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.
Corporate Profile 47Billion Information Technology
Indian pesticide market
1. 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
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 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
8. 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
9. 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
10. 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
Consistently growing Market
Highly fragmented with 30 - 35 big companies along
with other regional players
Export from India – US $ 2 Bn
11. 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
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 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
14. 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.Cr.
New Product Introduction being the major driver of Indian Industry Growth
CAGR of 15 % in last decade
15. 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
16. 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
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 & time of New Product Introduction
Total = 10 - 12 years and ~ US $200 - 300 Million
Source :- Phillips Mcdougal report 2012
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
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
23. 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)
24. 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
26. 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
27. 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
28. 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”
29. 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
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 ”