Exclusive Q&A with Adama’s Ziki Levavi, China Chief Commercial Officer
FCI: How big of a market is China for you? How does it rank in terms of your other businesses, or what are your revenues?
Levavi: China is a core region for Adama, both in terms of target market, as well as key operations moving forward. In the next decade, China is expected to be one of the top markets in the world for crop protection, and we intend to take a leading role in this market through our integration with selected assets controlled by the China National Agrochemical Corporation (CNAC), the agrochemicals arm of ChemChina (China National Chemical Corporation). We believe that we are uniquely positioned among the multinational crop protection companies to capitalize on the significant China opportunity. Our strategic approach to tapping into the Chinese market differs from how we have approached our other markets, due to our unique ownership structure; in 2011, ChemChina, through its strategic business division CNAC, acquired 60% of Adama. In turn, Adama was tasked with leading the entire agrochemical business on behalf of the ChemChina Group. As part of this process, last year Adama signed a definitive agreement to acquire control of certain CNAC businesses in China (what we call the “China Business”). In addition, we have already broken ground on construction of an advanced R&D center in Nanjing (Jiangsu Province), and a state-of-the-art formulation hub in Jiangsu Province, adjacent to Jiangsu Maidao’s (one of the companies we will be acquiring) new facilities in the new industrial zone there. Once we complete the acquisition and fully integrate the China Business, the China market will account for around 15% of Adama’s business globally, thereby instantly becoming one of Adama’s main markets worldwide.
FCI: What are your top products for the Chinese market? Why have they grown in recent years so quickly?
Levavi: Our focus has been, and will continue to be, on developing a broad, differentiated, hybrid portfolio of solutions that simplify farmers’ lives. Adama’s portfolio is the most comprehensive in the industry, and this is what we will be offering, over time, to Chinese farmers. The solutions within our portfolio will help improve efficacy and usability throughout the full product life cycle, and includes new active ingredients, novel mixtures and innovative formulations, as well as new packaging and application methods. We are currently in the process of building our product portfolio in China, including working diligently on product registrations. For example, one important product we are currently focusing on getting regulatory approval for is our proprietary nematicide NIMITZ, which was recently approved for use in the USA. NIMITZ is a broad-spectrum, non-fumigant nematicide, which is highly effective in controlling plant-parasitic nematodes. The product belongs to a new class of chemistry, offers a novel mode of action with very favorable toxicological and eco-toxicological profiles, and is very relevant for certain crops in China.
FCI: What key crops do you serve in China? What is the outlook for cropping area?
Levavi: Due to the depth and breadth of our product portfolio, our global product portfolio includes crop protection products that serve all of the main crops worldwide. In China specifically, we see a large opportunity in the fruit and vegetables space, as well as in the traditional, large Chinese crops such as rice, corn, wheat and cotton.
FCI: What are some of the challenges with distribution? How do you work to overcome them?
Levavi: People are surprised to learn that China is the number one manufacturer of off-patent crop protection products in the world. However, it is also one of the most highly fragmented markets, and is highly diverse. There are an estimated 22,000 crop protection distributors of all sizes; it can be extremely challenging to gain access to, and manage, such a large number and diversity of distributors. Direct sales is extremely difficult, since around 90% of the farms in China are smallholdings. We are planning to combine several key components in order to approach this challenge: bringing on leading China industry experts, building a strong marketing team, and sharing our global crop protection expertise with the Chinese market. Adama has a known international brand, and when we combine this with local Chinese thinking, we believe we will be able to position Adama’s solutions as differentiated offerings that the Chinese distributors will seek to carry.
FCI: How do you see China’s product consumption changing? What are the demand drivers, in terms of education, availability and sophistication?
Levavi: In my experience, Chinese farmers are rapidly catching up to the most advanced practices used in global agriculture, but there are still some gaps both in terms of knowledge and technology. A big part of Adama’s work in China is helping close those gaps through farmer education. As I mentioned, most of the farms are extremely small, however, there has been increased consolidation in recent years, and these larger farms are becoming more and more professional; as a result, there is increasing demand for the best products, solutions and technologies available globally, along with desire to learn best practices of how to improve crop yields. As a result of modernization, Chinese farmers are more open than they ever were to receiving objective advice and support from third-party agronomists. The concept is that if it can help them succeed better, they are receptive to it.
FCI: Are any regulatory changes on the horizon that might hinder or help crop protection?
Levavi: As China is becoming more globally aware and open to the international community, and as multinationals are targeting China for their own growth, regulation is increasing. New regulations will most likely be published in the coming year and we expect them to be stricter than ever before. We see this as a positive thing, as many of the new restrictions are designed to protect the environment, and improve product quality. Of course, our products are manufactured to the highest quality standards, so we are well positioned to succeed in the highly regulated environments of the future.