Biopesticide Companies Set for Consolidation Amid Growth
23 January 2016 The Biocontrol Industry is a projected to generate about $2 billion in sales this year, according to Dunham Trimmer, and it is trending toward continued strong growth for the foreseeable future. The research firm expects the segment’s market share to double by 2020.
Biopesticides, which includes biochemicals and microbials, but not macro-organisms, constitutes an estimated $1.3 billion to $1.6 billion of the segment, making it the largest subsector by far. Microbials and biochemical products have been adopted at the greatest rate, finding footing in the early years on vegetable crops and in greenhouse operations. These products are expected to experience double-digit growth rates in nearly all countries through 2020, according to Kline, a research consultancy.
The main driver behind current growth of biopesticides is the development of microbial seed treatments on field crops, including corn, soybeans, and cotton. Microbials are growing faster due to the high use in field crop seed treatment. The field crop use of biopesticides has grown from a barely measurable position to the leading segment in end-user value in the past decade, now accounting for approximately 34% of the total biopesticide market, according to a report by Kline. Vegetables rank second.
Rapid consolidation will continue in the biopesticide space as companies try to right-size R&D operations with the market. Like any emerging advancement in biological science, strong investments into research lay the foundation for new discoveries and new products. Now the sector will try to consolidate its disparate and in many cases proprietary discovery and development infrastructure so products can reach the market in more timely and affordable ways. In a recent Kline survey across nine countries, more than 150 companies showed measurable market shares, and the top 48 companies accounted for just 60% of the biopesticide market, illustrating the fragmentation of segment and in many cases the specialization of company technology.
Getting Products to Market
Distribution, too, will continue to drive M&A activity. The not-too-distant acquisitions by large traditional crop protection companies were in part driven by the need for biopesticide products to access various markets and enter a predictable value chain. Distribution is a struggle for the sector because of the nature of the product. Handling requirements are exact, and so is the application timing for the end user. This reality requires that product education follow the products through the value chain, infrastructure already established by traditional crop protection product distribution.
Distribution was an ever-present discussion at the Annual Biocontrols Industry Meeting (ABIM) in October in Basel. The collective industry has worked painstakingly to prove the efficacy of biopesticides, and the reputation of individual products and the impression of the segment as a whole hinges on growers’ understanding of how the products work and when they are most effective. Consequently, suppliers choose distribution partners with great care and must be convinced that product education and use guidelines can be articulated to end users.
Bayer, with its acquisition of AgraQuest in 2012, is the largest biopestide company in the world, according to Kline, followed by Sumitomo subsidiary Valent BioSciences, and BASF following its 2012 acquisition of Becker Underwood.
Bayer Vice President of Global Marketing Ashish Malik told attendees at ABIM that biocontrols could represent a new green revolution by understanding how biological products interact with plants.
“There is an opportunity for us to change the way agriculture works around the world,” he said. “But integrated solutions and programs require knowing the needs of the farmer at the local level.”
Malik said he expects the industry to grow during the next 10 years as farmers continue to demand more integrated solutions and programs, and there is a potential market in nearly every crop in every country around the world.
Regulatory continues to hamper product introductions as well. Although many countries provide a fast-track process for biological products, highly regulated markets are still on their heels. Notably, the EU and Brazil continue to treat biopesticides like conventional chemistries during the registration process.
Though the European Commission’s 1107/2009 regulation does not permit fast-track registration for biocontrol products, there is good news on the horizon as the European Commission is planning its routine re-evaluation of the regulation with an emphasis on creating more favorable framework for biocontrol products, according to Wolfgang Reinert, head of the EC’s Directorate for Health and Food Safety. The re-evaluation is expected to take place in early 2016.
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