Corteva 2023 R&D Innovation Update Highlights and Analysis

Essential news and analysis for agribusiness leaders

Index for the Corteva R&D Innovation Update:

1. Introduction

2. Research and Development Overview

3. Seed, Genetics, and New Frontiers

4. Crop Protection

5. Biologicals

6. Final Thoughts

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1. Introduction

In September of 2022, Corteva held an investor day sharing their strategic direction and focus.

They identified the following:

1. What is our winning aspiration?

2. Where will we play?

3. How will we win where we have chosen to play?

4. What capabilities must be in place to win?

5. What management systems are required to ensure the capabilities are in place?

Chuck Magro called out the winning aspiration for Corteva as:

To be the leader of innovative sustainable solutions for farmers worldwide, today and tomorrow … to become the world’s most valuable Agriculture Solutions company

Then called out where Corteva will play, in geography, product focus, crop focus, and manufacturing emphasis:

1. ~110 countries, ~20 must-win countries

2. Focused investment in select crops Seed: corn, soy, canola, sunflower, cotton, sorghum and for Crop Protection: fruit & vegetables, corn, soy, cereals, rice

3. Focus on differentiated, sustainable solutions

4. Grow seed licensing business and distribution channel

5. Redirect and increase R&D investment

The underpinning of their success overwhelmingly falls on their ability to turn R&D dollars into differentiated commercial products.

The aim of the event this week was to emphasize the technology in their pipeline and the future sales potential from that technology, specifically, examples of fundamental enablers of their 2025 targets, along with the $24 billion pipeline that takes Corteva out to 2035.

2. Research and Development Overview

One of the first slides that stand out is Corteva’s point to call out R&D Efficiency:

Corteva is where you'll get the highest return on R&D. In other words, $20 of forecasted sales per dollar invested, which is essentially double that of our peers. We have the most disciplined and productive R&D organization in the industry, and we intend to keep it that way. We're looking to capitalize on the strengths of our technology solutions in the areas of greatest opportunity on a risk-adjusted basis as long as those opportunities align with our core strategy. So, we've set a target to invest approximately 8% in R&D and innovation by 2025, which translates into $400 million of additional investment

Though I like the concept, it has some flaws, specifically that it is a “forecasted return.”

Forecasts are often “who is more optimistic,” but even if we give Corteva the benefit of the doubt, there are some other parameters. Take “Company A” which is Bayer and see how they break out what percentage of the “peak sales” comes when:

Efficiently moving products from R&D through to a commercial product sooner means those dollars can be recognized earlier and potentially be a further pull-through in the marketplace for their heritage products. Suppose peak sales are weighted more heavily into the latter half of the forecast. In that case, this has a material impact on the business— a dollar attained today is worth more than a dollar earned tomorrow.

The metric used to measure R&D success currently has flaws, though too. Most organizations highlight the percentage of their revenue from products launched in the last five years, inherently ignoring the effectiveness of current R&D spend.

With all of this said, nothing is perfect, and the concept is a smart one from a positioning perspective for Corteva.

Here is how their investment breaks down: