Apr. 4, 2019
By Leonardo Gottems, reporter for AgroPages
After completing four years in the country, Renato Seraphim, president of the Brazil branch of Albaugh, talked exclusively with AgroPages, in which he analyzed his years working in the country, as well as discussed the timing of the company, the projections for the year and challenges ahead - such as dollar appreciation issues and higher raw material prices for agrochemicals. Finally, he reviewed which products are showing better performance and announced new releases for Albaugh.
How do you evaluate the company's trajectory in these first 4 years?
Our result is highly positive. We built a strong brand, anchored in the proposal that Albaugh becomes the best choice for the Brazilian farmer. We have improved our processes and our logistical effectiveness to deliver high quality products at rational costs. We know that what we sell to the farmer is production goods, and the more efficient we are in this relationship, the more we will contribute to Albaugh's customer profitability.
Albaugh has tripled its turnover in Brazil, having closed 2018 with a turnover of 230 million dollars. For this, we invested, and will continue to invest, in our industrial plant in Resende (RJ). Since our arrival in Brazil, we have also built a diversified and modern model of management based on balancing our human capital. This diversification has also brought the experience we need to deal with market pressures, and also to dare at times when the market is favorable.
Going back a bit to our operation, I emphasize that all our processes have gained qualitatively by the implantation of an ERP with interfaces and being integrated, for easy use to forecast sales, CRM and billing. In relation to products, we brought a dozen of them to the country, which made our portfolio adhere to the needs of the farmer. Just as important is the fact that we access the market differently from conventional ones. We maintained the focus on the distributor, so that they are our representative with the farmer, despite the traditional Brazilian market seeing 30% of sales directly to the agricultural producer. I believe that the focus on the distributor is nowadays the great differential of Albaugh, and this relationship accounts for much of our success.
How is the company at this moment, and what are the projections for the year?
We started 2019 optimistically, even in a business environment marked by deep transformations stemming from consolidations between large groups. The launch of products for sugarcane and cotton, as well as the entry into the soybean fungicide market, supports and motivates increasingly ambitious goals for our company. Since the arrival of Albaugh in Brazil, we have drawn up a plan to obtain a 5% share in the Brazilian market, and I am very happy that we have reached this in half the time.
How do you project the exchange rate and commodity costs in the short and medium term?
The major obstacle in the crop protection market today is the wave of consolidations in the industry. For example, there is a large consolidation of suppliers of Chinese origin that will affect the competitiveness of companies against the increase costs of raw materials. The trade war between the United States and China is another worrisome market variable that can negatively impact the agrochemical market, as it immediately leads to uncertainty about the level of demand for products.
The issue of foreign exchange is also of concern, since it reduces the assertiveness of business plans and forecasts regarding the behavior of the sector. To get an idea of these difficulties, last year we bought products for a dollar value in March, and by the time these products reached the market the dollar was 40% higher, which greatly affected our profitability. Despite this exchange imbalance, we have made our policy of transparency and the suitability of the Albaugh brand Prevail - and we do not pass on our internal problems to the customer.
It will be very important this year that the ongoing reforms in Congress are approved for a more promising business scenario. We need tax simplification. For the purpose of comparison, it is worth mentioning that in the United States Albaugh invoices three times more products than Albaugh Brazil and has a staff table three times smaller than ours in the administrative area. As the country advances in the modernization of the economy, and the Government meets the old demands of the business class, Albaugh Brazil will certainly generate more employment and income. It is necessary to uncomplicated the conduct of business in Brazil.
What are the best performing products in the portfolio?
Our greatest strength in the market is divided into four products, with solid penetration and good market share, which are glyphosate
, atrazine, 2,4-D and copper. The demand for protective fungicides, now applied in rotation with systemic fungicides in resistance management in soybean cultivation, has provided a favorable outlook for our copper-based products. It is important to remember that we have the world's largest factory of copper-based products. With this, we offer the farmer a genuinely national product, without relying on any imported raw material. Faced with the need to use more fungicides to control rust, we envisage offering the farmer an alternative for efficient control and with lower costs, or his profitability will be impaired.
What products are being prepared for launch?
Our portfolio has 18 products scheduled for release over the next five years, including dicamba. In this segment, by the way, Albaugh is a strong company to offer synthesis. We could count on an even greater range of technologies, if legislation were to favor the speed of generic approval. The delay of five or six years for an industry to be able to offer the farmer a product with efficiency and low cost impacts unfavorably on all ends of the market, and mainly harms the producer.
It is important to emphasize that in the drug industry the approval of generics is more agile and the consumer gains much with this speed. In Brazilian agriculture, crop protection products account for 20% of production costs, compared to 6% in the United States and 4% in Argentina. Agile legislation for drugs would result in greater profitability for the Brazilian farmer.
How would you design the future of Albaugh in Brazil?
I am confident that our efficiency is the key to competing in a business environment challenged by consolidations among large companies in the industry. These groups have more 'shelf', a larger portfolio and access to raw materials with more competitive advantages. We will continue to be positioned to make quick decisions and to rationalize costs. Our focus on the distributor will continue to be a differential. I emphasize that our confidence in the success of Albaugh Brazil is due to the willingness of the company to invest. We will build three more production units in Brazil, expand our portfolio, hire more people, and enter new markets while maintaining the strategy of offering quality products to the producer at lower costs.
We know that the producer wants to have choices, not want to buy products from one company only. Their goal is to merge technologies, use new technologies and, at the same time, rationalize costs. We want him to be convinced that Albaugh is the best alternative to reach his ambitions and results.