Improving the “mouthfeel” of beer? Eight surprising facts about Archer Daniels Midland
Near perfect harvest conditions helped lift Archer Daniels Midland’s profits in the fourth quarter, the company announced today. Earnings before taxes in quarter surged nearly 60%, to $996 million, up from $623 million in the same quarter of 2013—while diluted earnings per share nearly doubled, to $1.08.
Though the company’s revenues slipped $3.2 billion from the period in the previous year, the agricultural conglomerate was buoyed by the strong performance of its agricultural services division, which covers ADM’s milling, merchandising and transportation businesses. “Strong results will continue as the massive U.S. harvest continues to filter through financial results,” wrote Morningstar’s Jeffrey Stafford in an analyst note. “But we don’t think the outsize ag services profits will last forever. Weather fluctuations probably won’t lead to bumper crops year after year.”
Away from the headlines, ADM, which ranked No. 27—its all-time high—on the Fortune 500 in 2014 with $90 billion in revenues, has reach into lives that few other corporations have. As the world’s largest corn processor and the first of the ABCD’s—the four giant companies (along with Bunge, Cargill, and Louis Dreyfus) that dominate the global commodities trade—ADM’s fingerprints are all over the world’s food supply, from the elevators that store grain and the barges that transport it; to the tons of fishmeal, animal feed, and human food ingredients it produces each year. Though corn and oilseed (mostly soybeans) processing make up the bulk of ADM’s business, its activities are far more complex, wide-ranging and unfamiliar to global consumers. Here are eight things you may not know about this 113-year-old company.
1. In the beginning, it was all about flax.
ADM was founded in 1902 as Archer-Daniels Linseed Company, a Minneapolis-based outfit that processed linseed (also known as flaxseed) oil for ink, paints and linoleum. The company slowly expanded into food products (providing vegetable oil for the 1930s margarine boom, for example), and in 1967, the company sold its chemistry business altogether.
2. It helped put high-fructose corn syrup and ethanol fuels on the map.
Dwayne Andreas, a Midwesterner and master of political influence who presided over ADM for 26 years, came to the helm in 1971 and brought boom times with him. That’s when, as Fortune wrote in 1973, “the whole world suddenly seemed to go wild for soybeans” (the magazine also compared “the protein-packed little globules” to gold). It’s also when high-fructose corn syrup—developed by Japanese scientists and now something like liquid gold for ADM—exploded onto the scene as a cheaper sweetener than sucrose in 1975. And when ADM became an early entrant in the fast-growing, soon-to-be-subsidized ethanol business.
3. You can thank the company for your foamy beer.
The company used to describe itself as “Supermarket to the World”, and indeed ADM’s products, which are processed to varying degrees—from oils to flours to a mind-boggling array of highly refined ingredients—can be found in most items in one’s grocery aisle. It makes emulsifiers that keep salad dressing from separating; acidulants that help foods, from candies to seafood, hold color and flavor; and fibers (halal and kosher-certified) that improve beer’s “mouthfeel” and foam retention. ADM developed “Textured Vegetable Protein”—a commonly used meat extender —in the ’60s and makes at least 24 distinct products from corn kernels.
4. It is a key combatant in the war against leaky diapers.
ADM’s refined products are also used in a wide-range of non-edible goods including diapers (as superabsorbents), industrial-grade solvents, pharmaceuticals, de-icers, and wood varnishes.
5. It’s one of the kings of cocoa…but not for much longer.
ADM has been on the hunt for higher, more stable margins. In 2014, the company agreed to sell its underperforming chocolate and cocoa businesses—it was the world’s third-leading cocoa producer—for a total of $1.7 billion. The sale will close later this year. Last year, ADM also announced that it was getting into the flavor trade, with the $3 billion acquisition—the largest in ADM’s history—of WILD Flavors, a Swiss company that makes specialty ingredients like its line of “Vegeceuticals”.
6. This North American company has a South American CEO.
On Jan. 1, Juan Luciano, an Argentine who, as Chief Operating Officer and President most recently ran the ADM’s global operations, became the company’s first foreign-born CEO. (He is the only Argentine and, indeed, only South American-born CEO in the current Fortune 500). Luciano took the reins from Patricia Woertz, ADM’s first female CEO. And last year, the Big Ag company moved its headquarters (and 60-odd people) from its farm-belt residence in Decatur—a city of 75,000 in Central Illinois—to Chicago, which is now home to eight Fortune 500 companies.
7. It was embroiled in one of the oddest, most incomprehensible corporate scandals of all time.
In the mid-90s, ADM starred in what, at the time, was the largest price-fixing case in the history of corporate America. In 1996, after years under investigation, the company pled guilty to conspiring to control the price of of lysine, which is used in animal feed, and citric acid, a food additive. Several ADM executives, including the son of CEO Dwayne Andreas, went to jail, and the company paid $100 million in fines. But the scandal is perhaps best known for the whistleblower—a senior executive named Mark Whitacre—who brought the case to the FBI’s attention. While spending hundreds of hours wearing a wire and cooperating with the agency, Whitacre was simultaneously embezzling money from ADM (he also tried to extort $10 million from the company to conceal the embezzlement). He, himself, went to prison in 1998; he was released in 2006 and now works for a California biotech. Matt Damon played Whitacre in The Informant!, Steven Soderbergh’s 2009 film about the case.
8. It’s a leader in Green Chemistry.
Big Ag often gets a bad rap these days, but ADM has been recognized for environmentally minded innovation it has brought to food and other products in the past decade. In 2005, the company won praise for its line of NovaLipids, oils and shortenings without trans fats that are manufactured in a bio-friendly way. More recently, ADM earned plaudits for figuring out how to produce propylene glycol—a petrochemical used in medicines, foods, and cosmetics—using biological sources, and on a commercial scale.