Are post-patent products the new biggest threat to ag retailers? In this episode of CropLife Retail Week, Editor Eric Stiligoj sits down with Bob Trogele, CEO of ProAginvest, to discuss a shocking spike in concerns over generic crop chemicals among CropLife 100 retailers. From FTC rulings unbundling marketing programs to massive margin compression, learn how the market is shifting and what business models will survive.
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*Below is a partial and edited transcript:
Eric Sfiligoj:
Hello. Welcome to another edition of CropLife Retail Week. I’m Eric Sfiligoj with the CropLife Media Group, here with a special guest this week, Bob Trogele, CEO of ProAgInvest. Bob, welcome back to the program.
Bob Trogele:
Well, thank you, Eric. It’s a pleasure always being with you. I’m looking forward to today’s discussion.
Eric Sfiligoj:
Yeah, I know it should be a good one. I know we’ve been industry friends for better than 20 years, and I know I always enjoy your insights and our conversations. So hopefully our viewers will find it just as enlightening as I do.
Part of the reason I wanted to have you on, Bob, again, is that this is the time of year when I’m actively putting together our annual CropLife 100 list of the top ag retailers in the country.
For viewers interested in that, in about two or three weeks, some of that information will start showing up on our website, CropLife.com, and then it’ll be appearing in print in the December edition, which should be out the second week of December.
One of the things I always ask in the survey, Bob, is the last question: What are you concerned about or worried about going into the next growing season, and why?
I’m actually always surprised by the responses. Things like cost structure, margin pressure, and labor issues always come to the top of the list. But this year, I was kind of surprised. Post-patent products, or concerns about generic products, went from about 0% in the 2025 survey to about 17% of this year’s CropLife 100 retailers listing that as their primary concern going into next year.
So I’m curious, from where you sit and from what you know of the marketplace, generics have been around for a long time. Why this concern now, after a nine- or 10-year gap since it’s shown up on our concern list in the CropLife 100?
Bob Trogele:
I think, first of all, I’m an avid reader of your magazine and a contributor sometimes, and I always love following your shows. So thank you for the opportunity to be with you today.
Yeah, I mean, the generic game has been around forever. When I joined the industry in 1987, I was faced with that competition. At that time, I was in Europe, and I was the area manager for France and Belgium. You had companies like KVK, Chimera, Starfish, and I can go on and on, entering the market.
By 1997, when I was the head of the business team for cereals in Europe, about 60% of my portfolio was generic.
We were playing the innovation game, trying to find new molecules. We were trying to combine that, of course, with things like LibertyLink to add value, but also retain value for the vendor community.
Then everything really moved over to China, right? From a manufacturing standpoint, China probably produces 60% or 70% of the generic chemical space today.
They’ve gotten more sophisticated with two things, mainly formulation technology, but also market access.
So what you’re seeing now in the market is different levels of maturity around the regions. The U.S. has been somewhat protected from the global generic game, mainly from the regulatory front, because you had data compensation, right? And it was very, very expensive. You also have, I would say, few customers on the buying side. There are only about 20 distributors at the wholesale level in the United States.
But what’s really changed from the vendor side is, one, the FTC ruling here recently. They made a deal with the FTC on the court case. Syngenta was also noted in that announcement. They have not made a deal yet.
What has happened over time is there’s been what lawyers don’t like to hear called bundling. Basically, they only leave a certain amount of space in their programs to allow for competition in a generic world.
That is the number one driver that’s going to happen in the next few years: a deep unbundling, is what I’m going to call it, from those marketing programs.
There’ll be more space for generic competition. So you might only see the brand having, let’s say, 40% or 50%, instead of 80% or 90%, of the possible market opportunity.
That will open up the markets. My expectation is that for pricing, we’re probably going to see similar pricing to what we see in Asia, South America, and certain parts of Europe, where you might see a price decline of 15% to 25%.
That basically means your value, your relative margin, is going to be compressed in a market where volume is either going to grow, but if the margin is compressed with lower pricing, there’s just not as much profit opportunity out there for retailers.
Eric Sfiligoj:
Okay. Well, Bob, before we move on a little bit, again, you mentioned the FTC, the Federal Trade Commission, in this lawsuit. I guess it went back to 2022, if I was reading some of the background information correctly, and it had involved Corteva, as you said, and Syngenta.
I’m curious if you could give a little background on how that came about and then basically where things stand. You already said that they’ve settled, but the Syngenta aspect of this lawsuit continues. So, I mean, what’s kind of the outlook on that?
Bob Trogele:
Well, I think that there’ll be a ruling at some point in time, right? And that could be more or less favorable to Syngenta. I don’t want to speculate on what that outcome is, but considering the arbitrated agreement, it’ll look at least a little bit similar, and they will not be able to defend their active ingredients as they have been in prior decades.
Syngenta is an excellent marketing firm, with strong brands and a lot to offer growers. But the overall program protection that they’ve had over the past few years will weaken. You’ll just see more market opportunity for generic players in the market.
