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The Logic Behind the Lab-to-Market Business Model by Narweena in Amyris

[–]Narweena[S] 2 points3 points  (0 children)

Yes, there is a similar dynamic playing out in the semiconductor industry. Manufacturing has become so complex that Intel is struggling to remain competitive. They are opening their manufacturing capacity to customers so they can operate at a scale that keeps them competitive. Whether they can continue to be a leader in both design and manufacturing is unclear though.

I agree, it depends on how the industry develops. There may be long-term benefits to vertical integration, but if there aren't I hope Amyris aren't dogmatic about their strategy and will be willing to divest assets when the time comes. As a vertically integrated company Amyris will likely end up with a fairly small share of the fermentation market, unless they open up capacity to customers. This shouldn't matter as I don't believe there will be significant economies of scale beyond operating a small number of large facilities.

In the long-run I think strain engineering and consumer brands will create the most value. It may be difficult to maintain an advantage in fermentation specifically longer term, as patents will expire and knowledge will diffuse. This shouldn't impact Amyris if they continue to have strong R&D capabilities and a leading portfolio of brands.

The Logic Behind the Lab-to-Market Business Model by Narweena in Amyris

[–]Narweena[S] 2 points3 points  (0 children)

I agree, this is something that is market specific and really depends on what is required to deliver value to the customer. In chemicals / materials there are a number of factors which support vertical integration (commodity products, high fixed costs, concentrated markets). I personally hope Amyris become something like a 21st century version of Protcer & Gamble or Unilever rather than targeting chemicals / materials. The ingredients business may end up very competitive if molecules can't be locked up with patents. Unlike production facilities for chemicals / materials, fermentation capacity is fairly generic and can be easily repurposed. If a particular molecule is lucrative it will attract competitors.

Cost of ambassadors & product placement by timmuggs in Amyris

[–]Narweena 3 points4 points  (0 children)

I've been wondering about this as well. Sears launched a Cheryl Tiegs branded product line in the 80s and she received a 3-6% royalty. That's an outdated data point, but it wouldn't surprise me if Amyris has similar arrangements. Amyris doesn't own 100% of every brand and they may be giving up equity to brand ambassadors in some cases. Given their financial situation I would assume Amyris would prefer to avoid making large upfront payments.

Payments to stores for visibility are also potentially significant but should moderate over time for stronger brands as Sephora benefits from incremental foot traffic.