Strategic evolution of overseas market development of Chinese pesticide manufacturers
Feb. 12, 2021
While 2020 was a difficult year for Chinese pesticide manufacturers, it was also a year for creating opportunities during hard times. Although China's COVID-19 pandemic caused a stagnant state in many business sectors, Chinese pesticide manufacturers worked diligently to advance the global market. Many manufacturers still persisted in implementing their overseas strategies, to overcome the difficulties in the areas of business operations, travel and logistics while ensuring the health and safety of their employees.
Due to the gradual loss of the low-cost advantage in international pesticide trading, in spite of the enhanced product quality and brand image of Chinese agrochemical manufacturers, while also taking into account the far-reaching impact on the global industry structure caused by the mergers and acquisitions among international giants, Chinese manufacturers have started the strategic evolution of their overseas market development, which is changing from the business model of export trade to the introduction of technology, brand or even platform.
In the details as below, elaborations are made on five Chinese companies that are recently active and representational in respect of overseas market development. Some of them adhere to the steady development strategy which is supported by the strong technical expertise and formulation resources at home, having gradually penetrated into market beginning from product registration, then followed up by setup of distribution channel and independent brand; some of them make full use of its successful marketing experience via the acquisition of local companies, which allows for a quick realization the promotion of its own proprietary formulations brand; some others are starting with logistics and warehousing service to utilize overseas warehouses to establish trade platforms.
Both at home and abroad, these companies have remained active in 2020. This article will also present the development dynamics of leading manufacturers, as well as the comments of their leaders.
20-year market cultivation in Africa, grew to be the market leader
Limin Chemical is the largest protective EBDC fungicide manufacturer in China, as well as the largest manufacturer of cymoxanil, phosethyl-al, pyrimethanil and metham. The company plays an important role in the global fungicide industry.
In June 2019, Limin Chemical completed the acquisition of 100% stakes in Veyong (Veyong Pesticide, Veyong Veterinary and New Veyong), therefore, acquiring Veyong’s continuous gas phase synthesis technology for the production of glufosinate. Limin Chemical also gained a variety of veterinary products, such as tiamulin, ivermectin and acetamido. In the first half of 2020, the company achieved a net profit ranging between Yuan288 million and Yuan308 million, an increase of 45% to 55% year on year.
While consolidating high-quality assets, the company has actively developed its overseas market. After years of overseas registration efforts and market cultivation, Limin Chemical’s products have been exported to more than 70 countries or regions, including the EU, Thailand, Philippines, Pakistan, Indonesia, Tanzania, Algeria and Egypt. Limin Chemical has also established subsidiaries or representative offices in Tanzania and other regions for further business promotion.
When conducting business in the remote African continent, how can Limin Chemical manage its remote business operations and coordinate a synchronized business development system between home and abroad? Wu Mingfu (Former General Manager of Limin Chemical Tanzania) was stationed in Africa for many years and led the company’s gradual growth into an agrochemical leader in the Tanzanian market. He briefed AgroPages about the fact that Limin Chemical’s Tanzania branch was established in 2004 and started its business operations in 2005. At the beginning, there were only two registered products, with annual sales below $100,000. After years of development, Limin Chemical has now formed a portfolio in Tanzania containing some 20 registered products, which are mainly its proprietary fungicides, supplemented by insecticides and herbicides sourced from China, with sales reaching $9 million. Today, the company has become an agrochemical industry leader in the local market.
Limin's local manufacture facility in Tanzania
Growers in Tanzania with Limin’s products
Wu added that at when it started its business operations, Limin Chemical Tanzanian adopted Limin Chemical’s business philosophy of “gaining profit, rewarding people,” with the aim of offering high-quality products and services in support of Tanzania’s agricultural development and to benefit local people. In the meantime, while the company is growing, Limin Chemical Tanzanian has tried to create local job opportunities as much as possible. In terms of overseas business operations, the first difficulty faced by manufacturers is the recruitment and management of staff. Limin Chemical Tanzania mainly recruit local employees via online recruitment and from colleges and secondary schools. After being employed by the company, an internship will be established and Chinese staff will train the new employees on all pesticide sales-related knowledge. At present, the company employs over 50 enrolled staff and a number of temporary employees. Except for six Chinese employees, the rest are all local employees whose salaries are higher than the industry average in Tanzania.