You see that a little bit through the activity that’s already happening in the generic market. In the last few years, we’ve had a lot of startups that are buying and selling, sometimes buying from the originator, formulating and packing in their own brands, and selling more directly to independent retailers or sometimes directly to growers.
So that’s just a proliferation of what’s already going on. It’ll just give them more space to operate. And I think that’s just normal market evolution.
Eric Sfiligoj:
Okay. All right. Well, again, as I said, the ag retailers that we surveyed for the CropLife 100, obviously, there’s a group of them that are concerned about this.
I know, based on some talks you and I have had, there are many more products getting ready to come off patent between now and the 2028 growing season.
So, I mean, if I’m an ag retailer and I’m paying attention to what we’re talking about and worried about this topic, are there things I can be doing now to get prepared and maybe insulate my business from major issues when it comes to this whole question?
Bob Trogele:
You know, what I observed when I was studying or doing the strategy for distribution in Europe in the ’90s is that they were sort of ahead. They were much further ahead on generic competition than we were in the United States.
Really, two basic models were evolving.
You had the straight discounter, no service. He’s just a warehouse and a truck, a cash-based business. And you have that today already in the United States. It’s just a model of lower margin, and that’s all they do.
Then you have the service-oriented retailer who provides a service. You can call them up on Sunday, and he’ll come out. He’ll have plenty of inventory, maybe in the barn. He can service you quickly. There are other things that he’s offering, as far as business advice to the grower and bringing maybe other technology, like ag technology, to the grower.
So these are the two ends, right? I think the danger point is if you’re somewhere in between.
Eric Sfiligoj:
Okay. Yeah.
Bob Trogele:
If you’re a hybrid, right? So you have high costs but are also a discounter. That’s where you can get caught, and you don’t want to get caught in that trap.
Now, if you’re on the discount side, you’ve got to be lean and mean, and there’s no frills, right? I mean, you might be working off of a 10% gross margin.
So you’ve got to really keep your back office very competitive. You’ve got to keep your sales force very competitive.
If you’re on the high-service end of the equation, you’ve got to really be on top of things. How can I provide services to my customer that he’s willing to pay for and values?
You don’t want to be giving away free services that cost you money that you’re not monetizing.
So you really have to decide where, in my business model, do I make money, and where do I allocate resources?
I’ll give you an example. It’s just a dumb example. Car dealerships today make very little money on the hardware, meaning the car transaction. There’s plenty of cars out there, used cars, et cetera. But boy, they really like it when you sign a service contract, because that’s where they make the money.
So, when I buy a car, I’m kind of a hybrid buyer. I really focus on the cost of the vehicle. I get them down to the lowest denominator that I can possibly get them down to. But I’ll always buy a service contract. I always tell them right up front I’m going to buy a service contract. That’s their incentive, because that’s where they make really big money.
And hopefully they’ll see me very often.
Eric Sfiligoj:
Very, very.
Bob Trogele:
Well, just joking around. All right. But that’s just a simplified example.
I think there are different models. They can also do things like, maybe with certain manufacturers, invest in more collaborative ventures, like manufacturing.
You’ve recently published a little bit about that. For example, I think there was an example where Growmark, a very innovative company, was building or bought a fermentation facility.
So they’re actually looking to buy the basic ingredients to ferment product and directly sell to the farmer.
They’re not buying finished product from a vendor. They’re creating their own formulation technology and therefore capturing that part of the upstream margin.
You’re going to have new competitors like Rainbow, which is commonly mentioned in the press now. They’re buying, for example, formulation facilities in Texas and looking for more opportunities.
They’re bringing in a Chinese active ingredient, formulating it in the United States, and adding the value there.
So where do they go from there?
We’re going to be a little bit in transition. We’re going to be a hybrid market, like Brazil.
If you go visit a large producer in Brazil, he might be a $100 million customer in chemicals because he’s got his own warehouse, his own agronomic staff, and he’s buying direct from the vendor’s factory.
But then you also have specialty growers, and there’s the classic distribution, traditional distribution channels, both independent and co-ops.
Some of those, like the co-ops, are looking for their own private labels, looking for a differentiated formulation that adds a little bit more value to the grower to get out of the price-margin discussion.
So you’re going to have different models evolving now. And we’re primarily talking about the United States, so I think you’ll see different business models evolving.
I’ve talked about this as you adapt to this trend. I think it’ll take a couple of years to settle, and everybody will be positioned at what they do best.
Eric Sfiligoj:
Okay. All right. Well, you mentioned vehicles a little earlier, cars, and that got me thinking about the ag equipment marketplace.
Again, whenever it is that equipment dealers around the country, they tend to partner with one manufacturer. They’re a Case dealer or a John Deere dealer.
And again, most of the time when I visit ag retailers around the country and when I’m looking at their warehouses, when it comes to crop protection products, they’ve got products from Syngenta, they’ve got products from Bayer, they’ve got products from BASF, and, of course, generics. They’ve got a nice mix of products on the shelves.
