats stopping at 6,000 ports around the globe.
But it’s low-margin work, and since Forbes started tracking private company revenues 30 years ago, Cargill has never once netted more than 4 percent of total sales, or $4 billion. MacLennan is hoping a slew of innovative new products can juice those margins. “Being big means that we’re slower than we need to be,” he says.
His plan: Make the elephant sprint, or at least jog. Inside Cargill’s industrial specialties unit on the edge of Minneapolis, scientists play with crop derivatives to turn them into things like paint, glue, shoe soles and glass. The unit’s sales have grown by more than 15 percent annually for 15 of the last 16 years and are expected to grow by 30 percent this year. Its most promising products today? For one, a modified vegetable oil that makes asphalt less likely to crack in the winter or turn to tar in the summer. Cargill started selling it two years ago and has already shipped 30 million pounds of the product around the world. The plan is to be selling 100 million pounds of it a year by 2020. Another big win could be soybean oil that can be tweaked into foam for car seats. Thirty percent of all cars have seats made with agricultural products today, but Cargill predicts that figure will double in the next year. The company already has its foam in Fords across the US.
(This story appears in the 12 December, 2014 issue of Forbes India. To visit our Archives, click here.)