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Interview with Nihon Nohyaku: Improving the tolerance of crops and plants to deal with the changing environment
Sep. 21, 2017
Nihon Nohyaku Co., Ltd.
JapanFollow
Japan
Mr. Yosuke Tomoi, President of the Nihon Nohyaku Group, works to ensure a safe and steady food supply, while creating new value through technical innovation
By 2050, the population of the world is expected to exceed 9 billion. According to the UN’s Food & Agriculture organization, food production will have to increase by 60-70% to feed everyone. What must be done to increase food production by 60-70% for 2050? What will be the biggest challenge to achieve such results?
The essential thing is to improve the productivity of the agricultural industries. To make agriculture sustainable is the number one priority. There is not enough space to be able to increase arable land and water resource, so instead we have to rely on other measures such as breeding improvements, innovation and the use of chemicals for pest and disease control. We also need to focus on improving the tolerance of crops and plants to deal with the changing environments caused by global warming; which is still progressing and the increased amount of salt found in the soil. We can rely on GMO or agro-chemicals to control pests and diseases but the chemicals to control the tolerance of the crop against shortage of water, high temperatures or a salty environment are also expected. We are taking steps by focusing on those variants with new chemistry development in mind, though it is a big challenge.
Suffering from a shortage in usable land and being highly dependent on imports for much of its food supply (rice, beans, fruits), Japan has, since 1970, more than quadrupled its consumption of agro chemicals. To what extent can food science be the answer to Japan’s geographical limitation? How is your corporation contributing to lessening the dependency of food imports?
Japan’s agriculture has been gradually reducing because of the aging population of farmers and the lack of introduction of the bigger mechanical production systems. Even with the implementation of measures to improve the Japanese agriculture production, I don't think Japanese crops can compete pricewise within the world market. I think the only way to grow Japanese agriculture production is to improve the quality of the products, and focus on the quality of production instead of the price competition.
Available land is limited and agriculture fields are separated from each other within a local area, even in the countryside you can see many houses in between farm lands, for that reason large field integration is difficult, compared to the US, Brazil and other big countries. If Japan can become more qualified in producing superior food such as rice, vegetables, and fruits which can be sold at higher prices, it may be possible to compete with the world.
We, agrochemical companies, can then also contribute to the Japanese market on the agriculture production of such high-quality products and start to export them to neighboring countries; especially Asia including China. There are many measures that need to be implemented by the Japanese agricultural merchants to improve product quality. I also see the area of agrochemicals and other chemicals to control the tolerance of crops to the changing environment as being key.
In the Western World, the debate that opposes organic supporters to the agro industry has “been overtaken by emotions, to the detriment of true rational science,” according to Rainer von Mielecki, head of Global PA at BASF. The short-term, profit-oriented vision of certain international actors has destroyed the reputation of the industry as a whole. What differentiates Japanese corporations from international ones in their approach to business? Can this negative vision of big names be an opportunity for Japan to bring a different mentality to the table?
This is a controversial issue, but I personally see the conditions faced by the western companies are not so different from those experienced by Japanese companies. In terms of people and opponents against the use of agrochemicals for example, there are a number of people opposed to using agro-chemicals in the Japanese market as well. It is impossible to cultivate without using any agrochemicals and fertilizers because agriculture is an artificial conduct.
In the natural world there are many plants, weeds, insects that live together. On the other hand in agriculture, we pick out and improve the crops which would become suitable for food. So, it is an artificial business, which needs measures to be taken to control and support it, in order for the business to continue.
The important thing is to pass on this information to make people understand the usefulness of the agrochemical products. We are communicating with the public, not only the consumers, but also teachers and experts within the academia sector. This is not an aggressive form of communication but a gradual process which is carried out in collaboration with the Japan Crop Protection Association. It is a long process but it is very important. I feel that continuing these kinds of activities and communication is the key to overcoming the negative visions.
On our recent interview with the President of Agro-Kanesho, he mentioned that nowadays around 40% of all products that were currently patented in agrochemicals were patented by Japanese corporations. From a global perspective, the agro chemical and core protection industry is taken by the big five. However, Mr. Kushibiki believed that we would see a change in ten to twenty years as embodied by the agri mergers. In the years to come, how well positioned do you believe Japan is to take international leadership and to break monopoly from the big five?
