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Pioneer Hi-Bred International, Inc.

 


Address:
400 Locust St.
700 Capital Square
Des Moines, Iowa 50309
U.S.A.

Telephone: (515) 245-3500
Fax: (515) 245-3650


Statistics:
Public Company
Incorporated: 1973
Employees: 5,016
Sales: $1.26 billion
Stock Exchanges: National Market System
SICs: 0115 Corn; 0116 Soybeans; 0119 Cash Grains NEC; 2879 Agricultural Chemicals NEC; 5191 Farm Supplies; 0181 Ornamental Nursery Products


Company History:

Pioneer Hi-Bred International, Inc. is the world's largest seed company, with research facilities in 30 countries worldwide. Pioneer develops, produces and markets hybrid corn, sorghum, sunflower, soybean, alfalfa, wheat, canola, and vegetable seeds. The company dominates most of the markets it participates in, holding a 39.6 percent share of the North American seed corn market, and even higher shares in European markets. The company was instrumental in one of the most important genetic accomplishments of American agriculture, the development of hybrid corn. Pioneer has become more involved in the use of biotechnology to speed up the breeding process in the last decade of the twentieth century.

Pioneer was established in 1926 as the Hi-Bred Corn Company under the leadership of Henry Agard Wallace. Before the company was created, it was commonly assumed that a farmer's best-looking corn yielded the highest-producing seeds. Farmers took their handsomest ears to university-sponsored county- and state-wide contests to be judged and used as the following season's seed. But a select group of people questioned the efficacy of this seed-choosing process. One of those forward-looking people was young Henry A. Wallace. At 16, he conducted a field test pitting one of the area's best-looking ears of seed corn against one of the ugliest, and the ugliest ear out-yielded the pretty one. The tassels of corn grown in test fields were removed in order to isolate a hybrid's desirable characteristics. "Detassling" continued throughout the twentieth century, requiring massive numbers of seasonal laborers at Pioneer's seed corn fields.

Studies made during the first two decades of the twentieth century revealed that yield varied greatly with the quality of seed: the seed yielding in the top ten percent outproduced that in the bottom ten percent by an average of 25 bushels per acre. At a time when farmers generally expected to yield about 40 bushels per acre, the disparity was astounding. Unfortunately, the results of these tests would have seriously undermined the university-sponsored "pretty corn" contests and many researchers' findings weren't published.

But Henry Wallace had an advantage over many researchers: his father, Henry C. Wallace, owned a progressive farming newspaper, Wallace's Farmer. The Wallace family provided a heritage of farming leadership that helped launch Pioneer: young Henry's uncle had served on President Theodore Roosevelt's first Commission on Life in Rural America, and in 1921, his father was appointed to be U.S. Secretary of Agriculture. Henry A. Wallace inherited the editor's chair at Wallace's Farmer that year and got both a forum for his studies and an advertising medium for his seed.

When Henry, his brother Jim, and several partners founded the Hi-Bred Corn Company in Johnstown, Iowa in 1926, it was the first business created for the specific purpose of developing and marketing hybrid seed corn. The joint stock company was established with 200 shares and a $5,000 capitalization. Hi-Bred's first seed crop consisted of 40 acres of hand-planted, hand-picked corn. The company's seed was sold by mail-order through advertising in the family newspaper and profited $33.62 in the first year of sales, 1928. Sales doubled in 1929, prompting Hi-Bred to purchase 80 additional acres and create a Parent Seed Department. Soon, Pioneer's hybrid seeds dominated Iowa corn yield contests. The majority of farmers, who still relied on open-pollinated seed, complained that hybrid corn was too costly and unrealistic to produce and use, so the contests were split into two separate divisions.

The 1930s brought depression to the world economy, and drought, erosion and pestilence to the fields of the Midwest. The brutal growing conditions were both a blessing and a curse for Hi-Bred. Several breeds of corn failed during the harsh drought of 1934, but other lines endured the weather long enough to produce a crop. In comparison with open-pollinated fields, which performed miserably, Hi-Bred was able to show a significant advantage in hybrid corn.

