Vilmorin & Cie - Annual report 2017-2018

PRESENTATION of Vilmorin & Cie 1 ANNUAL REPORT Vilmorin & Cie 44 2017-2018 1.6.4.1. Vegetable seeds: reinforce world leadership Vilmorin & Cie’s objective in this mature business, where it is solidly positioned as No. 2 worldwide, is to consolidate its positions in the most mature markets (Europe, Middle East, North America) while expanding in emerging regions, particularly in Asia and Africa. Vilmorin & Cie thus aims to become a leader in all markets and for all the main crops. To do so, Vilmorin & Cie’s strategy is based on a combination of organic growth, driven by a regular flow of innovations, close proximity to markets and external growth, through targeted operations. This strategy will be pursued and promoted through its organization in Business Units, emphasizing a number of main focuses, to enable Vilmorin & Cie to develop on complementary crop/territory segments. For this purpose, the Company has defined a segmentation strategy for its geographical markets and crops, depending on their size and growth potential, to guide its market approach. Concentrating on its core business of seeds, Vilmorin & Cie decided on the withdrawal by the Business Unit Vilmorin-Mikado from the activity of distributing agricultural supplies in Japan. This information is presented in detail on page 23. Combining organic growth with external growth Maintaining organic growth higher than that of the market In order to gain market shares and prolong its organic growth, Vilmorin & Cie relies on the virtuous circle of innovation combined with proximity to its markets. Indeed, development of the vegetable seeds market, due to evolutions in the world consumption of vegetables, depends primarily on the development of novel seeds. For this reason, mastering cutting-edge research technologies, for example plant biotechnology* (molecular marking*, cellular biology, etc.), are now vital tools for breeders*, since they contribute directly to the acceleration of plant breeding. Therefore, research investment allocated to these tools continues to be high. Upstream Vegetable Seed research is organized in a mutualized and cross-cutting way, via centers of expertise dedicated to all Business Units, and sometimes also used for the group's other activities. For example, the Business Unit Vilmorin-Mikado has developed very specialized expertise in image processing and in 2007 created an “artificial vision” unit, based in La Ménitré (France). This unit has developed cutting edge tools to obtain and analyze information automatically on seeds, seedlings, fruit and the finished product. These tools are used in numerous fields (research, quality control). The Business Unit HM.CLAUSE benefits from its center of expertise in molecular biology, and in the domain of entomology, the Business Unit Hazera is researching into the detection of links between the behavior of insects and genotypes. At the same time, investment in the sites which run this research is increasing. For example, during fiscal year 2017-2018, the Business Unit Hazera continued to upgrade its research and development infrastructures, with the inauguration of one of its major research sites in the Netherlands. Similarly, in France, the Business Unit Vilmorin-Mikado opened a pathology laboratory this year in La Ménitré, while the Business Unit HM.CLAUSE opened a new laboratory dedicated to cell biology at its site in Maninet. Moreover, opening new sites increases proximity to markets and contributes to the chances of winning business there, while the modernization and extension of certain production sites directly participate in the final quality of the product and customer satisfaction. Investments are regularly made to improve the different sites of Vilmorin & Cie everywhere in the world. At the same time, organization in Business Units, set up 10 years ago, also guarantees close proximity to customers. The three Business Units, which work in close coordination, have a global vocation and have built teams that are as close as possible to the markets, from plant breeding* to marketing and product development. This organization, which combines a global vision and a local approach, provides much finer knowledge of customer needs in markets that are highly fragmented. Strengthening positions by targeted external growth operation Vilmorin & Cie has pursued targeted external growth operations to consolidate the current geographical set-up, and solidify the key territories and crops that are less prominent in the line-ups in the Business Units; such operations will continue in the years to come. As such, the acquisition of the Danish company AdvanSeed, which specializes in hybrid* spinach and leafy vegetable seeds, was completed at the beginning of fiscal year 2018-2019. It allows Vilmorin & Cie to complement its product portfolio, with a new business position for spinach, a crop which it has not worked on until now, and to strengthen its global presence in leafy vegetables, while capitalizing on AdvanSeed's genetic resources. This information is presented in detail on page 24. Similarly, the acquisition, in February 2016, of the company Genica Research, based in the United States, has enabled Vilmorin & Cie to strengthen its positions in major crops (sweet pepper, hot pepper, cucumber, summer squash and tomato in particular), while consolidating its presence in the United States, Mexico, Spain, Italy and the Middle East. 1.6. Strategy and perspectives