Mark Green: You took over Alltech last spring after the passing of your father, Dr. Pearse Lyons, who founded it in 1980 and built it into a multibillion-dollar company. What should the Kentucky business community know about Mark Lyons?
Mark Lyons: My father and I are very similar in many regards. We loved working together and want to make sure people feel Alltech is very much a Kentucky citizen. There are great opportunities to collaborate and create more for everyone.
My father became well known, particularly after the Alltech FEI World Equestrian Games in 2010. Moving to Kentucky as a child, going to school and growing up here, I do know a lot of people here.
I very much represent continuity, but also a little something different in the personality I have and the expertise and different exposure I’ve had. Dad traveled the world and gave me the opportunity to live around the world. That international experience, seeing the world without boundaries and borders is something I bring. And connections: When I was in China, when Kentucky companies came in they came to Alltech. We are very close to the U.S. embassy. We were the Kentucky office in China as much as anything else was; we have our Kentucky Ale bar in our office and always welcomed people.
What Dad and I share, and I may be more inclined to, is collaboration. He was so good at making connections; when he heard you were going to go do something he’d say, ‘Let me put you in touch with this person.’ We both want to tell the community that as you go out and look around the world, let us know because we may know people who may be able to help you. Being a private company affords you that ability, but it’s also very much part of who we are.
MG: Your father had many friendships, including with other well-known Kentucky entrepreneurs such as Jim Host and John Y. Brown Jr. But you say you not only take his “make a friend, make a sale” advice to heart, you “create deeper relationships” and are “more collaborative” in business. How so?
ML: The ‘building deeper relationships’ thing is actually something he said about me. A lot of times he would want me to go talk to people where we needed to forge a relationship.
My father was always (Alltech’s) president and the leader. Having lived in different places, having been in the company as a teammate of many people, I have had to be more collaborative with colleagues. We can look back in 10 years and see if I’m still like that! But that’s part of my personality, and I don’t think that will change.
We need to create another group of leaders now who can come through from Kentucky. We just co-chaired a leadership roundtable with Commerce Lexington CEO Bob Quick and brought together people from different businesses, trying to initiate dialogue around what do we want this place to be, what are some of the challenges, and how do we come together as business leaders?
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MG: Alltech provides products for dairy, beef cattle, poultry, pigs, aquaculture, equine, pets and crops that variously increase feed efficiency, reduce mycotoxin risk, improve gut health, optimize mineral nutrition and deliver quality protein. What are today’s major business lines?
ML: Alltech’s business is primarily agricultural. The animal nutrition business that breaks into feed supplements and additives is where Alltech began. We produce these products ourselves; we invented most of those categories – things like organic minerals that are in the form you would find in plants and are more bioavailable. We make nutritional Technologies for the animal’s digestive system so it can be efficient in converting the feed it’s consuming into meat, milk, eggs and reduce the requirements for things like antibiotics. A lot of people
want antibiotic-free today; if you have a healthy intestinal system, maybe you don’t need antibiotics.
A lot of our acquisitions have been getting into feed production, what’s called premix, adding other elements with those products that we sell into a form that’s more accessible or able to be sold to a farmer directly. That’s driving us toward the end user.
On the crop science side, how do we remove the requirement for pesticides and fertilizers or improve the productivity of crops, fruits and vegetables in a natural way? A lot of it is improving the plant’s own systems. How does the plant’s immune system function? How is the biodiversity in soil? These are called biostimulants. It’s a really hot area right now; a lot of big companies are looking at this. Alltech’s been working in it for over 20 years.
MG: What proportion of the business is the beverage side?
ML: Dad liked to joke that beverages are 1 percent of the revenue and 99 percent of the passion, but it is becoming quite a nice business. We now have a brewery and distillery in Pikeville, the new Dueling Barrels, and a brewery and distillery here in Lexington, with Town Branch being the only distillery on the Bourbon Trail that’s in a city. Now we’ve got a brewery in Dundalk, Ireland, where my father grew up, and the distillery in Dublin right next to Guinness.
With their visitor centers, that’s going to be more than $50-60 million in revenue, a significant business when you put them together. When you think of Alltech selling over $2 billion in total revenue it’s pretty small, but the potential is exciting, particularly on the spirits side. We’ve come up with three gins in the last year, two in Ireland and one here, Town Branch Gin. Our push for beverages is to get to $100 million and beyond in the next three years.
MG: Which Alltech products does Kentucky agriculture use most?
ML: Among people with cow/calf operations, many of them know the (digestive supplement) brand Bio-Mos better than they know Alltech. Bio-Mos was put into supplements or feed blocks and branded as good for the cow and for the calf and the development of its intestinal system. Bio-Mos is still the most-used Alltech product in Kentucky.
Minerals are big because of the acquisitions we’ve made; some of those have facilities here. Kentucky’s unique because we have our crop science production, our feed additive production, the feed and block production, and the breweries and distilleries. There’s a lot happening (for us) in Kentucky. It represents our biggest head count compared to overseas offices.