As word of Hi-Bred's relative success spread, demand for the seed increased. To market the product, the company instituted the "farmer-salesman concept," where farmers worked part-time for Hi-Bred and full-time on their own farms. This sales method became an industry standard and was continued throughout the century. These local representatives were familiar to their customers and had first-hand knowledge of the product and its performance. Farmer-salesmen often used eight-pound samples of seed to graphically illustrate Hi-Bred seed's advantages vs. open-pollinated seed. Skeptics soon learned that the commercial seed produced heartier, stronger, more uniform plants and yielded about twenty bushels more per acre. Hi-Bred's first distributorship was established in the 1930s in the southwest.

Growing competition in the hybrid field prompted the company to distinguish itself from its rivals, and the Pioneer Hi-Bred name was instituted. And even though the company lost money throughout the depression years, remote research operations were expanded to several areas in the Midwest to test seed under varying climactic conditions. Founder Henry A. Wallace left Pioneer in 1933 to follow his father as Secretary of Agriculture. In 1941, he was elected Vice President of the United States under Franklin D. Roosevelt. Fred Lehman, Jr., a founding partner in Pioneer, succeeded Wallace as president of the company.

World War II's profound technological and workforce changes affected Pioneer as well as the rest of the world. While "Rosie the Riveter" took her husband's place in the factories, "Marge the Detassler" roamed Pioneer's corn fields. Pioneer even brought German prisoners of war into the process when labor was scarce. Wartime rationing slowed Pioneer's growth somewhat, but the company was able to expand into Canada, and expand research into cold germination and increased mechanization. Pioneer's eggs and broiler hens became a more significant part of the business during the 1940s as well. By the end of the decade, nearly all farmers had made the transition to hybrid corn seed. With much of the world engaged in war, the United States became the world's granary.

Pioneer chalked up several "firsts" during the prosperous 1950s: the first electronic analysis of research and sales data, the first sorghum hybrid breeding program, and the first attempts at alternative packaging. Research facilities were expanded to Florida and South America, and Pioneer entered into a joint venture with the Arnold Thomas Company to produce alfalfa hybrids. By the end of the decade, corn sales rose to 400,000 bushels per year. The company's upper management clarified the company's four guiding principles in a 1952 booklet titled, "The Long Look." Executive vice-president Jim Wallace and sales director Nelson Earvin noted that Pioneer had always tried to provide quality products, honest product information, strong product promotion and advice to customers.

Farming in America had changed dramatically since Pioneer was created. The number of farms had decreased from 6.5 million to four million, and the number of farmers shrunk from one-fourth of the population to just five percent. When Pioneer first sold corn seed, the average family farm consisted of 150 acres producing a variety of livestock and crops for subsistence and commercial use; by the 1960s, most farmers devoted their 300-acre farms to a single crop. Technological improvements in corn harvesters in the 1960s permitted farmers to shell corn as it was mechanically "picked" and dry and store it on the farm, saving time and money. These advances made new demands on hybrid corn: it had to shell easier and dry faster. Farmers averaged three hours of work per bushel of corn in 1929, but advances in equipment, pesticides, fertilizers, and especially hybridization had shortened that time to six minutes. Higher yields meant higher profits and a better standard of living for many farm families.

Pioneer concentrated on overseas development during the 1960s, establishing joint ventures in Australia, Argentina, and South Africa. And as concerns about overpopulation and global hunger mounted, Pioneer strove for ever higher yields and worked to lengthen the company's growing season by creating its first winter nursery, in Hawaii. The fiftieth state's year-round growing season permitted three crops of seed per year. But with its eyes on foreign development, Pioneer lost market share in America.

By the 1960s, the U.S. hybrid seed corn market was saturated, and had little unit growth, forcing a higher level of competition. DeKalb AgResearch Inc., a rival since the 1930s, pulled ahead of Pioneer in terms of market share. The rival company introduced a revolutionary hybrid that gave it a slender lead in the industry by the end of the decade. But by 1972, each of the seed corn producers held 22 percent of the hybrid seed corn market.

