Alltech

Alltech was a Lexington, Kentucky–based producer of supplements for animal feed, with revenues of over $2 billion (projected to reach $3 billion in 2018), sales in 120 countries, 5,000 employees, and 100 manufacturing plants worldwide. For nearly four decades, Alltech had been defined by its focus on innovation and marketing as well as the entrepreneurial spirit and vision of its founder, Dr. Pearse Lyons, who remained intimately involved in company operations and in managing relationships with key customers. This case finds Alltech in the midst of a new growth strategy—downstream integration, specifically buying up feed companies—which marked a stark departure from the company’s longtime emphasis on organic growth. The decision to buy feed companies had been controversial within Alltech: feed was a low-margin, rather traditional commodity business, while Alltech earned relatively high margins on products rooted in science and innovation. However, Lyons believed downstream integration would allow Alltech to better communicate with its end customers (farmers), increase sales of its supplements, and help protect the firm from industry dynamics such as consolidation and cost pressure. Was he right, or should Alltech take a different approach?