indian pesticide market
TRANSCRIPT
Maximizing Profitability by selecting the best product mix to
benefit from domestic & international industry trends
Soumendu Ghosh Head – Marketing & Business Strategy
Cheminova India Limited, Mumbai
Agenda
Backdrop
Industry trends
Product Mix & Profitability
Backdrop
Food Demand – Supply situation laid a strong
foundation for the growth of Crop Protection Industry
Demand drivers :
Rising Population
Higher Incomes – Changes in dietary pattern & Improving Living
Standard
Spiralling Food Prices – Containing the inflation
Food Security Ordinance
Govt. Support – Crop prices (MSP) & Institutional Credit availability
Backdrop
Supply Side Constraints :
Dwindling arable land & diminishing av. farm size
Land degradation & Scarce Water resources
Labour availability in Agriculture
Lack of Investment in Agriculture
Low level of Awareness at ground zero
Low Productivity & Regional Imbalances
Backdrop
Indian Agriculture :-
Characterized by “Low
Productivity” &
“ Non mechanized Small
Sized Farm”
Backdrop
Urgent needs to improve farm productivity in an affordable,
environmentally sustainable way
On an average 20 – 30 % yield is lost due to Pests, weeds &
diseases amounting to ₹ 1500 bn @ current market prices
Improving agricultural productivity by preventing losses in an
integrated manner is the way to improve farm productivity
Strong Fundamentals of Crop Protection Industry with Positive
outlook
Industry trends
Global Crop Protection Market Trends
US $ Bn CAGR @ 7 % - 2007/12
Highly Consolidated
Shift in R & D expenditures to Seeds & GM
Traits with Increasing expenditures to
defend off patent molecules – Fewer
Pipelines
Development of Major markets in last decade
India - Introduction of Low dosages, environment friendly & high value
proprietary products resulting in Value growth in the market
Increased usage on improvement of Agricultural Economy & affordability
of farmers
Significant Growth in Brazil, India & China
Indian Crop Protection Market
CAGR @ 15 % - 2007/12 MNC’S Contributes ~ 40 % of
Indian Market
Generics ~ 70 % of the
domestic Market
Generic Indian Companies
are not involved in high end
R&D to find new AI’s instead
focus on Manufacturing
process, formulation
development & quality
improvement. R & D
expenses ~ < 1% of sales
compared to 8 – 10 % by
Innovator companies
Large off patent product
Opportunities
Consistently growing Market
Highly fragmented with 30 - 35 big companies along
with other regional players
Export from India – US $ 2 Bn
Changing Trend of Product Category
Tropical Climate – Crops more prone to Insect attack
& only GM - cotton
Increased wages & Scarcity of Labour - Herbicides
Differential Produce prices for Quality Fruits & Vegetables driving demand for Fungicides & Plant Nutrition Products
Changing Trend & Crop - Product dynamics
Indian Agricultural landscape is distinctly different from most other countries
1980 – 2004 :- Highly depend on Single Crop (Cotton)
GM Cotton :- Game Changer
Changes in Pest Complex – New Chemistries / Improved Formulations / Mixture / Spodoptera
Pulses – Heliothis & Maruca control New Chemistries
Soybean - Herbicides
Wheat – Phalaris Chemistries
Fruits & Vegetables – Emerging segments (MRL / Residue Legislation /
High Value Products)
Development of Indian Geographical Markets
Gradual shift in the
dominance of AP & Punjab
Emergence of Maharashtra,
Madhya Pradesh & Gujarat as
big markets
Govt. initiatives of 2nd Green
revolution in eastern India
led to the development of
Bihar, Orissa, Chattisgarh,
West Bengal, Assam &
Eastern UP markets
Crop diversification &
multiple cropping led to
development of Rajsthan –
Guar Crop
Evolution of Indian Domestic Agrochemicals Market
Wheat Herbicides &
Synthetic
Pyrethroids
Triazoles & Phalaris
New Chemistries
Neonicotinoids &
Heliothis Chemistry
2002 – Bt. Cotton
Strobilurins & New
Lepidopteran Chemistries,
Price Increases
Rs. C
r.
New Product Introduction being the major driver of Indian Industry Growth
CAGR of 15 % in last decade
Market Introduction of Products & Chemistries
Indian Industry all the time depend on MNC’s for New Technology & Product Introduction
Before IPR regime (2005) – MNC’s were hesitant to bring their New Technology due to Process patent in India
Market Introduction of Product & Chemistries
Residue legislation in the destination country of Export Crops like Fruits & Vegetables led to
increasing acceptance of New Fungicides in Indian Market
Post emergent selective herbicides adds to the convenience of Indian big farmers
Low dosages & High value new chemistries resulted in the overall value growth of the Industry
Top 20 Products - 2012
Out of top 20 products
in Value term – 5 Nos.
belong to Proprietary
Molecules
These 20 Nos.