The Tanzanian market is seriously homogeneous, where quality is very different while price competition is fierce. After landing in the local market, Limin Chemical adhered to its brand development strategy and has always offered top-quality products to the Tanzanian market. Through a self-built sales channel for independent distribution, which is backed up by high-quality products and a strong supply capacity, Limin Chemical Tanzania has now achieved reliable development.
Speaking about the future development of Limin Chemical Tanzania, Wu stressed that in the future, Limin Chemical Tanzania is prepared to make full use of the Limin Group’s product and registration advantages to file for the registrations of superior products in Tanzania. Limin Chemical Tanzania aims to become a comprehensive agrochemical company over the next five years, to sell Limin Chemical’s fungicides and Veyong’s insecticides, supported by improved technical services.
Ready to go, based on the strengthen of its domestic pesticide technicals
The Hailir Group is an enterprise that has been developing in recent years, resulting in the increased production capacity in pesticide technicals and volume of production of upstream and downstream products.
In June 2020, the trial production of Hailir’s neonicotinoid thiamethoxam and clothianidin began, followed by the trial production of prothioconazole technical in September 2020. In July, a new project of Hailir’s wholly-owned Qingdao Hengning broke ground covering 40,000 tons of pesticide technicals and intermediates, including difenoconazole, propiconazole, chlorfenapyr and diafenthiuron. In the first three quarters of 2020, Hailir's operating revenue increased by 30.76%.
The R&D center and plant of Hailir Group
During the centralization of China’s pesticide industry, Hailir expressed its intention to industrialize its reserve products over the next five years. The company is also prepared to select high-quality assets for acquisition, to enter the first tier of Chinese pesticide industry players within five years and become an upstream and downstream integrated agrochemical business group.
In addition to increased capital input in the domestic manufacture sector, Hailir has continued its efforts to capture the overseas market. In order to accelerate its market expansion in South America and Southeast Asia, Hailir Brazil and Philippines were both established in 2019. Even during the pandemic in 2020, Hailir established branches in Laos and Cambodia. Currently, the company's business deployment in Southeast Asia and South America is becoming clearer.
Ge Yaolun (Board Chairman of the Hailir Group) told AgroPages that Hailir's overseas branches were initially established to support the customer registration process in terms of traditional business development, which are now advantage towards the objective of independent product registration and distribution in some countries.
Hailir's overseas business is not only limited to Southeast Asia, it is also concentrated on developed countries with market potential, especially the EU, Brazil, the United States and Canada, where staff and resources will be allocated and strategies are being formed tailored to local characteristics, to deal with the requirements of countries with great potentials but have higher levels of difficulties. Staffing will be based on self-employed and localized employees, which is a shortcut to starting business operations. In Brazil, for example, Ge noted that the biggest challenge for Hailir Brazil is the lengthy and costly registration period, which is a severe test of the team’s ability to consolidate resources. The strength of Hailir lies in its pesticide technical resources in promising markets, its many formulation registrations and its local business experience. In Brazil, Hailir learned the successful operation model of multinationals and could establish a Brazilian branch. In the initial stage, 3 to 4 staff members are envisaged. In terms of personnel recruitment, the staff need to identify with Hailir’s corporate culture to make and implement plans that will achieve results via proper methods, which can be duplicated for further implementation to lead to further achievements. With regards to business cooperation, Hailir only cooperates with local partners on a long-term strategic and sustainable basis.
Ge added that Hailir's short-term overseas business plan is to set up a team, select a channel, speed up its registrations and establish cooperative relationships, while in the mid-term, it plans to adjust measures to local conditions and establish its own brand, to develop its business according to its own advantages. In the long-term, the plan is to refine and strengthen its own brand, he further added.
Shaping a global brand, backed by innovation and formulation expertise
In 2017, China’s leading pesticide formulator, Mindleader, took an important decision to fast track its development, by providing a capital increase to Pilarquim (Shanghai) Co., Ltd., as part of its efforts to start the product registration process in more than 40 countries and regions, including America, South Asia, the Middle East, Africa, Russia and Poland. The initiative is a good combination of domestic formulation research and production resources and overseas market channels built up over many years.