With some of these structural changes that we might see over the next few years, is it possible we’ll see more ag retailers being proprietary and dealing with just one manufacturer? The manufacturer or supplier would then be supportive of them and their network in sort of a partnership arrangement. Or is that just not going to be practical for the market?
Bob Trogele:
Yeah. So in mature markets, not evolving markets, and I consider the United States a mature market, the general rule has been at the retail end of the business, and maybe even at the wholesale end of the business, around 30%. Usually that’s the cutoff where they want to be dependent on a supplier.
We saw this in the last 25 years through the consolidation of the vendor industry. Some of it was driven by the FTC, where they said, per segment, you have to submit your application. When it went over 30% in one segment, the government rang the bell and said, no, you’ve got to sell something off.
But also, when I talk to customers at the retail end, over 25 years, they kind of say, “I don’t like to get more than 30% from any one vendor.”
I don’t know whether or not that rule will still apply.
But when you’re talking about maybe a little bit of what I call soft franchising, we did this at FMC.
Eric Sfiligoj:
Yeah. Right. Exactly.
Bob Trogele:
We tried not to oversupply the market and tried to allocate resources very differently so that dealers had a better margin opportunity.
If you oversupply the market, what usually happens in mature markets, or really any market, is you’re going to have brokering. And if you have brokering, that just tries to drive prices down.
Now, I think brokering is going to become much more difficult in this new environment, simply because you don’t have these programs out there anymore that you can play with.
So that might actually stabilize pricing at the retail side.
I also think the producer will benefit from it in two ways. One, I think he’ll get a closer global price to what is reality globally, as he’s competing because he’s also competing globally.
So he’s competing with Brazil. He’s competing with India. I think that’s going to be healthy for the market from a positive standpoint.
It’ll also take out some of the volatility in pricing at retail. And then you can hopefully, if you’re managing your OPEX, do well.
Now, there will be more consolidation, I believe. We have lots of points of sale in the United States. Every time we talk about reducing those, the number doesn’t seem to change a lot.
I think the service level may change. You may not have delivery options the way you’ve had them before. You may have to plan a little bit more ahead if you’re on the retail or producer side.
Invariably, with a little bit of change in the market, one of the risks is going to be on the supply chain. What does your inventory strategy look like?
You certainly don’t want to get caught with high-cost goods and the price dropping. That’s a nightmare for retailers.
Eric Sfiligoj:
Yep, yep. Yeah, everybody in the industry remembers what happened with fertilizer back in 2008-09 in that situation.
So, yeah, you’re right. And again, retailers have been telling me for the last few years now that, given the way there’s been so much market uncertainty, planning ahead further than you ever have in the past is just good business.
So I suspect we’ll see that continue in the marketplace.
Bob Trogele:
So, yeah, no, you’re absolutely right.
I think one of the things that you need to do from the supply side is really start thinking about your strategic relationships. What are my A relationships, my B relationships, my C relationships? What’s strategic? What’s more long-term, and what’s more opportunistic?
But also, on the customer side, when FBN came into the market, that was a direct-to-grower model. You remember we all remember that well. And everybody was really asking, “What does that mean? What does that really mean for me?”
Well, what it really means is you’ve always had three types of customers at the retail end.
You’ve had the full-service guy who understands, “I want that service.” That’s me with a car dealership. I want that service. I don’t want to go around shopping around. I don’t have the time for that.
Then you had the low-cost, price-focused guy who was always looking for the lowest price but also wanted the service. That’s the hybrid guy.
And then you have the people who just want the lowest price and are very well equipped to take care of their own backyard and get the job done.
I think what the industry really needs to focus on right now is the entire value chain. At the retail end, how do I take costs out of my business model, whether you’re full service or a discounter, to be competitive?
Because the producer has to do that right now. We’re seeing that he’s not going to make a living with a higher price on the global markets because it’s just not there.
We’ve had the biofuel demand. We’ve had the China demand. But China now has a declining population and is oriented toward getting product as Brazil and Argentina have ramped up.
So there’s more competition overall.
One thing you’ve got to get into your mind as a retailer is that there’s more competition.
Eric Sfiligoj:
Yep, yep.
Bob Trogele:
There’ll be more competition for your business. And at the same time, there will probably be more competition with new business models coming into the market.
Eric Sfiligoj:
Yeah, yeah. Good point.
All right, well, Bob, this has been fascinating. And as you said, this is probably a topic and an industry change that’s going to be happening over the next couple of years.
So we’ll be following it here at CropLife and on CropLife Retail Week. I suspect I will be having you on again before too long to talk about some of the more recent or current developments in this space.
I certainly thank you, on behalf of everyone here, for joining us for this week’s edition of CropLife Retail Week.
Viewers, we hope you enjoyed this episode, and we’ll look forward to seeing you again next week. Thanks again.
Bob Trogele:
Thank you. Thank you. Thank you, Eric. And I look forward to reading the report in December. I always look forward to that report. It’s one of my highlighted data points for the year.
So that’s why I contacted you. And thank you for the opportunity