In 1973, Pioneer went public and reorganized its operations. Prior to this time, Pioneer was a federation of geographically-based companies. Each independent dealer purchased its seed from Pioneer's centralized research division, but was responsible for its own operations. The incorporation and reorganization also brought about the formation of the Cereal Seed Division to breed wheat. Pioneer made acquisitions to diversify primarily within the hybrid seed business. The company expanded its alfalfa and soybean seed research with the purchase of the Arnold Thomas Co. and Peterson Soybean Seed Co. The acquisition of NORAND, a computer company, put Pioneer in debt for the first time since 1926, but the parent applied the new subsidiary's hand-held computer technology to field research and sales programs. Pioneer also acquired New Labs, a developer of microbial products that encouraged the formation of silage (feed that is fermented in a silo) and aided animal digestion. Pioneer was reorganized so that central management could assess the company's total value and consolidate its competitive efforts against DeKalb and new entrants into the market by bringing uniformity to policies, pricing, and promotion.

By the mid-1970s, the company faced new competition from chemical and pharmaceutical companies like Ciba-Geigy, Sandoz, Union Carbide, Upjohn, and Pfizer, who all applied their research expertise to the development of new hybrids. But Pioneer's decades of experience in the industry set it far ahead of these new rivals.

Over the course of the 1970s, Pioneer and its primary rival, DeKalb, applied divergent business strategies: DeKalb diversified into oil and gas exploration, mining, irrigation, and other industries, while Pioneer concentrated on developing seed with ever-higher yields. Pioneer's concentration on research and new product development paid off with the development of 3780, a corn hybrid that broke yield records and soon became the company's and the industry's best-seller. Pioneer's timing could not have been better: from 1970 to 1980, unit sales in the overall seed corn industry grew by one-third, and dollar volume tripled. Farmers were willing to pay Pioneer's premium prices for higher yields. At the same time, the United States' seed exports nearly doubled, fueled by technological improvements and increased global demand for food. By the end of the decade, Pioneer had regained the top share of the seed corn market, with 34 percent, and DeKalb's share diminished to 14 percent. Pioneer's sales multiplied five times from 1972 to 1980, to $400 million, and profits grew eightfold, to $53 million.

The United States' 16-month grain embargo in protest of the Soviet Union's invasion of Afghanistan marked the beginning of a difficult decade for American farmers. The 1980-1981 embargo caused grain prices to fall sharply, which precipitated a farm crisis in the United States. Grain surpluses from the embargo combined with a recession to force many farmers into bankruptcy. Others stuck with farming, but reduced their corn acreage to take advantage of government subsidies. A drought in 1983 deepened the downward spiral: corn acreage decreased by 27 percent over the course of the decade, and the U.S. seed corn market shrunk by one-fourth.

On the other hand, however, the Soviet grain embargo encouraged production in the affected countries, creating new markets where there were none before. After the embargo, Pioneer worked to capture these new global customers. The company added "International" to its name to reflect the growing importance of overseas operations. By the end of the 1980s, Pioneer had expanded to 32 countries abroad.

Rivals in the seed corn industry introduced hybrids that closely resembled some of Pioneer's best-selling products in the early 1980s. These low-priced knock-offs were so similar to Pioneer's most popular hybrids that company officials became suspicious of their origin and development. When genetic mapping proved that Holden Foundation Seeds had illegally used Pioneer's proprietary germ plasm to develop their seeds, Pioneer brought suit against the rival company and won. Pioneer instituted stricter controls to protect the company's intellectual property as a result, and has worked to patent many of its products.