After three years of brand integration and development, the resources of Mindleader and Pilarquim were consolidated, leading to a satisfactory synergist effect. So far, Pilarquim owns more than 400 registrations worldwide. Under the guidance of the “differentiated product strategy” adopted by the company’s board chairman, Mu Canxian, Pilarquim has gradually perfected its brand concept. Its high-end formulation products, including distinctive microcapsule suspensions, have succeeded in overseas markets and are highly regarded by users.
In 2020, the entire world was affected by the coronavirus pandemic, but this did not stop Pilarquim's market penetration. While ensuring the health and safety of its staff, Pilarquim continued its product releases in Peru, Brazil, Colombia, Kazakhstan and countries in Central Africa.
In 2019, in view of the incidences of spodoptera frugiperda and other major pests in Africa, Mu led the working team in charge of the Middle East and Africa market in conducting in-depth field research in Kenya and Tanzania, to learn about the local climate’s characteristics, farmers' pesticide application behaviors, and the status of the agrochemical industries of local regions. By 2020, Pilarquim has registered a series of hot products sold in Central and East Africa, while new registrations covering major crops are being processed and will be competed soon in Kenya, Tanzania and Uganda. Pilarquim is expected to soon join its partners in East Africa to conduct a series of promotion activities, to offer superior crop solutions and technical services in support of local agricultural production.
Pilarquim’s Chairman Mu Canxian conducted research in Kenya and Tanzania
In Brazil since 2020, Pilarquim's local work team has cooperated with its partners in organizing several online events. Pilarquim was one of the sponsors of the REPRODUCAMDA – 2020, held on 13th and 14th July, 2020, which witnessed the participation and interest of more than 125,000 growers and partners.
In Kazakhstan, Pilarquim's fungicide Pilartep was released in the country’s wheat market in 2020. In June 2020, Pilarquim promoted Pilarpro in the rice market of Llanos Orientales, Colombia. Pilaround (glyphosate 757 SG) was also released to the market. In Peru, after a large number of field trials, in collaboration with its partners, Pilarquim launched a primary chemical control tool for treating plant diseases and insect pests.
In an exclusive interview with AgroPages, Mu said that by 2023, Pilarquim will be prepared to launch more than 20 microcapsule products in the Chinese market, which will then be promoted in the global market. Adhering to its “differentiated product strategy” to create value for customers, Pilarquim is leading a new method of overseas sales of Chinese pesticides, which will create an innovative path for exportation of the “Products Intelligently Made in China” in the global market.
Proprietary brand in EU market developing toward a new dimension
In recent years, Tide Group's overseas market operations have developed rapidly, particularly its penetration into the European market, in 2019 and 2020, after it was granted ANNEX III registration of two formulation products in several European countries.
The tactics of the company are to make full use of the successful marketing experience via the acquisition of local companies, which allows for a quick cut-in and cultivation of local market channels to realize the promotion of its formulations of its proprietary brand.
The Brazilian market plays an important role in Tide Group’s global business deployment, as well as one of the promising crop protection markets in the world in the future. In 2014, the group announced the setting up of a subsidiary in Brazil -Tide do Brazil, LTDA, which exerts 70% control of the stakes in Prentiss Química, Brazil’s local crop protection product manufacturer and distributor. After five years of operation and consolidation, Tide Group took a step further in October 2019 to have successfully acquired 100% of stakes in Prentiss Química, thereby exercising full control of the company. Accordingly, Tide Group's comprehensive competitiveness in the Brazilian market has been greatly enhanced in an all-round way.
The facilities of Prentiss Química in Brazil
Prentiss Química is located in Campo Largo, whilst an administration center has been set up in the capital of Rio Grande do Sul, covering an area of 4,200m2, being capable of production of EC, SC and SL formulations, with an annual capacity of over 20,000 tons. Prentiss Química’s annual sales in Brazil was once ranked among Brazil’s top 10 agricultural and chemical companies. Through the full acquisition of Prentiss Química, Tide Brazil has not only obtained the production equipment and sales channels of Prentiss Química, but has also obtained registration resources, which paves the way for Tide Brazil’s further business development in the Brazilian market.
