Value First

After a couple of particularly strong years in almost every segment of U.S. agriculture, 2006 is not shaping up as a “year to remember” in crop protection. While unfavorable weather took its toll on crops in many regions domestically this season, positive weather events in key growing areas around the world has kept a lot of chemistry in storage and off the field.

This season aside, the big six research-based crop protection manufacturers were able to take advantage of the recent upward trend by working to solidify their positions in the market and set a clear course forward. And, it has meant reinforcing their commitment to partner with the distribution channel.

There is a lot more static in that relationship these days – the “generitization” of crop protection products, the growing impact of biotech traits, the consolidation of agriculture at all levels, and the increasing impact of the global economy test the strength of the connection. But these factors are also providing opportunities for manufacturers to differentiate themselves strategically in the market.

Seed, Biotech Bonanza

Each of the six basic manufacturers have some measure of position in the seed market, from proprietary traits and germplasm to seed treatments. The inevitable result is that seed is inextricably linked to the sales and marketing efforts, as well as the future outlook, for the basics.

In row crop growing regions, retailers have been learning to sell seed and traits for nearly a decade. Today, retailers are on the cusp of capitalizing on the biotech movement, says Travis Dickinson, vice president of U.S. Marketing, Syngenta Crop Protection.

“Retailers have evolved quite rapidly, and embraced biotechnology at a pace that many of us would not have envisioned even five years ago,” says Dickinson. “As we look at ways to deliver value-added combinations of crop protection and seed, alongside fertility programs and elite germplasm and biotech traits, I think we as an industry are only beginning to address bringing the kind of full-service offerings to customers that pull all those elements together.”

The “usability” of biotechnology from the retailer’s perspective is making a big difference, as traits are mixed and matched more readily today, and can be delivered using top-performing germplasm based on regional research and local demand. 

In recent years, many local seed brands have been purchased by basic manufacturers and the company names retained, providing added outlets for traits and, in many cases, alternative brands for retailers to carry.

And joint ventures and corporate strategies designed to build value and potential profitability for the channel have been rolled out as well. One prominent example is GreenLeaf Genetics, a joint venture between DuPont’s Pioneer Hi-Bred and Syngenta.

“Regional seed companies, and therefore most of our retailer partners, will have access to proprietary traits and select germplasm from Pioneer and Syngenta through the GreenLeaf Genetics venture,” says John Chrosniak, regional business director, DuPont Crop Protection North America. “I believe that our retail partners will have every opportunity to share and prosper in the value that can be created in licensed germplasm and traits, albiet in a different model.”

Stan Howell, vice president, North American trade area, Dow AgroSciences, says that through its Mycogen brand the company has made huge strides in matching up top hybrids and germplasm with traits that growers are demanding. “We’re able to offer retailers the ability to take advantage of the shift in value from ag chem to seeds and traits through our Mycogen seed corn and our Herculex insect protection in-plant traits,” says Howell. More than 50 new hybrids will be introduced this year.

A company with an enormous stake in the biotech side of ag is Monsanto, which claims to invest $1 million per day in its seed and trait R&D program and with biotech sales that dwarf its crop protection business. Retailer seed aptitude is a huge concern, and Jon Nienas, channel strategy manager, says retail training is critical.

“One of the biggest changes we’ve seen is that a lot of retailers have made the transition from having a major portion of their business in chemistry to now having it in seeds,” says Nienas. “We have provided and continue to provide training, help, and guidance to help our retailer/dealer partners become good seed sellers.”

That includes computer-based training on seeds and traits as well as programs like Monsanto‘s DEKALB/Asgrow University, says Nienas. “We’ve tried to bring dealers into the seed business to show them how to become a knowledgeable resource for their customers, provide value, and in turn capitalize on a new opportunity.”

It’s an investment in today and the future, when Monsanto plans to bring improved input and new output traits on the table.

Price Vs. Value

With the onslaught of generic options hitting the marketplace in recent years, and the virtually complete transparency of product pricing, retailers are being pushed to make some tough choices about what they buy and who they buy it from.

For Dave Coppess, president of Heartland Coop, West Des Moines, IA, price transparency is really the issue. “We are not getting pressure from growers to supply generics as such,” says Coppess. “We are getting pressure to be price competitive. In some cases, that can only be achieved by handling a private label or generic compound that may not have the cost of R&D, technical support, complaint handling, etc. that branded suppliers incur on behalf of the industry.

“We think it is important to manage the balance between the branded and generics,” he continues. For its part, Heartland is “not looking to disrupt this balance and lose the value-added services we currently enjoy.”

Recent threats to the systems growers and retailers rely on most, notably glyphosate resistance and Asian soybean rust, have served to reinforce the need for ongoing research.

In 2006, Bayer CropScience released 11 new products that were designed to fulfill specific regional needs, something only possible through the combination of a strong portfolio and research investment, says Dr. Geoff Kneen, vice president of marketing and portfolio management.

“This is the kind of thing we mean when we talk about our commitment to innovation,” says Kneen. “As a basic manufacturer, we must bring new innovations to this market. We won’t introduce 11 new products every year, but we will continue to keep up the pace.”

The basics are also investing heavily in programs to improve the retailer’s own business. Andy Lee, director, business operations for U.S. crops at BASF, notes that consolidation of growers and the distribution channel necessitates that manfacturers focus laser-like on working with the channel to minimize wasted resources.

Successful retailers and manufacturers will “work in partnership to deliver new technology most cost effectively to the grower,” says Lee. “BASF works with the channel to deliver new technology to the grower to meet their needs in an ever changing market.”

Syngenta’s Dickinson points to its “Learning Centers” as evidence of its commitment to retailer partnering. These model farms demonstrate the interplay of the various technologies and provide some real-world context to what Syngenta sales reps present to retailers.

Partnerships That Work

Each of the big six basic manufacturers expressed a desire to work with the channel, but the best retail partners will be those who can understand and deliver a value-based message. 

“We are looking for our company to be profitable and grow, for the channel to be profitable and grow, and together be able to add value and profitability to the grower,” says DuPont’s Chrosniak. “Trying to squeeze profit out of the channel to put in our pockets is not a win, and likewise, leveraging for margins but not using them to create value for growers it’s not a win. These partnerships are not easy, but I think ultimately that is what trying to do. It’s the only way we can survive and thrive.”

Building that value is more possible than ever because the retailer is in a position to consolidate the myriad technologies for growers, says Dickinson.
“The retailer’s fundamental role is as a consolidator of technology, information, and services to growers, and that will continue,” he says.
Monsanto’s Nienans says that to sell value, retailers need to choose the direction and commit to it.

“A retailer has to decide who they’re going to be, and then be it,” says Nienas. “In other words, they need to decide, ‘Who are my customers?’ and ‘what kind of services do they need?’ Once they have a business model decided based upon their answers, they need to stick to it.”

The biggest problem, says Nienas, is the retailer who tries to sell full service to growers that don’t want it, which ends up being a high-cost, low-value proposition.

“There are a lot of good, tough dealers out there because of consolidation and competition.” he adds “They have a real square vision of who they want to be and they don’t deviate because deviations are where they start to lose.”

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