Competing in the Indian Seed Market: Key considerations for success in a challenging business and regulatory environment

In just six years, India is expected to officially surpass China as the world’s most populous country. Combined with rising incomes, food demand is set to skyrocket. Experts estimate that India’s food production must double by 2050 to meet demand. Unlike some other developing countries, India does not currently allow the cultivation of genetically modified food crops and has not approved a single biotech seed technology for commercial release in ten years. How can firms help Indian growers meet demand while navigating the challenging regulatory environment?

Cotton has Proven the Value for Traits

In March 2002, the first biotech Bt cotton seed technology was approved for commercial cultivation in India. Prior to its approval, the country’s production yields were among the lowest in the world. The cost of pesticides to manage an especially damaging pest – bollworm – accounted for a grower’s single largest expense, and yet, crops continued to be severely damaged by infestations, reducing yields and profits by as much as 40-70 percent. In fact, nearly 50 percent of all insecticides sprayed in India were unsuccessfully used for cotton pest control at the time.

The introduction of Bt cotton seed technology enabled resistance to key bollworm attacks. Indian growers could reduce the need and expense for insecticides, and produce high-yielding cotton crops bringing newfound prosperity to Indian households and communities. Grower adoption of the new technology was swift (see graph). India’s seed industry saw enormous growth welcoming many new entrants and investments, and the country quickly evolved its position from a net importer of cotton to the world’s top producer and second largest exporter of cotton.

Encouraged by this agricultural transformation, local and global companies alike invested heavily in research activities and grower support infrastructure in hopes of continuing the evolution across a broader selection of crops important to India.

The Regulatory Environment is Still Unclear

While cotton production has grown significantly since the introduction of Bt cotton, major crops in the country have seen only modest improvements (see graph). The Indian government has not approved any biotech seed technology for commercial release in ten years and has only recently allowed field testing to restart in some states after a lengthy moratorium. Government intervention around seed technology pricing and a recent proposal that would force technology sharing, raising serious concerns around intellectual property protection, have created additional market complexity.

Consequently, the uncertain business and regulatory environment over a prolonged time has not only deterred investment into the sector but has made it difficult for those with existing investments or infrastructure to operate as profitably. The potential for biotech seed technology advancements are enormous, but firms recognize the considerable risk of developing products without a clear path to regulatory approval and profitability.

Market Development Without Traits

Context believes that the increasing demand for food and agricultural efficiency will eventually lead to the approval of additional traits in the country, but this is not imminent. In the interim, there are important activities that Indian seed companies can take to improve their competitive position and profitability. Without traits, differentiation relies solely on quality germplasm, highly efficient operations and impactful go-to-market strategies, including strong distributor and grower relationships. Companies who discerningly invest in these markets and continue their pipeline development will be well positioned as the population, income, and food-demand continue to rise and regulation eventually relaxes.

Now is the time to systematically reevaluate your seed business strategy in the context of both current and anticipated future market dynamics:

What are the key micro- and macro- level trends that will impact customer demand and market opportunities?

• What is the strength of your germplasm portfolio relative to competitors?
• Where are the performance weaknesses and/or geographic gaps?
• Which hybrids or varieties should you more fully leverage?
• Is your existing infrastructure optimized?
• Are your distributors and salesforce organized, incented and trained to deliver all they can for you?
• Are your products priced, positioned and supported for maximum success in the marketplace?
• Which assets, capabilities, crops or products should you divest, acquire or discontinue?
• Who are the ideal buyers or acquisition targets?

Context has enabled clients by identifying and evaluating global and regional trends to inform assumptions around market demand and customer need; benchmarking research, production, and/or commercial capabilities relative to the competition; and by identifying both risks and opportunities to successfully compete in their space.

Although it is unfortunate that a country that could so meaningfully benefit from investments in seed technology is facing such disincentive for continued investment today, there is huge opportunity for those firms that can successfully and profitably navigate the near-term challenges. Moreover, while the regulatory and acceptance environment remains challenging for new technologies, it will continue to place a disincentive on both national and multi-national investment in other new technologies such as gene editing or advanced biological control approaches. As India continues advancing its agricultural industry, our team is poised to help your firm maximize success while minimizing risk in an uncertain marketplace.