MG: What are Alltech’s current initiatives and business goals?
ML: We have been assessing where we are as a company, looking at areas where we want to invest more, areas that we want to focus on less, and get the message across that Alltech is a growth company. We don’t want to be operating in commodity (product) areas; we want to always be focused on value added (products). That’s where our creativity and innovation and our value within the company comes from.
The North American business now is extremely significant; we’re the second-biggest feed producer in Canada, so that’s a big part of our business. Back in the old days of Alltech, North America, Europe, Latin America and Asia almost represented equal parts. Now the North American business dwarfs the others. How North America does is going to determine a lot of the success and failure of the company. American agriculture is changing; there’s a lot of consolidation. So, where does Alltech play a role, and how do we make sure we can bring those innovations from our R&D center here in Nicholasville to the markets?
My father loved having audacious growth targets. So he put out this goal of becoming a $10 billion company. What that says to me and the leaders of the company is that we are going to grow. It’s not the type of growth where we say, come hell or high water we’re going to make that goal by a certain date, but it keeps reminding us that growth is what we’re about.
What I bring to this is a little more focus on the purpose and mission of Alltech. We have the ACE principle: Animal, Consumer, Environment. We’ve got to care for the wellness and the health of animals; we have to think about the demands and requirements for consumers and their safety; and we need to protect the environment. We balance those three elements, and most products or projects Alltech is involved in have some element of all three.
We’re down here in the food chain creating things that go into feed that animals eat, and then we’re talking about consumers that are at the end. We’re trying to link the entire food chain. We started talking about this in 1989. This is a concept a lot of people might be thinking about now: traceability, and what consumer demands are. We’ve been thinking this way for a long time.
MG: Alltech has more than 600 employees in Kentucky. Is Alltech able to find the talent it needs in Kentucky?
ML: Yes. On the communications side Asbury University has been great, as are several programs with the University of Kentucky, and we’ve done innovation competitions that involved all of the state’s universities. We see students who have the capabilities. What we’re looking for is, do they have that hunger? That excitement? Do they want to travel? It’s a responsibility of the company to create programs that help those students become the types of people and get the exposure to the types of things that will make them good future colleagues.
We’re talking about creating an ag tech hub (in Lexington) that could be pretty exciting. People could start their career and have a project right out of university; they could get some business exposure, and we can help mentor them.
Part of our responsibility is to bring people in so they make connections and have that Kentucky experience, but also to develop people in Kentucky. Companies that sit back and say the graduates aren’t up to specifications for my company… well, whose fault is that? If you’re not engaging with the educational institutions, then you’re not helping that process. If you do engage and you still don’t get anywhere, that’s a different topic.
MG: Tell us about the $21 million, 73,000-s.f. headquarters expansion in Nicholasville. What is being added, and why?
ML: This is going to be a doubling of square footage to fully form that area. We’ll have the two main buildings connected by an enclosed atrium that can function as a lunch area or event space. Behind that we have our research center, our nutrigenomics center. We have our farm up the road where we do research. You’ve got these three elements coming together, and it finishes out the campus nicely.
It’s a needed expansion with the acquisitions that we’ve had. Alltech is now a major purchaser of a lot of raw materials. Before, virtually everything Alltech sold, we made. Now, as we get into these feed activities, there are things like vitamins and amino acids that Alltech doesn’t make that we need to buy. Our supply chain team is growing. The most important role that area will function as is an innovation space. We have experts in our head office, and we want our global teams to come in, get out of their markets and get them to think differently, debate ideas and strategies, expose them to some things they should be thinking about, make their strategies and then go back to their markets. I believe a headquarters shouldn’t be a command and control center; it needs to be a support center.
MG: Alltech has 6,000 employees in 130 countries. More than 600 employees work in eight Kentucky operations. What operations take place in Kentucky?
ML: There’s this site (the One-on-One interview took place at the Alltech beverage division in Lexington where Kentucky Ale and Town Branch bourbon are made); the consumer-facing Dueling Barrels (brewery and distillery in Pikeville); and Connemara Golf Course across the road from our headquarters in Nicholasville is a public course, and we use a lot of our crop science there.
The Flemingsburg facility is feed and blocks in which you put minerals and nutrients. We’ve got a (yeast production and ethanol) facility in Springfield that is involved in our product called Optigen, a slow-release nitrogen source for cattle and our bioplexes, our minerals. We have McCauley’s horse feed, in Versailles, and the Nicholasville main office.
MG: You have said the Alltech Life Sciences division is a fledgling area but that in 15-20 years it could dwarf the animal science division. Would it mean more operations and employees in Kentucky?
ML: A lot of what we’ve done in life science has been a collaboration. We’ve worked with UK Sanders-Brown Center on Aging; my father was good friends with the late Bill Markesbery there, and they did some work together around anti-aging and nutraceuticals and some specific components we were able to isolate and synthetically produce.
