Global vegetable seeds market is increasingly fragmented and diversified

Vegetable seeds form the third-largest segment of the seed industry, with a market share of almost 17% in global seed sales during 2020. Compared with other large seed segments, including maize, soybean and cotton, the vegetable seed market is highly fragmented. In 2020, the top three companies in the vegetable seed segment accounted for 29% of global vegetable seed sales. In contrast, the top three players formed 66%, 58%, and 53% of market shares in global maize, soybean, and cottonseed markets respectively.

In the global seed industry, nearly 70% of the seed sales are accounted for by 22 companies. The majority of these are active in the vegetable seed segment. This industry has a great diversity of players: global companies, some of which are active in both seeds and agrochemicals; regional or specialized companies; and a multitude of local players.

Many of these companies specialize in vegetable seeds; some focus only on seed varieties for protected horticulture, and others develop varieties for open fields and small-holder farmers. In the vegetable seed market, different players are leading different crop markets. The leading vegetable seed company by sales, Vilmorin, holds the number 1 position in sales of tomato, carrot, melon, cauliflower and summer squash seeds.

In contrast, Rijk Zwaan is the leader in lettuce crops and is known as the 'salad king' in Europe and North America. Sakata has the largest share in broccoli worldwide. Bajo Zaden has had a robust organic vegetable seed division since the 1990s, and East-West Seeds specializes in tropical vegetable seeds production for small-holder farmers.

The wide variety of vegetable production methods (open field, cold or heated shelters) and the wide geographical dispersion of production areas creates demand for various seeds specific to these conditions. Hence, the market is highly fragmented. The vegetable seed sales of the leading companies during 2020 are given below:

The vegetable seed divisions of multinationals and the regional vegetable seed companies are R&D intensive and spend a large percentage of their sales on R&D; sometimes as high as 40%. These companies offer thousands of vegetable seed varieties with high-yield, natural disease resistance and improved nutritional quality and hundreds of new such varieties enter the market every year.

All of these leading companies use molecular selection methods to accelerate breeding and use biotechnology to study trait genetics. The use of modern technologies such as digital phenotyping, machine learning, and artificial intelligence is helping these companies to understand plant traits in-depth and speed up the process of new variety development. Even though the vegetable seed industry was using very advanced technologies to understand the traits for a long time, none of the companies used genetic modification techniques to develop vegetable varieties until very recently.

Globalization in the vegetable seed industry, i.e., companies conducting R&D in one area, production elsewhere, growing in another area, and sales in yet a different locale - is a new advancement in the industry. A few years ago, breeders were developing region-specific varieties. However, due to technical progress and ever-growing consumer demands, the trend has changed. Now the region-specific varieties can be grown in different parts of the world, throughout the year.

Innovative traits and concept brands

A combination of factors, including globalization, the successful use of gene-editing technology on various crops, increasing demand for vegetable seed for home gardening impacted by coronavirus pandemic, higher demand for organic vegetables and growing consumer health consciousness, has led to the emergence of different new trends in this industry.

Developing vegetable varieties alone is no longer sufficient in today's dynamic and competitive vegetable seed market. To be competitive, the companies including Syngenta, Bajo Zaden, Enza Zaden, Rijk Zwaan and Takii are developing innovative traits and concept brands. These products allow their supply chain customers to create competitive advantage and help them cater for the changing consumer lifestyle and purchasing patterns.

These players are working closely with retail, trade or processing industries to develop solutions to fulfil the demand coming from all parts of the value chain. With enhanced capacity to manipulate the genetic background and more significant insights into consumer needs, the border between a vegetable seeds company and a consumer food company is blurring.

The strategic collaboration among the entire chain has led these companies to build their concept brands meeting current consumer needs for snacking, high nutrition, easy to cook, tasty, easy processing and standout colourful vegetables on the supermarket shelf. A good example is the launch of Knox iceberg lettuce which offers a longer shelf life to help the foodservice industry reduce food waste.

