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Indian pesticide market
This document discusses how selecting the optimal product mix can maximize profitability for an agrochemical company. It notes industry trends like increasing food demand and decreasing arable land that are driving growth in the crop protection industry. The document outlines different approaches to product mix like being technology-driven, cost-led, or alliance-based. It also discusses factors like product life cycles, market segmentation, and pricing strategies that are important to consider when determining the best mix. The conclusion emphasizes the need for a product mix that offers solutions to customers' crop and pest problems at a quality and price that provides true value.
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- 1. Maximizing Profitability byselecting the best product mix to benefit from domestic & international industry trends Soumendu Ghosh Head – Marketing & Business Strategy Cheminova India Limited, Mumbai
- 2. Agenda Backdrop Industrytrends Product Mix & Profitability
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- 4. 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
- 5. 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”
- 6. Backdrop Urgent needsto 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
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- 8. Global Crop ProtectionMarket 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
- 9. Development of Majormarkets 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
- 10. Indian Crop ProtectionMarket 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 Consistently growing Market Highly fragmented with 30 - 35 big companies along with other regional players Export from India – US $ 2 Bn
- 11. Changing Trend ofProduct 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
- 12. 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 /
- 13. Development of IndianGeographical 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
- 14. Evolution of IndianDomestic Agrochemicals Market Wheat Herbicides & Synthetic Pyrethroids Triazoles & Phalaris New Chemistries Neonicotinoids & Heliothis Chemistry 2002 – Bt. Cotton Strobilurins & New Lepidopteran Chemistries, Price Increases Rs.Cr. New Product Introduction being the major driver of Indian Industry Growth CAGR of 15 % in last decade
- 15. Market Introduction ofProducts & 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
- 16. Market Introduction ofProduct & 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
- 17. 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
- 18. Cost & timeof New Product Introduction Total = 10 - 12 years and ~ US $200 - 300 Million Source :- Phillips Mcdougal report 2012
- 19. Fewer New productsin Pipeline A Typical Product Life Cycle
- 20. Product Mix &Profitability
- 21. 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 %
- 22. Basic Approaches StrategicAlliances & 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
- 23. Profit & CostAnalysis – 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)
- 24. Selecting the ProductMix 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
- 25. Determining the Effectiveness& Exclusiveness of Product Portfolio
- 26. Exclusiveness Commoditized Leverage Opportunity Vulnerable • Products arein 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
- 27. New product launchand 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
- 28. New product launchand 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”
- 29. Concluding Points IncreasedPurchasing 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
- 30. 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 ”
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