WinField United South Africa: Managing entire value chain from chemical producers to growers, promising more robust growth after merger

Date:07-06-2021

In March 2021, the South African agricultural market witnessed a major industry consolidation when leading local companies Villa Crop Protection and Intelichem Group announced their merger, forming WinField United South Africa. 

WinField United is the crop protection input business unit of the Land O’Lakes Group in the United States (US), which has been investing in Villa Crop Protection since 2015. 

What changes and innovations will the integration of these two companies bring to the agriculture and crop protection market of South Africa? Recently, AgroPages exclusively interviewed Dan Hennessy (Vice President at International of Land O’Lakes) and Jan Vermaak (CEO of WinField United South Africa), who introduced, in detail, the strategic development plan of Land O’Lakes, the resource advantages of Villa Crop Protection and the Intelichem Group, and the development strategy of WinField United South Africa after the merger.

Dan Hennessy (left), Vice President at International of Land O’Lakes; Jan Vermaak (right) , CEO of WinField United South Africa

AgroPages：Please briefly introduce the development of Land O’Lakes and WinField United, including its main markets and business scale.

Dan Hennessy：WinField United is the crop input business of the Land O’Lakes Group in the US. The business was launched in 1921 by dairy farmers in Minnesota as a cooperative. Land O’Lakes has since evolved to incorporate other businesses, which are the crop input company, WinField United, and a feed company, Purina. Today, these businesses span the entire agricultural system, offering a farmer-to-fork view of agriculture. 

AgroPages：We know that Land O’Lakes invested in Villa Crop Protection in 2015. After five years of development, what results have this investment brought to both parties?

Dan Hennessy：Villa Crop Protection was formed in the early 90’s as an off-patent and commodity agrochemical supplier in South Africa. The development pipeline introduced a significant number of new products from 2010 onwards. When Land O’Lakes invested in Villa Crop Protection at the end of 2015, the company was already repositioning itself as a “one-stop” chemical supplier to all major dealer networks in South Africa.  

The partnership with WinField United has accelerated Villa Crop Protection’s evolution from a supplier of products to a leader of agronomic insight and innovation. As part of the partnership, Villa Crop Protection can now access the world class research and product development capabilities of WinField United. Interlock and the Max-In range of micronutrients are two of the most notable examples of high value products launched in South Africa. The team is working on the next generation of products to bring to the market.  

The interaction between the teams from Villa Crop Protection and WinField United created not only unique products and crop solutions, as well as a strong product portfolio, but it also introduced a new way of interacting with farmers and dealers through campaigns such as the Answer Plot™ system of in-field demonstrations, as well as the sharing of the WinField United US team’s expertise through visits to and from the US.   

WinField United’s investment in Villa Crop Protection supported growth through improved working capital funding, leveraging economies of scale and significant improvements to infrastructure via the expansion of Villa Crop Protection’s formulation capacity, warehousing and R&D investments. Today, the organization enjoys a leading position in the South African wholesale crop protection market.

From a Land O’Lakes perspective, our global investments enable us to leverage our contributions to new products and insights across a broader base. The work we have done in South Africa also provided valuable information on how our products perform on various crops, such as citrus.

AgroPages：This time, Land O’Lakes increased its investment in South Africa. What strategic considerations were this based on?

Dan Hennessy：Land O’Lakes has been pleased with its investments in South Africa. We also understand that the needs of growers are changing and continue to witness opportunities for offering innovation, technology and new solutions to channel partners and growers. Africa has a dynamic and growing agriculture industry, and Land O’Lakes believes that ongoing investment in research and development will create opportunities to expand its African footprint in the future. It also sees opportunities to support transformation, assist emerging growers and secure food production.

AgroPages：What are the various advantages offered by Villa Crop Protection and InteliChem? What strategic considerations are the merger based on?

