CAC International: Continuing investment in researching innovative compounds and enriching product pipeline

In a recent press interview, Wu Langming, Vice President of CAC International in China, talked about the birth of its creative compound, cyproflanilide, as well as the company’s future development strategy and business planning. The details of the interview are as follows:

Could you please brief us about your company?

Wu: CAC International is an export-oriented enterprise, running on ″two wheels″ - crop protection and functional chemicals. The company’s export trade accounts for over 80% of total, ranking among China’s top 10 export pesticide exporters last year, according to statistics from the China Crop Protection Industry Association. Today, I want to stress that CAC International has spent heavily on innovation. Since 2006, we have been investing in the creation of new compounds. Among Chinese pesticide technical manufacturers, when people talk about innovation, they probably refer to innovation in production and the development of process and types of formulations. But at CAC International, we have been making continued investments in the innovation of new compounds over the last 10 years.

In recent years, affected by the COVID-19 pandemic and many international political incidents, the global agrochemical market has been changing and becoming more volatile. As an export-oriented enterprise, how would you view the changes? 

Wu: The international situation is becoming increasingly complex. As part of the senior management of CAC International, I think the complex international environment is definitely a great challenge, but at the same time an opportunity. Why is this a great challenge? Because China’s total pesticide technical export accounts for around 70% of the total global market share. With the ongoing process of ″derisking,″ the supply chain will become diversified, which will definitely put pressure on CAC International and other leading Chinese pesticide companies, especially as the industrial chain is moving to India. 

However, we also see opportunities. Because of the pressure and challenges, Chinese enterprises are forced to make changes. Just now, I spoke about our strategic transformation, which focuses on increasing investment in innovation, and a good outcome of that innovation would be our novel compound, cyproflanilide, for which we have initiated the registration process both at home and abroad. Its market launch in China will take place shortly. Meanwhile, we are also going global and are initiating the process of registration and market launch abroad. This type of technological upgrading and technological innovation is a particularly important basis for dealing with the complex international environment. In the meantime, we are thinking about globalization and how we can effectively partner with multinationals in establishing a local production, supply and marketing system that will meet the needs of multinationals. All these initiatives are forcing Chinese enterprises to change and reform. In this context, I can say it is an opportunity.

Despite such a diverse and complex situation, CAC International can still maintain stable growth. What do you think are the main reasons?

Wu: For an enterprise to grow, regardless of whether the situation is easy or tough, an important strategic measure would be to increase investment in research and development (R&D). In fact, R&D or innovation are rather general terms. Specifically, our investment in R&D and production is considerable. We have a smart factory or ″dark factory,″ and we have five production bases, which are all dark factories. We also invest in process development, types of formulation, warehousing and supply chains, which all improve the efficiency of our operations. Of course, the major spending in R&D is on new compound development, which is the key point. 

Another move we have made is to go global and become international, which can also be referred to as localization. Firstly, the internationalization of talent cultivation is necessary. CAC International employs foreign staff in major markets around the world, including Argentina and Brazil in South America, the US in North America, Germany and the UK in the Europe, and the entire Southeast Asia region. Secondly, the localization of registration and business operations is required, which is also called internationalization. Thirdly, the internationalization of production arrangement is required, where we seek partners or proper locations in many countries to achieve production, which is called localized production. The other area we are looking at is business model innovation. China became a World Trade Organization (WTO) member more than 20 years ago, and Chinese enterprises have been constantly progressing. For example, in the past, we supported registration; we conducted our independent registration; we supplied technical material to formulators and multinationals; and we then gradually created our own brands. Because of this brand building, we achieved a premium and maximized value of production and innovation. There is no definite business model, but there needs to be a main standard to innovate the business model, to meet the specific needs of each territory, especially the needs of growers. Starting from the research and development of new compounds and continuing to production, supply, branding and technical services, we created a complete industry chain of our own.

CAC International’s first innovative compound, cyproflanilide, has become a focus of attention among the industry. Would you please tell us about the research and development of the product?

Wu: Chinese entrepreneurs are very admirable. Since the founding of new China 74 years ago, China’s manufacturing capacity has ranked at the top of the world. However, in terms of new compounds, the Chinese pesticide industry is falling behind by comparison. Today, Chinese entrepreneurs have been courageous enough to achieve innovation, despite the scale of business being much smaller compared to multinationals. For example, CAC International had the courage to invest in the creation of new compounds, which is very significant, because we are not strong enough yet. Going back 17 years ago, we did not hesitate to invest in creation despite having limited resources. The significance of our investment in innovation is to show the entire industry that Chinese enterprises are willing and competent enough to achieve innovation, which is meaningful to the industry’s development. 

Furthermore, thinking of farmers who solve the challenge of providing food and clothing to the whole world, we know that farmers are facing production restraints that are difficult to solve due to lack of effective solutions. For example, in our communication with experts at the Ministry of Agriculture and Rural Affairs and university professors, it has been made clear that there is basically no available solutions for controlling rice stem borer due to the problem of resistance. Also, due to the problem of resistance, no solutions are available for controlling vegetable diamond back moth and flea beetle in the coastal areas of China. For this reason, innovation is not just for show, but should be used for problem-solving in a practical manner. In this connection, the innovative compound, cyproflanilide of CAC International, can help farmers solve the problem of resistance that could not be previously solved. Meanwhile, our product is innovative and satisfactory in addressing environmental issues, such as the issues of toxicity to rice field aquatic organisms and the food safety of vegetables. Strategically, it is naturally the responsibility of Chinese enterprises to help farmers solve practical problems. 

Our R&D process began in 2006, and up to 2016, we spent around US$10 million annually. Why do we calculate our R&D spending in dollars and not in RMB? This is because bioassay and the evaluation of the international market are done based on sourcing of various international data. Therefore, we do not solely spend in RMB. Currently, our R&D process has been going on for more than 10 years while our real focus on registration began in the last six to seven years, covering the discovery and screening of compounds, bioassay, and then the registration process and OECD data package, up to start of production, and eventually the market launch, in cooperation with business partners. In the last six to seven years, more than US$50 to US$60 million have been spent, bearing in mind that a new compound developed by foreign companies may cost at least US$280 million. By contrast, the efficiency and speed of Chinese enterprises are quite encouraging and inspiring.

In fact, this is CAC International’s breakthrough from 0 to 1. As a complete R&D system has been established, CAC International can expect more 23456 to happen in the future, which may generate a larger number of innovative compounds.

Wu: This is a good point. First of all, a system is especially important, and we have an R&D system, registration system, and complete production system of created compounds, as well as a business system. Thanks to these systems, we can create insecticides. In our current pipeline, we have creative fungicides and herbicides. In terms of development in phases, the latest is cyproflanilide which is in the process of commercialization while some others are in the early stage of screening. To date, we have established a systematic mechanism for the R&D of innovative compounds, including our product pipeline and product line.

Please brief us about your future development strategy and business planning.

Wu: We are focused on crop protection, but we pay attention to material science. This is a two-wheel drive strategy. Anyway, we want to make creation a major strategy. For the next 10 years, we are prepared to continue investing in the creation of new compounds and enriching the product pipeline. Besides, internationalization will continue to be our strategy. In today’s complex international environment, going abroad can maintain our growth momentum. Of course, we would not abandon our key strategy of safeguarding food supply. As I said just now, we will build smart factories and increase our high-end manufacturing capacity. China is a ″world factory,″ in which I believe CAC International will play a key role. In the meantime, CAC International intends to move forward in the high-end manufacturing sector, which is also our important strategic direction going forward.