constitute ~ 50 % of
Indian Domestic
Market
New products ~ 30 %
of total domestic
market & growing at
faster pace
Cost & time of New Product Introduction
Total = 10 - 12 years and ~ US $200 - 300 Million
Source :- Phillips Mcdougal report 2012
Fewer New products in Pipeline
A Typical Product Life Cycle
Product Mix & Profitability
Basic Approaches Technology / New product driven
Few products (4 – 5) contributing ~ > 60 % of sales
Brand led focus
Premium Pricing & higher margin ~ > 35 %
Offering Co – Marketing for market access after establishing the
1st mover’s advantages
Manufacturing & Cost Led
Off Patent Product manufacturing through reverse engineering
Acquisitions of Products & Companies for global reach & market
access
Back ward integration for Cost Leadership
Investment in Overseas Registration
Export focus
Market led Pricing Strategy - margin ~ 20 %
Basic Approaches Strategic Alliances & Market Access driven
New Product access from Japanese & Other MNC’s and Marketing
in Own brand names
Market Reach / Distribution Channel focus
Brand Building & differentiation through services / education &
training
“Value for Money” Pricing model – margin ~ > 25 %
Chinese Sourcing / Collaboration
Registration of Chinese Analogue of Proprietary off patent
molecules
Direct dealers / retailers networks
Services to gain grounds
Investment in Manufacturing & Contract research
Profit & Cost Analysis – An Example
Innovator Companies generally operate @ Net profit margin ~ 10 – 15
% while Generic Companies @ 5 – 10 %
Product Mix is the key determinants of Profitability
Profit Growth :- Market Contribution (External Market
Environment) – Cost (Internal Management in Supply Chain
and Manufacturing and Operational Efficiency)
Selecting the Product Mix Categorization & Concretization :- BCG Matrix of Relative Mkt. Share & Industry
growth
Product & Market Priorities :- To bring the desired “Focus” & Set the
“Priorities”
Priority & Activity Focus as per the Life Cycle / Stage of the Product by defining
/ detailing the Investment & Return Matrix
Determining the Effectiveness & Exclusiveness of Product Portfolio
Exclusiveness Commoditized
Leverage
Opportunity
Vulnerable
• Products are in a relatively less crowded market
• Products have high degree of differentiation in terms of effectiveness
• Products are in a relatively less crowded market
• Products do not have differentiation in terms of effectiveness
• Products are in a relatively crowded market
• Products do have differentiation in terms of effectiveness
• Products are in a relatively crowded market
• Products do not have differentiation in terms of effectiveness
Effectiveness High
Low
High
Low
Market expansion
(new segments)
Quality of sale
Framework to assess characteristics of product portfolio to determine focus products for marketing and promotion planning
Market growth through brand
promotion
Market share growth - Differentiation
Price levers dependant
Non price levers dependant
Pull
Push & Pull
Dealer Focus
New product launch and commercialization
Market and customer segmentation and
targeting
►Determining target segments based on structured analysis of market and customer characteristics (such as cropping intensity, productivity level, affordability)
Product positioning
►In-depth analysis of “Points of parity” and “Points of difference” vis-à-vis competition for ensuring clearly differentiated positioning
►Ratification of positioning based on customer and channel feedback
Key aspects Key focus areas
Product and market development
►Effective involvement of research and development and sales and marketing team in knowledge sharing, demos, training
►Clear focus on maximizing impact of demos by targeting trend setting farmers
►Feedback through FGDs as a formal input to market development
New product launch and commercialization
Key aspects Key focus areas
Pricing
►Defined mechanism for value based pricing (Formal framework considering customer’s affordability, willingness to pay and clearly articulated tangible and intangible product benefits)
Branding (Marketing and promotion)
►Clear articulation of benefits, differentiated by customer segments
►Adequate training of sales team and effective merchandising w.r.t FABs
►Effective communication of cost benefit ratio to farmers
►Enhanced ability of field force to handle “price objections” and “large customers/channel partners”
Concluding Points Increased Purchasing Power of Indian Farmers:-
Better Prices of Agri Commodities – Willingness and affordability to pay
for performance / need based products (Proprietary Products)
Demand for Value added formulations / Mixture Chemistries /
Differentiated products in Generics Habit Segments
Higher emphasis on Yield Increase & Quality of Fruits & Vegetables :- Increasing
sales of high end Fungicides and Plant Nutrition Products with low residue level &
lesser waiting period
Increasing trend of Agri Exports :- Approved / Least residue / High end Products
Machines replacing Man in Agriculture :-
Post emergent Herbicides & Herbicides tolerant cotton
Cotton Plucking machines, Rice Trans planter necessitates specific type
of product mix usage for ease & convenience of Operations
Increasing preference for Seed Treatment Products
Concluding Points
“Product mix” offering “Solutions” of “Crop – Pest Problems” of
“Customer’s Preference” with “Quality & Prices” which provide true
“Value for Money” & thus helping farmers to increase “Yield &
Quality” of crops to satisfy the global demand for food, feed, fibre and
energy – ”Basic for Sustainable & Profitable Business Growth ”
Any Questions? Thank you