Organic market drivers

The coronavirus pandemic has led to a change in consumer preferences for vegetables and has increased the demand for organic vegetables. According to the Organic Produce Network in the USA, organic fruit and vegetable sales rose by 22% in March 2020. The same was true in Europe, where specialised retailers such as Ekoplaza have also received a substantial boost. Nautilus Organic, a Dutch growers' cooperative, has seen a fourfold increase in demand from British retail customers. Whole Foods Market, the world's biggest retailer of natural food products, has restricted the number of online customers due to unprecedented demand. Hence, in 2020, some organic seed companies experienced a tripling in sales compared to the previous year.

In addition to higher organic vegetable demand, the European Commission for mandatory use of organically grown seed has also boosted organic vegetable seed production. The January 2020 announcement by the European Commission for mandatory use of organically grown seed for early sprouts for the 2020 season and leeks the following year is helping vegetable seed companies active in the European region expand sales from their organic divisions. The European Commission's expectation of growing all organic crops through certified organic seeds by 2035 will help organic vegetable seed companies thrive long-term.

Key European pure vegetable seed players, namely Rijk Zwaan, Enza Zaden and Bejo Zaden, are also continuously strengthening their organic seed sector. Rijk Zwaan, the largest European vegetable seed pure-play company and the fourth largest vegetable seed company globally, has been working heavily in the organic seed sector over the past decade. Around 40% of all Rijk Zwaan's varieties are suitable for organic production. Rijk Zwaan is currently testing 107 different organic seeds and 300 different non-chemically treated (NCT) seeds across 19 crops. Lettuce, vine tomatoes, peppers, aubergines and cucumbers are important crops in the organic segment.

Future trends and developments in the global vegetable seed industry

The global vegetable seed industry is gaining more attention due to its variegated nature and scope for further growth. Below are some key moves and announcements by the main industry players in the area showing their increasing focus on vegetable seeds:

• KWS, the fourth largest seed company globally, entered the vegetable seed sector in 2019 with the acquisition of Pop Vriend Seed. With this acquisition, KWS has gained a leading position in the global market of spinach seeds. In 2019, KWS laid the groundwork for establishing an international vegetable breeding program focused on developing tomatoes, pepper, cucumber, melon, and watermelon hybrids. KWS also acquired another tomato breeding company, Genplanta, in 2021.
• Corteva identified the lack of vegetable seed segment as a gap in its product portfolio. Announcements from the company's leaders at various events indicate that Corteva plans to invest in the fruits and vegetable seed sector. In the coming years, we expect Corteva to take the M&A route to enter the segment. Currently, among the top 10 leading industry players, Corteva is most active in the gene-editing segment, with its waxy corn already commercialised in Canada in 2020. The successful use of the CRISPR technology on vegetable crops will help the company grow in the vegetable seed segment in the future.
• Bayer is taking many initiatives to strengthen its capabilities and focus on the vegetable seeds segment. Bayer's investments in Pairwise Plant, Unfold Bio Inc., and De Ruiter Experience Center-BraZander Nursery shows the growing importance of the vegetable seed segment for the company.
• Acquisition of Verisem B.V. from Paine Schwartz Partners, highlights Syngenta's second transaction in the Netherlands and this represents one of the key events in the vegetable seed sector. Verisem BV produces over 2,000 seed varieties involving more than 90 crops and will become a part of Syngenta's vegetable seeds unit.

Based on the above discussions, we expect vegetable seed industry consolidation in the coming years. The "Big 4" (Bayer, Corteva, Syngenta and BASF) with integrated crop protection and seed portfolio, rapidly developing digital agriculture platforms, and greater market reach will create pressure on mid-sized regional vegetable seed leaders.

Hence, over the coming decade, we would expect vegetable seed pure-play regional players to initiate more collaborations with domestic or international crop protection players or even with local distributors to help drive their market share and profitability.

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Posted 03 November 2021 by Bharti Malhotra, Senior Analyst, Crop Science, Agribusiness, S&P Global Commodity Insights

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.