This document discusses how selecting the optimal product mix can maximize profitability for an agrochemical company. It notes industry trends like increasing food demand and decreasing arable land that are driving growth in the crop protection industry. The document outlines different approaches to product mix like being technology-driven, cost-led, or alliance-based. It also discusses factors like product life cycles, market segmentation, and pricing strategies that are important to consider when determining the best mix. The conclusion emphasizes the need for a product mix that offers solutions to customers' crop and pest problems at a quality and price that provides true value.

1. Maximizing Profitability by selecting the best product mix to
benefit from domestic & international industry trends
Soumendu Ghosh
Head – Marketing & Business Strategy
Cheminova India Limited, Mumbai

2. Agenda
 Backdrop
 Industry trends
 Product Mix & Profitability

3. Backdrop

4. Food Demand – Supply situation laid a strong
foundation for the growth of Crop Protection Industry
Demand drivers :
 Rising Population
 Higher Incomes – Changes in dietary pattern & Improving Living
Standard
 Spiralling Food Prices – Containing the inflation
 Food Security Ordinance
 Govt. Support – Crop prices (MSP) & Institutional Credit availability
Backdrop

5. Supply Side Constraints :
 Dwindling arable land & diminishing av. farm size
 Land degradation & Scarce Water resources
 Labour availability in Agriculture
 Lack of Investment in Agriculture
 Low level of Awareness at ground zero
 Low Productivity & Regional Imbalances
Backdrop
Indian Agriculture :-
Characterized by “Low
Productivity” &
“ Non mechanized Small
Sized Farm”

6. Backdrop
 Urgent needs to improve farm productivity in an affordable,
environmentally sustainable way
 On an average 20 – 30 % yield is lost due to Pests, weeds &
diseases amounting to ₹ 1500 bn @ current market prices
 Improving agricultural productivity by preventing losses in an
integrated manner is the way to improve farm productivity
 Strong Fundamentals of Crop Protection Industry with Positive
outlook

7. Industry trends

8. Global Crop Protection Market Trends
US $ Bn
CAGR @ 7 % - 2007/12
Highly Consolidated
 Shift in R & D expenditures to Seeds & GM
Traits with Increasing expenditures to
defend off patent molecules – Fewer

9. Development of Major markets in last decade
 India - Introduction of Low dosages, environment friendly & high value
proprietary products resulting in Value growth in the market
 Increased usage on improvement of Agricultural Economy & affordability
of farmers
Significant Growth in Brazil, India & China

10. Indian Crop Protection Market
CAGR @ 15 % - 2007/12  MNC’S Contributes ~ 40 % of
Indian Market
 Generics ~ 70 % of the
domestic Market
 Generic Indian Companies
are not involved in high end
R&D to find new AI’s instead
focus on Manufacturing
process, formulation
development & quality
improvement. R & D
expenses ~ < 1% of sales
compared to 8 – 10 % by
Innovator companies
 Large off patent product
 Consistently growing Market
 Highly fragmented with 30 - 35 big companies along
with other regional players
 Export from India – US $ 2 Bn

11. Changing Trend of Product Category
 Tropical Climate – Crops more prone to Insect attack
& only GM - cotton
 Increased wages & Scarcity of Labour - Herbicides
 Differential Produce prices for Quality Fruits &
Vegetables driving demand for Fungicides & Plant
Nutrition Products

12. Changing Trend & Crop - Product dynamics
 Indian Agricultural landscape is distinctly different from most other
countries
 1980 – 2004 :- Highly depend on Single Crop (Cotton)
 GM Cotton :- Game Changer
 Changes in Pest Complex – New Chemistries /
Improved Formulations / Mixture / Spodoptera
 Pulses – Heliothis & Maruca control New Chemistries
 Soybean - Herbicides
 Wheat – Phalaris Chemistries
 Fruits & Vegetables – Emerging segments (MRL / Residue Legislation /

13. Development of Indian Geographical Markets
 Gradual shift in the
dominance of AP & Punjab
 Emergence of Maharashtra,
Madhya Pradesh & Gujarat as
big markets
 Govt. initiatives of 2nd Green
revolution in eastern India
led to the development of
Bihar, Orissa, Chattisgarh,
West Bengal, Assam &
Eastern UP markets
 Crop diversification &
multiple cropping led to
development of Rajsthan –
Guar Crop

14. Evolution of Indian Domestic Agrochemicals Market
Wheat Herbicides &
Synthetic
Pyrethroids
Triazoles & Phalaris
New Chemistries
Neonicotinoids &
Heliothis Chemistry
2002 – Bt. Cotton
Strobilurins & New
Lepidopteran Chemistries,
Price Increases
Rs.Cr.
New Product Introduction being the major driver of Indian Industry Growth
CAGR of 15 % in last decade

15. Market Introduction of Products & Chemistries
 Indian Industry all the time depend on MNC’s for New Technology & Product Introduction
 Before IPR regime (2005) – MNC’s were hesitant to bring their New Technology due to
Process patent in India

16. Market Introduction of Product & Chemistries
 Residue legislation in the destination country of Export Crops like Fruits & Vegetables led to
increasing acceptance of New Fungicides in Indian Market
 Post emergent selective herbicides adds to the convenience of Indian big farmers
 Low dosages & High value new chemistries resulted in the overall value growth of the Industry