Jan Vermaak:  A key component of Villa Crop Protection’s success in South Africa is its comprehensive range of quality products, supported by a dedicated marketing and technical team, state-of-the-art formulating and warehouse facilities, and extensive logistical support for dealers.  Villa Crop Protection is also one of the few companies in South Africa that invests in in-house research and trial capabilities across all major crops and geographies of the country, therefore, utilizing a strong “data to insight” approach to bring unique solutions to South African growers through channel partners.  

InteliChem has created a strong portfolio of products and services that offer integrated crop protection and specialist plant nutrition solutions, as well as a high-quality seed range, with supporting seed care expertise and independent and impartial agricultural consulting services. Strong emphasis is also placed on developing a bio-rational offering with a food safety focus in line with the changing needs of growers. InteliChem’s strong supplier relationships set it apart as a leader in the agricultural industry. Our main objective is to improve crop yield and quality with the best possible return on investment for our customers. 

The merger positions the WinField United South Africa Group well for future market developments, such as further grower consolidation, new channel formats, the shortening of the value chain and the need to provide growers with lower cost input materials or ways of using less input materials while attaining better results. Leveraging WinField United’s new products, services solutions and technology capabilities, we aim to bring internationally advanced, innovative and affordable solutions to the South African market. The ability to manage the entire value chain, from chemical producers overseas to the actual growers, allows us to reduce supply costs, ensure supply security, increase speed to market and control the product quality from start to finish. Both Villa Crop Protection and InteliChem are well positioned for growth, with the support of the larger WinField United Group.

AgroPages：After the merger, under the WinField United South Africa brand, how will you integrate resources from both parties? How will you use the resources brought by Land O’Lakes from the US for future development?

Jan Vermaak:  As described above, the merger is about integrating perspectives to better serve the market, not about integrating a wholesaler with a retailer. The approach will involve WinField United South Africa retaining a separate wholesale division (Villa Crop Protection) and retail division (InteliGro & InteliSeed). These will be separate legal entities with dedicated and focused management teams. 

We will, however, fully integrate Villa Crop Protection and Meridian Agritech under a new WinField United wholesale umbrella, which will continue to serve aligned dealers. Similarly, the InteliChem group will continue to represent key suppliers and further build on its long-standing supply relationships.  

WinField United South Africa will import and sell Land O’Lakes’ products and innovations once registered in the country, as well as leverage technology and data insights, and benefit from Land O’ Lakes’ experience in various areas, such as environmental stewardship and grower support. In addition, we will also apply insights gained by the extensive research and development of Land O’ Lakes to benefit the local market.

 

AgroPages：What will be the focus of WinField United South Africa's business in the market? What is its medium and long-term development plans?

Jan Vermaak:  The key short-term focus is to ensure that the wholesale division maintains and grows our business with aligned dealers, and that retail maintains and grows in terms of supplier and customer relationships, both leveraging the advantages of our international parent, WinField United.

In the medium-term, we are considering product expansions into bio-rationals and services expansions in the agri-advisory space. Several technology opportunities also exist, as well as partnerships across the wider industry. Our aim remains to be a leading, trusted and innovative agri-input supplier to dealers and growers alike. 

In the longer term, we will explore ways of assisting food production in Southern and sub-Saharan Africa to ensure food security. Working in Sub-Saharan Africa has many challenges related to politics, cross-border trade, micro and general business finance and culture, which need to be solved. Jan’s experience in these markets and in managing projects that can address these issues will enable WinField United to play a more significant future role in the continent.  

WinField United is also interested in expanding where opportunities exist. The growth we have seen in Africa certainly places it at the top of the list of potential markets. WinField United is also expanding in Canada, Brazil, Mexico and China. 

AgroPages：What adjustment will this merger require in WinField United South Africa's strategic procurement? What do you think of the recent price fluctuations of some major pesticides, such as glyphosate in China? 

