UPL bets big on Brazil farmer relationships

Mumbai-based UPL Ltd, will invest some $200 million in Brazil over five years to best serve local food producers who are key suppliers in India’s ever-growing market.

In their first interviews since concluding a $4.2 billion acquisition of North Carolina-based Arysta LifeScience Inc earlier this year, UPL executives said investment in the Latin American agriculture giant will be primarily directed at research, and excludes cash for potential acquisitions.

“We are not only selling technology into Brazil,” Jai Shroff, global chief executive, told Reuters from Atibaia, where he attended a company convention this week. “We’re enabling entrepreneurs in Brazil and in South America to set foot in countries like India.”

Fabio Torretta, UPL head in Brazil, said the company is pioneering the combination of selling both chemicals and “bio” solutions to help farmers establish a crop, fight disease and manage stress.

Creating products for Brazil remains challenging due to the climate, which makes it easier for diseases and bugs to resist chemicals, he said.

The company said its presence in Brazil, where it operates two manufacturing plants, underpins a strategy of forging lasting commercial ties with farmers. The company has estimated that 80% of the world’s food production will come from emerging countries including Brazil in 30 years.

Recently, UPL sponsored a meeting of its Brazilian customers with food importers in India to build trade relationships.

With 20 percent of global sales, Brazil is UPL’s biggest single market. Nevertheless, Shroff said, “penetration in Brazil is still not where it can be.”

With $5 billion in annual sales and a footprint in 76 countries, the 50-year-old company founded by Shroff’s father says it is essential to keep in touch with farmers to make sure products are tailored to their needs.

One reason this is so important is the cost of creating a new chemical molecule, which can take 15 years and cost $280 million, said Diego Casanello, global business chief operating officer.

Another issue is the approval process for new product registrations, which is particularly long in Brazil at an average 6-10 years compared with 2-3 years in developed nations.

“The regulatory costs and the cost of doing business is rising, so size matters,” Shroff said.

The company also sells technology to make agriculture more resilient to climate change.

“We are going to change farmers’ practices so they can manage (the effects of climate change). They can afford to pay for these things now. Before they did not need to,” Shroff said.