17. Top 20 Products - 2012
 Out of top 20 products
in Value term – 5 Nos.
belong to Proprietary
Molecules
 These 20 Nos.
constitute ~ 50 % of
Indian Domestic
Market
 New products ~ 30 %
of total domestic
market & growing at
faster pace

18. Cost & time of New Product Introduction
Total = 10 - 12 years and ~ US $200 - 300 Million
Source :- Phillips Mcdougal report 2012

19. Fewer New products in Pipeline
A Typical Product Life Cycle

20. Product Mix & Profitability

21. Basic Approaches
 Technology / New product driven
 Few products (4 – 5) contributing ~ > 60 % of sales
 Brand led focus
 Premium Pricing & higher margin ~ > 35 %
 Offering Co – Marketing for market access after establishing the
1st mover’s advantages
 Manufacturing & Cost Led
 Off Patent Product manufacturing through reverse engineering
 Acquisitions of Products & Companies for global reach & market
access
 Back ward integration for Cost Leadership
 Investment in Overseas Registration
 Export focus
 Market led Pricing Strategy - margin ~ 20 %

22. Basic Approaches
 Strategic Alliances & Market Access driven
 New Product access from Japanese & Other MNC’s and Marketing
in Own brand names
 Market Reach / Distribution Channel focus
 Brand Building & differentiation through services / education &
training
 “Value for Money” Pricing model – margin ~ > 25 %
 Chinese Sourcing / Collaboration
 Registration of Chinese Analogue of Proprietary off patent
molecules
 Direct dealers / retailers networks
 Services to gain grounds
 Investment in Manufacturing & Contract research

23. Profit & Cost Analysis – An Example
 Innovator Companies generally operate @ Net profit margin ~ 10 – 15
% while Generic Companies @ 5 – 10 %
 Product Mix is the key determinants of Profitability
 Profit Growth :- Market Contribution (External Market
Environment) – Cost (Internal Management in Supply Chain
and Manufacturing and Operational Efficiency)

24. Selecting the Product Mix
 Categorization & Concretization :- BCG Matrix of Relative Mkt. Share & Industry
growth
 Product & Market Priorities :- To bring the desired “Focus” & Set the
“Priorities”
 Priority & Activity Focus as per the Life Cycle / Stage of the Product by defining
/ detailing the Investment & Return Matrix

25. Determining the Effectiveness &
Exclusiveness of Product Portfolio

26. Exclusiveness
Commoditized
Leverage
Opportunity
Vulnerable
• Products are in a relatively
less crowded market
• Products have high degree of
differentiation in terms of
effectiveness
• Products are in a relatively less
crowded market
• Products do not have
differentiation in terms of
effectiveness
• Products are in a relatively
crowded market
• Products do have
differentiation in terms of
effectiveness
• Products are in a relatively
crowded market
• Products do not have
differentiation in terms of
effectiveness
Effectiveness High
Low
High
Low
Market
expansion
(new segments)
Quality of sale
Framework to assess characteristics of product
portfolio to determine focus products for
marketing and promotion planning
Market growth
through brand
promotion
Market share growth -
Differentiation
Price levers
dependant
Non price
levers
dependant
Pull
Push &
Pull
Dealer Focus

27. New product launch and commercialization
Market and customer
segmentation and
targeting
►Determining target segments based on structured
analysis of market and customer characteristics
(such as cropping intensity, productivity level,
affordability)
Product positioning
►In-depth analysis of “Points of parity” and “Points
of difference” vis-à-vis competition for ensuring
clearly differentiated positioning
►Ratification of positioning based on customer and
channel feedback
Key aspects Key focus areas
Product and market
development
►Effective involvement of research and development
and sales and marketing team in knowledge
sharing, demos, training
►Clear focus on maximizing impact of demos by
targeting trend setting farmers
►Feedback through FGDs as a formal input to market
development

28. New product launch and commercialization
Key aspects Key focus areas
Pricing
►Defined mechanism for value based pricing
(Formal framework considering customer’s
affordability, willingness to pay and clearly
articulated tangible and intangible product
benefits)
Branding (Marketing and
promotion)
►Clear articulation of benefits, differentiated
by customer segments
►Adequate training of sales team and
effective merchandising w.r.t FABs
►Effective communication of cost benefit
ratio to farmers
►Enhanced ability of field force to handle
“price objections” and “large
customers/channel partners”

29. Concluding Points
 Increased Purchasing Power of Indian Farmers:-
 Better Prices of Agri Commodities – Willingness and affordability to pay
for performance / need based products (Proprietary Products)
 Demand for Value added formulations / Mixture Chemistries /
Differentiated products in Generics Habit Segments
 Higher emphasis on Yield Increase & Quality of Fruits & Vegetables :- Increasing
sales of high end Fungicides and Plant Nutrition Products with low residue level &
lesser waiting period
 Increasing trend of Agri Exports :- Approved / Least residue / High end Products
 Machines replacing Man in Agriculture :-
 Post emergent Herbicides & Herbicides tolerant cotton
 Cotton Plucking machines, Rice Trans planter necessitates specific type
of product mix usage for ease & convenience of Operations
 Increasing preference for Seed Treatment Products

30. Concluding Points
“Product mix” offering “Solutions” of “Crop – Pest Problems” of
“Customer’s Preference” with “Quality & Prices” which provide true
“Value for Money” & thus helping farmers to increase “Yield &
Quality” of crops to satisfy the global demand for food, feed, fibre and
energy – ”Basic for Sustainable & Profitable Business Growth ”

31. Any Questions?
Thank you