The European market is known for its high capital requirement, high technical barrier, highly complicated regulation and market system, which makes lots of Chinese companies to step back. However, it has been Tide Group’s long-year plan to include the EU market in its territory of trade. In 2013, relying on its previous experiences in market development in the United States and Brazil, Tide’ Group’s plan to access the European market was eventually implemented. Tide Group, Lanfeng Biochemical and Agroventures S.R.L. jointly launched a joint venture company – VEXTACHEM SRL, in Latina, Italy. VEXTACHEM is now serving as a very useful business platform, which fully utilizes the information and distribution advantages of localized operations, as being backed up by registration and promotion of the proprietary brand of Chinese manufacturers.
The results of the market deployment in the early stage have shown up rapidly. In March 2019, VEXTACHEM SRL was granted registration of the herbicide metamitron under ANNEX III in nearly 10 European countries. VEXTACHEM SRL participated in the process of Renew of metamitron technical in EU, having become the only generic compound company participating in ANNEX II Renew, besides ADAMA and UPL. In 2020, VextaDim, the company's modified clethodim formulation 240 EC, was expected to be registered in all target markets in the European Union. The company is also an applicant for the renewal of clethodim’s active ingredients in the European Union.
Being backed up by the above two superior products, VEXTACHEM SRL will achieve a longer and more stable market position in the European market. The product brand of VEXTACHEM SRL is expected to develop toward a new dimension.
Building a comprehensive import and export trade platform, supported by overseas warehousing
In 2020, the Wynca Group embraced its robust growth. In November, phase two of the annual 300,000-ton organosilicon project of Zhenjiang Jiangnan Chemical Co., Ltd., a wholly owned subsidiary of Wynca, began running with a capacity of 150,000 tons of organosilicon monomer. Its total annual organosilicon production increased from 340,000 tons to 490,000 tons, which established a solid foundation for the company's upstream and downstream integrated industry chain development, and helped interlock its original glyphosate production in Zhenjiang Jiangnan Chemical, therefore, improving its overall technical level of business operation.
Due to the load run of its production capacity, the strong market demand for the organosilicon series, and the contribution of Huayang Chemical, the Wynca Group's profit increased significantly in 2020, with its annual net profit expected to grow from Yuan548 million to Yuan586 million, an increase of 45% to 55%.
Under the circumstance of continuous mergers and acquisitions among Chinese agrochemical industry players, Wynca has had to take part. In January 2021, Wynca announced the acquisition of over 51% stakes in Hefei Xingyu Chemical Co., Ltd., a company that possesses a nationally advanced bentazone technical production line. The acquisition complements Wynca in terms of the development of its product chain and sales channel.
As far as overseas market expansion is concerned, Wynca has taken a different route compared to other pesticide manufacturers. Looking at African market development, back in 2005, the “Ghana Sunshine Agricultural Inputs” was founded, with the controlling share being acquired later by Wynca in 2009, followed by a change in name to Wynca Sunshine (Ghana) Agric Products & Trading Co., Ltd. The company also established three branches in Cote d'Ivoire, Nigeria and Mali, having launched three major product lines, which include pesticides, spray machinery and organosilicon covering nearly 20 pesticide varieties, in the West African market including Ghana, Cote d'Ivoire, Nigeria and Mali, from where its business coverage could spread over to Togo, Benin, Burkinabe and Senegal via border trade.
The facilities of Wynca Sunshine in Ghana
After years of development, the annual sales of Wynca Sunshine Ghana increased 10-fold over a period of five years. At present, the company's leading product, glyphosate, occupies a major share of the market in Ghana. Wynca Group has filed for a registered name, Sunphosate, which is a dedicated product name for use in overseas markets.
Having discovered considerable local market demand and the potential for further market share growth, increasing product supply and expanding business scale, in 2011, the Wynca Group decided to make an investment to establish a formulation plant and an overseas warehouse in Ghana. Therefore, it can also provide warehousing and logistical services to more Chinese enterprises wishing to access the West African market. In 2018, Wynca’s 5,400m2 warehouse was built and its business sector was extended from agricultural products to building materials and daily use chemicals distributed via border trade to a number of West African countries, such as Togo, Benin, Senegal and Burkinabe, using the well-established existing market network. To this end, its products can be distributed further to other African countries.
Currently, Wynca Sunshine(Ghana) is working on an IT system for its cross-border trade online platform and cross-border online logistics, which will establish two further platforms, an online one and an offline one. A comprehensive import and export trade platform targeting West Africa is being developed using Wynca’s own sales channel and logistics in the region, based on the two logistics platforms at home and abroad and supported by the latest internet technology.
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