A Closer Look at Jebagro: Growth on Its Own Terms
Imagine the agrichemical industry as an atlas. The names in big, bold lettering jump out first: Syngenta, ADAMA, ChemChina, Bayer, BASF. Each is punctuated by a large dot, from which many finer lines and smaller names and smaller dots radiate.
Well off the beaten path, Jebagro might initially escape notice. The closely held agrichemical unit of Jebsen & Jessen, the Hamburg-based, family-owned diversified holding company with storied roots that go back more than a century, has traditionally preferred to stay under the radar and out of the press.
Now Jebagro is sharing its vision for growth in conventional crop protection, precision agriculture, and biocontrols and is emerging as a coveted partner for many agrichemical players — customers who not long ago said they had little use for its somewhat unconventional three-way business model that has included supply chain management, sourcing support, and financing as well as third-party product distribution and distribution of its own products. The push back it received was before the aftermath of the last mergers and acquisitions wave and the fallout of the Chinese environmental crackdown. The light at the end of the low commodity price tunnel failed to show.
“It’s gotten more complicated over the last 12 months, where we could feel it,” Max Witt, Department Manager for Central America and Andean Countries, said in an interview at the AgriBusiness GlobalSM Trade Summit in Atlantic City, NJ, on 31 July. “Two years ago there were always customers who said, ‘I can do everything in China.’ Now, we have orders with customers who suddenly say, ‘I need you.’ Suddenly, they give us a call and want support in sourcing and require a payment term.”
Management is quick to own up to weaknesses of the business — notably, its crop protection portfolio — but makes clear that it is not like other crop protection players. Dr. Felix Thürwächter, Managing Director, is a 25-year industry veteran who joined Jebagro in 2017 after working for several years in global business development and herbicide research. As he put it, “We are not here to say, ‘This is the bottle, and that’s my price; you buy, it or you don’t.’ … We try to understand what the customer wants. Sometimes he needs sourcing support because he doesn’t understand the developments in China anymore. Sometimes he needs product sourcing but also help with payment terms — ‘The Chinese want a 30% prepayment. I have to give my customer 300 days, so how can I bridge this?’”
For some Latin customers, payment terms that distributors get from Chinese or other suppliers of around 180 days are simply not enough.
“The financing business for our customers is very important. Customers who want to grow need cash flow, and this is where what we are offering is helping them,” Michael Lüthje, Managing Director, said. The company offers payment terms of up to 365 days in certain markets but more commonly 240 days.
It is not only Jebagro that approaches customers or vice versa about credit terms. Suppliers also approach the company and ask if it can supply their customers with credit. “This is really interesting, and you can imagine what information is available within Jebagro of what customers are buying,” Lüthje said.
As it happened, Witt arrived at the Trade Summit interview late because, as he was about to leave a meeting with a South American customer, the customer called in their Chinese supplier. “We were all sitting together, and I explained the model. And the supplier agreed and said, ‘Now I understand,’” Witt said.
Lüthje pointed out that the end of the “glyphosate curve” that had formerly guided buying decisions has led to confusion in the market. “With the information we have, we can help customers take the right position — including on quality. Quality of the product has become better, but customers are still facing surprises when they buy product, and it’s not what they expected. For them to deal with these things with Chinese or Indian producers is sometimes difficult. That’s the reason many of our customers prefer to work with Jebagro.”
While the company has strengthened its financing arm, it has also benefited from post-merger turbulence. Some hapless companies — whose names were off the record — snapped up active ingredients, then failed to keep the right product or registration managers and were subsequently left without access to sources. “Then they come to us and say, ‘Can you please help us? We need access to a registered source of this product,’” Thürwächter said.
Another business model is distribution of third-party products. “We provide market access to companies who have registrations but no market access. Some 10 years ago you would have immediate sales once you had registered a product. This has completely changed,” he said. “Today market access is the key. There is an overhaul of registered products.”
Drones, Biologicals Shake Things Up
While crop protection growth remains constrained overall, Jebagro has stayed lean by keeping overhead and cost of sales low. “That helps us to survive at a moment when the margins are very low,” Thürwächter said. “We have a good presence in Nanjing, and we are known to all the important companies, but we try to keep the team small,” he said in reference to the company’s Chinese office. Meanwhile, it has given priority to the Paraguay and Argentina markets, where distributors dealing with a challenging economy have recognized the company’s sourcing and financing capabilities. The two countries now account for more than half of its yearly revenue of around 160 million euros.
Over-reliance on the region is what drove the company to embark on its current country portfolio expansion.
According to Lüthje, Jebagro’s vision for the next three to five years is to offer, together with financial services, its own diversified products, including biological products. It is expecting its first registrations of nine biostimulants in Europe by the end of 2019 and one biological insecticide in Central America in 2020.
Jebagro’s growth path includes a digital farming initiative that Thürwächter spearheaded in Myanmar, where rapidly growing drone application technology is promoted to enhance disaster risk management.
“(The non-governmental organization) focus on glyphosate in Europe is, from a scientific point of view, nonsense,” Thürwächter said. “If they go to the emerging markets and see how products are sprayed and what operator exposure is there, then there is an issue.” Acceptance of drone technology is quicker in Myanmar than, for example, Central America, he added. “In Myanmar they have 5G everywhere; everything is with mobile phones. We don’t have 5G in Germany.”
Jebagro constantly seeks new opportunities and looks for the best fit with potential partners. “The USA is a market we have a high aspiration to enter, but we don’t know how to do it at this moment,” Thürwächter explained, as an oversupplied row crop market ruled by loyalty programs means it would need to find a different role.
For Thürwächter, one of the key questions when looking into the future is whether commodity prices will recover. If they remain as low as they are now, many companies will not be able to survive the next five years, he said. Jebagro, by all accounts, will push through it.
“We want to create better business opportunities, be more flexible than others, understand what they need, and develop whatever’s possible for them.”