We’ve done more work, and a lot has to do with mitochondrial function, dysfunction or decay. Any disease that is linked to mitochondrial function we may be able to impact. Right now we’re assessing our strategy. What is the game we’re in? How are we going to win? How do we go forward?”
My father had looked at life science a number of times and considered whether Alltech would take outside investment or actually divest or focus on it in a different manner. I’m looking at it now.
One of the ONE18 start-up pitches, which had gone through our Pearse Lyons Accelerator and launched there, was for something called Truly, a personalized nutrition program. You would get nutritional supplements based on your lifestyle, what you want to do, age, health status, etc. I’ve been interested in the concept for awhile. We’re looking at that as an avenue different than this pharmaceutical route, more of a nutraceutical route. Equally, we’re looking at a product we’re going to be launching focused around digestive health and brain health. That is a different route than we were doing before that could help us to progress faster.
MG: You’ve said there is an opportunity for Kentucky to create the first ag tech hub in America. Is pursuing this one of Alltech’s goals?
ML: There isn’t yet an ag tech hub of America. In Silicon Valley people are talking about agriculture, but Silicon Valley is not really in agriculture. In Kentucky we have 300,000 farmers. A lot of them are small. These smaller producers need to innovate, think differently, produce products that are differentiated. They seem like people who might be more accepting of these (new) concepts and want to use them. There’s an opportunity. There’s been a lot of interest across the board, from the government, from the ag commissioner, from universities.
Alltech’s traditional way is to do things ourselves, but what we’re trying to think about is do we build this and allow other people to come in? These ag tech companies can spend part of their time with the Pearse Lyons Accelerator here in Kentucky. If we had a physical space, we could bring people in full-time. I don’t think that has a place in our headquarters, because these people need to be in that startup mode. The physical space is the piece that’s missing. It’s something we would like to do. It’s healthy and important for our business to always have a few of these missions, and this is a worthwhile one and a great opportunity for Kentucky.
MG: After having grown organically for 30 years, Alltech made around 20 acquisitions in the past five years that doubled the size of the company and moved it “closer to the end user.” Is this a strategy that will continue?
ML: It will absolutely continue. The scale of some of the acquisitions we made was substantial. We will always be looking. We turn down a lot more deals than we move ahead. We’ve picked up a lot of knowledge. Alltech is definitely a player now within the animal feed industry and agriculture in general, and we needed to get that scale and separate ourselves from any traditional competitors we ever had and put ourselves on the map.
We’ve started to create internal innovation. We have the ability now to create products we use ourselves that previously we didn’t.
MG: You have been traveling around the world to Alltech locations, conducting Innovation Days events to hear the ideas of your employees. What trends are you hearing?
ML: This is essentially to allow people to share their ideas, collaborate on those ideas. The first phase is just people throwing out ideas, and you only have three minutes. People are writing on Post-it notes, and then the group leaders summarize them, and the next stage is to put the ideas together and see what overlaps and start to create a more fully formed thought. Finally the groups have to pick one idea and come up with a presentation on it. This all happens within three hours.
You get a sense of what people are thinking, especially as you overlay those across these markets. There’s a lot around career development, around how we can be more effective in the way we utilize our teams. There’s a lot around new markets we should be getting into. Quite a bit of it is talking about technology and can we create new apps that connect consumers with agriculture? Can we create apps that allow our customers to see the benefits of our products? But the biggest, the most important thing is that you engender this power within the team.
The next phase of this is the kickoff of our Pearse Lyons incubator. We have two phases of this thing. The first is the internal incubator; the second is the accelerator, where we’re taking a few of those internal concepts and some outside concepts and forming businesses. Having done this now in different geographies and different cultures, such as a production facility in China, you’re showing that innovation culture isn’t for the scientists only; it’s for all of us. Innovation should be taking place in every part of our company; innovation is at the core of our DNA.
MG: Alltech has a goal of $10 billion in annual revenue. Where is it now at 38 years old, and how long will it take to reach $10 billion? Is this going to mean major new lines of business and initiatives and products?
ML: We’re a little over $2 billion today. My father liked to say the only constant in life is change. We’re always trying to push our teams to anticipate and be part of creating change. Absolutely it will require new businesses and different ways of working. Certainly acquisitions will be part of this; in many of our markets, we know the business we have today will take us so far, and we have to think what comes after that. We talk about Engine 1 and Engine 2. Engine 1 is what got you to the point you are; at what stage do you start building Engine 2 to bring you into further growth? How do you think differently? What are new growth models, new ways to adapt to markets? Our colleague Aidan Connolly likes to say that when you say you want to grow by 10 percent, there’s lots of things you could do to grow by 10 percent. If you want to double, or maybe you want to grow 10 times, there are not that many things you can do, but they have to be big. ■
Mark Green is executive editor of The Lane Report. He can be reached at [email protected].
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