After 153 years, Cargill moves to a Netflix content model.


I recently spotted an article in Bloomberg Businessweek entitled "America's largest private company reboots a 153-year-old strategy." If you are a subscriber you can access it in the business section here.

The article piqued my interest because I have spent a lot of time dealing with global grain traders on supply chain development financings. Through those often challenging times I have always been amazed at the level of power they have been able to exert across their supply chains.

I have learned that when all the fat boils down to tallow, the industry is fundamentally based on the notion of using scale (information, storage, funding, access) to play middleman, in order to create and profit from a carry trade between farmers and customers.

But maybe, not for much longer.

What's really interesting about digital transformation is that no industry model based on 'carry for scale' is safe any longer. Faster processors, big data and cloud are providing producers and customers in almost every industry with affordable capacity to scale - big time.

The article provides a nice little vignette of undeniability: "even a small Iowa farmer with a smartphone or a tablet can get real-time data about weather conditions and prices facing his Brazilian counterparts." 

On top of that, on-farm or in-house storage has increased significantly. 

So what does the future hold for Cargill and its billionaire family owner group, and other big ag-traders?

Cargill's CEO, David MacLennan has said that the days of buying and storing farmers crops and then playing the carry (i.e., profiting from scale) are over.

Instead, Cargill, by taking a leaf out of the Netflix playbook, has come to a key realisation.

That is, because everyone now has access to scale (and thanks to AWS and other cloud providers, scale is now elastic and accessible 'as you go') the only way to stand out and grab advantage and patronage is through tailoring 'content' to specific customer needs.

Last August I wrote that Netflix was spending US$15.7 billion or close to 22% of its market capitalisation on 'exclusive content', to protect its business. With streaming replacing DVD post-outs, content has become king.

So why should Cargill be any different?

Indeed, Cargill is racing to transform from a functional middleman that once spent most of its time on pricing intelligence, to a content-rich protein ingredients company, refocusing on tailoring (protein) content to specific customer needs. Well, that's the plan anyway.

It means that Cargill has embraced the Netflix model, that in turn has been enabled by the cloud, courtesy of Amazon's AWS.

Deep in transformation mode, Cargill is expanding its protein range into aquaculture, organics/non-GMO products and other areas, given the changing tastes and preferences of its customers. 

It is also tying content to in-house Apps designed to more closely connect with farmers and assist in increasing on-farm productivity. This is akin to an infrastructure as a service (IaaS) offering from Amazon, and/or Netflix support tools for exclusive content producers.

Either way, it is reinventing the trader model to one that is designed to create content that will be valued and sought after by its end customers, and at the same time deliver efficiency and productivity tools to its primary developers/producers.

The convergence of industry needs, data analytics, super fast processors and cloud has become the great transformer and leveller in almost every industry that relies on scale to justify a business case.

The ability to add 'content' and real value to customers is now a no-brainer strategic component/consideration for every similar business.

In many ways, the Cargill transformation shows how a digital TV and movie business can be very similar to a food business, in these digital times.

Well done Cargill. 


NextLevelCorporate is focussed on independent and transformative corporate finance advice and transaction arranging solutions for clients looking to reshape their competitive landscapes, in and out of Australia. Our ability to do this comes from ~30 years of sector-specific intel plus the freedom to independently originate, advise on and arrange customised Mergers & Acquisitions, Growth Capital, Special Situation and bespoke Corporate Strategy designed to capture advantage.