Heartland transformation: ADM CEO Allen Andreas has led the giant out of scandal and put it on a winning path

Chief Executive, The, March, 2004 by Dale Buss

Out in the heartland where Archer Daniels Midland is headquartered, the farm economy has been recovering, and so has the company. And when Chief Executive G. Allen Andreas flies to New York City, he reaps another kind of harvest: kudos from Wall Street about the company's recent strong numbers. ADM reported a 56-percent surge in operating profit for the second half of 2003, as analysts scrambled to raise their estimates. And that followed a climb in sales for the prior fiscal year to $30.7 billion, from just $22.6 billion the year before.

"We've made a radical change in the last six or seven years," says Andreas, emitting a confident glow as he sits in ADM's 40th-floor suite at the Waldorf Towers, in between meetings on the Street. He took over as CEO in 1997 in a traumatic transition after a price-fixing scandal forced his uncle, Dwayne Andreas, from the post and landed a cousin, Michael Andreas, in prison for three years. "We needed more open leadership. We have become a major global organization with an asset base vastly diversified across the product chain. And almost everywhere in the world we have a presence now."

Headquartered in Decatur, Ill., ADM is the world's largest processor of soybeans, corn, wheat and cocoa. Everything it does is aimed at squeezing, crushing and, if necessary, conjuring the last drop of value out of raw commodities and shipping them to food processors as flour, meal, oil, syrup, starch, livestock feed and fuel. While ADM has roots in rural America, its 6,000 employees are dispersed throughout the world, running 270 processing facilities. 500 grain elevators, 2.380 barges, 85 towboats, 650 trucks and 17,000 rail cars.

After a slow start because of the mess made by his uncle and cousin, his own inexperience and the "Asian flu" recession, the 59-year-old Andreas has turned ADM into a dexterous, globally sourced player in a highly competitive business. He has overhauled practically everything about the company, including the globe-girdling deployment of its physical assets, its information-technology system, his corps of senior executives and even ADM's board. "He's made a tremendous difference in how this company is run," says Leonard Teitelbaum, a food-industry analyst for Merrill Lynch who has followed the company for about 30 years.

Of course, Andreas benefits from the great tailwind now being generated by a world economy that finally is improving across the board and from the long-term trend toward consumption of more proteins and fats in developing countries. But many challenges remain. Andreas still has to hope that expected bountiful crops in coming months ease the prices of soybeans and corn, helping the CEO to boost margins as handsomely as he has the top line. The company hasn't performed nearly as well in expanding sales of value-added ingredients--such as Enova, a cholesterol-fighting cooking oil developed by a Japanese partner--as Andreas had forecasted even a year ago. "People have a great bias toward conventionality in their food supply," he says. "We're trying to stay on the cutting edge. But in the final analysis, we have to produce what the customer wants."

Moreover, the company's struggle to regain credibility with the financial community isn't over. Moody's changed to negative its outlook for ADM's long-term bonds in May, citing among other factors a rising debt load. The stock price has remained mired between $10 and $16 a share for three years, compared with a split-adjusted high of nearly $25 just as Andreas was taking over. "They still score relatively low among people who run money," says John McMillin, Prudential Securities' long-time food analyst.

Perhaps most burdensome. Allen Andreas still must spend considerable energy trying to distance himself from the mixed family legacy at ADM. The Andreas clan began supplanting the founding Archer and Daniels families in the 60s and still own a few percent of the century-old company. While chief competitors Cargill and Bunge Ltd. established a broad global network of suppliers as well as customers during the last half of the 20th century, the charismatic Dwayne Andreas built ADM as "supermarket to the world" almost entirely on the crops of American farmers. The elder Andreas was an advisor to several U.S. presidents and could count on his Washington connections to prop up prices for key ADM products domestically, including high-fructose corn syrup and ethanol, a gasoline alternative made from corn. Dwayne Andreas also secured ADM a key position in international sales, symbolized by a mid-1980s meeting in which he got Soviet Premier Mikhail Gorbachev to taste-test a soy burger.

Dwayne Andreas was an archetypal top-down CEO, avatar of a highly closeted corporate culture whose insularity frustrated professional investors, among others, for decades. The elder Andreas preferred to issue "only one-sentence press releases where ADM wouldn't even reveal pretax earnings," recalls Bill Leach, food-industry analyst for Bank of America Securities. And he packed ADM's 14-member board with family members and cronies who could help him navigate the political terrain that was so crucial to his modus operandi.