Pioneer expanded into biotechnological research in the late 1980s and early 1990s. Biotechnology is a genetic science that seeks to add new traits through gene manipulation rather than the slower process of traditional breeding. This emphasis on research helped Pioneer claim "the best-performing product lineup in the seed industry," as well as over 39 percent of the United States seed corn market by 1992. The company posted record results in the early years of the decade. Earnings rose over 40 percent in 1991 and again in 1992 to $152.16 million in the latter year. But Pioneer officials were cautious about earnings projections for the remainder of the decade. They were acutely aware that the impact of politics and the weather were two unpredictable, yet significant factors that could influence their business at any time. Corn acreage in North America and Europe was expected to drop, reducing the volume of the seed corn market and threatening Pioneer's unit sales. From a global perspective, however, 40 percent of the world's corn acres did not employ hybrids, leaving significant room for expansion of the market. Pioneer expanded its product lines to include relatively new products, including two oilseeds, canola and sunflower, and vegetable seeds. The company hoped to utilize research and marketing to achieve 20 percent return on equity by 1995.

Principal Subsidiaries: Pioneer Overseas Corp.; Advantage Corp.; Endonor Corp.; Green Meadows, Ltd.; Microbial Environmental Services, Inc.; PHI Communications Co., Inc.; PHI Financial Services, Inc.; PHI Insurance Co.; PHI Insurance Services, Inc.; Pioneer Hi-Bred Australia PTY Ltd; Pioneer Hi-Bred Europe Inc.; Pioneer Hi-Bred Ltd; Pioneer Hi-Bred Philippines Inc.; Pioneer Hi-Bred Production Ltd.; Pioneer Hi-Bred Puerto Rico Inc.; Pioneer Overseas Corp. Ltd. (Thailand); Pioneer Seed Co. Pvt. Ltd. (Zimbabwe); Pioneer Vegetable Genetics Inc.; Pioneer Vegetable Genetics Ltd. (90%); Semillas Pioneer S.A.; U.S. Specialty Grains Co.; Ethiopian Pioneer Hi-Bred Seeds Inc. (70%); Grainfield Co., Ltd. (49%); Hibridos Pioneer de Mexicanos S.A. de C.V.; Hibriven Hibridos Venezolanos C.A.; Investigaciones Pioneer S. de R.L. de C.V.; Lesotho American Hi-Bred Seeds (PTY) Ltd (60%); Misr Pioneer Seeds Co. S.A.E. (70%); PT Pioneer Hibrida Indonesia; PHI Biogene Ltd. (40%); Pioneer Agrogenetique Cote D'Ivoire S.A. (99%); Pioneer Argentina S.A.; Pioneer Egypt Inc.; Pioneer Genetique Cameroon S.A.; Pioneer Genetiques S.A.R.L.; Pioneer Hi-Bred Agricultural Technologies Inc. (80%); Pioneer Hi-Bred FSC Ltd; Pioneer Hi-Bred Italia SpA; Pioneer Hi-Bred Japan Co., Ltd. (52%); Pioneer Hi-Bred Korea, Inc.; Pioneer Hi-Bred Magyarorszag K.F.T.; Pioneer Hi-Bred Nederland B.V.; Pioneer Hi-Bred S.A.R.L.; Pioneer Hi-Bred Sementes de Portugal, S.A.; Pioneer Hi-Bred Nigeria Ltd. (70%); Pioneer Hi-Bred Thailand Co., Ltd. (95%); Pioneer Overseas GmbH; Pioneer Overseas Research Corp.; Pioneer Research Co., Ltd. (65%); Pioneer Saaten GmbH; Pioneer Seed Co., Ltd. (65%); Pioneer Semena Holding GmbH; Pioneer Tohumculuk A.S.: Semillas Hibridas Pioneer S.A. (75%); Semillas Pioneer Colombia S.A.





Further Reading:


Davenport, Caroline H. "Sowing the Seeds: Research, Development Flourish at DeKalb, Pioneer Hi-Bred," Barron's, March 2, 1981, pp. 9-10, 33.
Pioneer: A History, produced by Pioneer Hi-Bred International, Inc., 60 min., Des Moines, IA, 1992, videocassette.
"Seed Corn's Long, Hot, Bruising Summer," Business Week, August 25, 1980, pp. 52, 54, 56.
"A Sustained Harvest," Forbes, October 15, 1979, pp. 120, 122.

Source: International Directory of Company Histories, Vol. 9. St. James Press, 1994.




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