Jan Vermaak:  Villa Crop Protection already has excellent relationships with several key suppliers across the globe. Some of these relationships have existed for more than 25 years. Meridian Agritech brought some additional procurement partners, with whiom we will maintain our relationships. Our combined international bargaining power may provide us with additional scale advantage to manage availability, price and payment terms, which, in turn, will allow us to compete effectively in an increasingly price sensitive and highly competitive market.  

The prices of various pesticides from China are also increasing, although not as significantly as the price of glyphosate. In most cases, the reasons are the increasing cost of raw materials. The COVID-19 pandemic’s impact on the supply chain is the main driver of the increasing cost of many commodities worldwide.

 

The pressure on vessel and container availability has continued to increase over the past 18 months, and there is no indication that the situation will improve in the short-term. This situation adds to the cost of pesticide products coming into South Africa and is causing severe delays to incoming orders.

 

The focus of WinField United’s current procurement strategy is supply security. We are buying at the best prices available to us while ensuring that our orders are placed several months in advance in order to ensure stock availability in the country when required by our customers. We cannot do much to control prices except to monitor the situation closely, in order to pass on any pricing advantages to our customers as soon as there is a lowering in the prices of material coming from China.

AgroPages：What are the characteristics of the current development of South Africa's agriculture and local agrochemical companies? What are the main problems facing the industry? 

Dan Hennessy : South Africa is a water scarce country with diverse crop systems and extreme climate shifts that impact farm profitability. The ability for innovation and the scale of one’s business will determine long-term viability under these conditions. The new combined entity is the largest single importer of crop protection products in South Africa and has, over many years of experience, acquired extensive expertise in managing supply for South African dealers and growers across many crop production systems. 

Since there is currently no significant production of active ingredients in South Africa, only formulations, the bulk of raw materials are imported and, therefore, businesses are exposed to foreign exchange risks and international price fluctuations. From the point of view of suppliers, it is all about serving your customers with the on-time delivery of quality products at competitive prices. These requirements must be fulfilled in an environment where exchange rate fluctuations are rife and supply chain disruptions are common. The mounting pressure on working capital with the increase in stock days to mitigate supply chain risks linked to declining margins are affecting all input suppliers. 

The investment climate in South Africa has also not been the best, with land transformation uncertainties, high unemployment and weak economic growth and downgrades all compounded by COVID-19 related restrictions.

Despite these challenges, South Africa enjoyed record yields in several crops and exports of agricultural products over the last year that was favorable to most sectors, with the major exception of wine products, due to many alcohol bans during lockdowns. This resulted in one of the best years for both our wholesale and retail operations. 

Jan Vermaak:  The global agrochemical market and the South Africa market seem poised to grow despite persistent challenges, such as increasing requirements for integrated pest management (IPM) and precision farming, more regulation based on consumer demand for sustainably-produced food, the role of agrochemicals in tackling climate change, the rise of biorational products, and the growing popularity of indoor farming, all of which can reduce traditional agrochemical revenues. As such, the agrochemical industry must continue to drive growth by capturing value through innovation, resourcefulness and digital alchemy.

However, longer product development cycles and escalating costs, increasingly stringent regulatory requirements and the accelerated pace of change within and in adjacent markets must be addressed.

The South African industry is witnessing similar changes and facing many of the same issues as other markets. Rising input cost, increased competition and farm/channel consolidation, and financing challenges for growers considering the demise of the Landbank are all putting significant pressure on margins across the supply chain. As a result, local companies are working hard to position themselves to deliver value in an increasingly commoditized marketplace.

Challenges can create opportunities for companies that are willing to evolve with the market. The current pressure on the industry is accelerating their evolution. Companies are looking very closely at their supply chain costs, value propositions and offerings to growers. Return on investment is becoming the key driver of farm decisions.

We are seeing the rapid embrace of new technologies, and we expect that pace to accelerate. Digital adoption, demand for biologicals and increased export residue requirements are changing how companies enter the market. Access to scale and innovation will be key going forward.