Compared to multinational companies, the rate of discovering new compounds by Japanese companies is high. The philosophy of the screening or invention differs immensely between multinational companies and Japanese companies. We carry out screening through a 'picking-up' concept whereas major companies conduct screening with a 'throw-away' concept.
In other words, the mesh of our screen is very fine, therefore we can pick up many compounds, but for the multinational companies the mesh of screens are rough so they tend to pick up only the bigger type of product because they have to cover their large amount of R&D expenses with a profitable product.
The rate of discovery in Japanese companies is quite high in this sense. Japanese are traditionally very delicate and we value the communication and association with people. Discoveries are mainly led by chemists in multinational companies, where our discoveries are led by biologists, chemists and toxicologists communicating with each other actively from the early stage of the development. Through these efforts, we are able to develop a product even which is rather small scale but with less toxic features for humans and the environment.
In 1928, Nihon Nohyaku was born from a merger between the Agricultural Chemical Department of Asahi Denka Kogyo KK（now ADEKA CORPORATION）and Fujii Seiyaku, giving birth to Japan’s first agrochemical manufacturing company. Can you highlight the milestones of your company for us? Can you give our readers a short overview of Nihon Nohyaku’s core activities & products today?
Since its foundation in 1928, our company has been the formulate distributor for many multinational companies. About fifty years ago, there were nearly twenty-five multinationals and most of the Japanese agrochemical companies, including us, were the representatives for all of those interactions. We had been doing such business for thirty to forty years since then.
Our first milestone happened in the early 60's when we started doing our own research and becoming a R&D company. Since then, we have launched several new proprietary products. Our second milestone was the acquisition of the agro-chemical business of Mitsubishi Chemical Holdings, which is one of the three major Japanese chemical companies. They tried to diversify the business in early 2000 and we brought out the business in 2002 (I was at the Corporate Planning Department at that time). With this acquisition, we could run the R&D company as well as being a manufacturer of many technical grades. Our third milestone is our recent acquisition of the company in India and Brazil.
We expanded our business to the Asian market before World War II, but after the war, companies in Korea and China were confiscated. Nevertheless, we started to expand our presence again in the late 60s. We formed a company in Malaysia in 1969, then in the mid-90s we opened an office in London and in New York, and those companies have been developed into the active companies they are today.
From FY 2012 to FY 2015, your net sales grew from 42.2 to 56.9 billion JPY, as your operating income also rose from 4.1 to 9.9 billion JPY. After such strong results, growth took a small halt, as your revenue from FY15 to 16 went down by 6 billion, followed by a drop in operating income (from 9.9 to 4.4 billion). What were the reasons behind the growth experienced from 2012-2015?
Before 2012 our business was stable but growth was quite slow. It was during this time that we saw we needed to expand our business in order to achieve continuous research capabilities. The capacity of our R&D and overall expenditures mainly depends on the size of our company and so in order to survive in a global market we need to have a certain capacity.
From 2012 to 2015 we invested in the acquisition of companies and started business development. We have also seen a rise in organic sales from our actual business, which have been steadily increasing by themselves over the past eight years and sales peaked between 2012 and 2015 which is mostly attributed to royalty income from Bayer Crop science. In 2008, we licensed our flubendiamide insecticide to Bayer, who started to market this product on a global scale with maximum sales by Bayer and myself totaling more than five hundred million US dollars. There was a market collapse in Brazil in 2014-15, which impacted the sales of flubendiamide and caused a halt in profit in 2016.
As you mentioned your company is a true international player, with a presence all over the globe. What do you believe makes your products competitive in America? Why should farmers buy NihonNohyaku’s Products?
We were not alone in our aim to enter the US market, a number of Japanese companies also attempted to do so, but we were the only company to succeed. I think the reason for this was our timing and the characteristics of our product portfolio. I opened the New York Office in 1995 which was about the time we licensed our products to the Hoechst/Shering group.
AgrEvo was among the multinational companies who started to grow the GMO business in the 1990's following Monsanto, and because they were focusing on that and not sales for third parties such as ourselves, we decided to take the product back and started carrying out the marketing ourselves. I faced strong resistance from our management because of the risk in the US of product liability and such things, but I was confident in the decision, I could see multi-national companies were focusing on big crops and diverting to other businesses such as GMO.
Our products were also suitable for rather small cash crops such as citrus, apples and vegetables being in the horseshoe area of the US continent where it is not necessary to hire a large team of employees, which is very different from the local role in the central US conserving market, where the area is quite large and requires a number of sales representatives and marketing personnel.
