Bundling and Unbundling in Crop Protection: Where Value Accrues Next

In The Post-Patent Boom and Why Ag Retailers Are Suddenly Worried About Generics, Bob Trogele of ProAginvest talks about the FTC settlement and suit involving Corteva and Syngenta. He makes a point I think most of us would agree with: we will see "debundling" of programs. I don't think programs go away, but they are likely to get more conservative.

Companies have been bundling more and more at the product level (multiple modes of action), the program level (buy herbicide plus fungicide, get a bigger rebate) and the acre level (seed treatment plus seed and trait plus herbicide). The thing about debundling, or what is commonly referred to as unbundling, is that the second-order effect is always a rebundle around a different point. As Jim Barksdale put it: "There's only two ways I know of to make money: bundling and unbundling."

Rebundling happens around the new point of scarcity, the bottleneck where value builds up once the old bundle falls apart. This comes from Clayton Christensen's theory known as the “law of conservation of attractive profits": when one layer in the value chain becomes a commodity, profits move to the next layer that is still hard to copy.

So the question for input manufacturers without seed, and curious retailers and distributors, is where the new points of scarcity are, the places companies will bundle around to protect margin and differentiation.