It was rather easy to enter into such a smaller market and I think this is the reason for our success. Competition between multinational companies has become severe over the last few years and they have been trying to target the minor areas as well. Many multinational companies are acquiring for example the Bio Pesticide company.
It is a small business for them but because competition is so high they have to look for every market. I see potential for growth in the US market, our current product can be grown within the horseshoe area and we are developing a lot of good products that can be used for the row crops. In the future, we would like to further penetrate into the global market, and maybe we will enter into the US row crop market by ourselves perhaps in a collaboration with a multinational company. The large companies have nearly 500 sales reps in the US market, where we have only twenty or thirty so there are difficulties. We are also trying to obtain a product license from the Japanese Companies who are currently selling their products through the US, or European multinational company.
What are your expectations for this year and what will be your strategy to reach that objective?
Our target is to have generated a 100 billion yen in sales by 2021. I am confident that we will achieve this target, with the kind of organic growth from subsidiary companies including the US, India, and Europe. I cannot foresee any problems that will impact this milestone but in order to be graded as Japan's number one company and to be within the Top 10 in the world, we need to have a consolidation with the other companies.
This has already been done among European and American companies so to break into those alliances, but between Japanese companies it is not an easy task. Because Japanese companies have obstacles such as not having stable shareholders and lack of experience of business portfolio conversion. However, the top major Japanese companies have already acknowledged that it is necessary to increase business size in order to survive in the future so there is a possibility that we may be able to collaborate in the near future. We have already been expanding our presence in the global market, so I think we could take a lead for better integration.
Could you give us an insight from the president into the philosophy of NIHON NOHYAKU?
Our philosophy and mission is to contribute to society by ensuring a stable food supply and sustaining quality of life with our innovative technology and products. We would like to implement those objectives with the creation of the new chemistries, so therefore our company's message is “Chemical Innovator for Crop & Life”.
We disclosed that we are developing two products: one is the wide spectrum fungicide, ISO name; pyraziflumid, the SDHI Fungicide - the succinate dehydrogenase inhibitor. It has high efficacy on specific diseases so we expect to capture the market globally. This compound will be introduced in Japan next year, the US in 2021, Brazil and other areas in early 2020s.
The second product is the insecticide for brown plant hoppers, ISO Name; benzpyrimoxan. This is quite a new molecule designed to control the hopper insect, which is very troublesome in rice, they especially impact Asian countries, including India and Japan. This will be launched in 2021 in Japan and 2023 in India and other Asian countries. We project this product will generate over one hundred million dollars. We also have a number of other products in the pipeline which we will be able to disclose in the future.
Our bestselling product is flubendiamide, which is the insecticide for the lepidopterous insects and we have licensed this compound to Bayer who is marketing this compound in more than 45 countries, and we are simultaneously marketing this compound in 25 countries. In 2014 the totals sales exceeded more than $5 hundred million.
In addition, we have another two very unique products, one is the isoprothiolane, which is our first propriety product for the rice blast disease, it is a dithiolane-based compound that was introduced over 40 years ago but it is still being sold today in Japan and other Asian countries, not only as a fungicide but a plant growth regulator as well.
Another is buprofezin, which is an insecticide for hemipterous insects like plant hoppers, scales, mealybugs and whiteflies. Buprofezin is an IGR (Insect Growth Regulator), and was introduced in the early 1980's. At that time, the concept of the insect growth was introduced and there were a few IGR´s for the lepidopterous insects, but there were no other products for hemiputerous insect which is why buprofezin captured a good market on a global scale. Buprofezin is used for whitefly control in vegetables and cotton. And for scales control in citrus, apples, and also for brown plant hoppers control in rice.
As the President of NIHON NOHYAKU, have you set an objective for your presidency?
We are planning to exceed our business size to more than one hundred billion yen by 2021, my goal is to open the path towards being one of the top ten companies, so I would like to see this come to pass during my presidency.
In Japan and also on a global scale, many companies are aiming to have smart agriculture and we are also trying to evolve into that kind of business. We are working on a device for farmers to diagnose infections of insects and diseases so that the appropriate agriculture or time can be chosen. These new technologies will not be covered by just the one corporation and many companies will collaborate to develop new smart devices in the future, and that they may be combined with the cloud system.
Source: The Worldfolio
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