Will Pesticides Grow Beyond Agriculture?
8 October 2009 The acronym FOPPITTS (forestry, ornamentals & nursery, pest control operators, public health, industrial, timber treatment, turf, and self-applied or consumer) might be the latest, emerging term to encompass noncrop pesticide use, but it might also be the most awkward ever. “Beyond agriculture” is a happier phrase, and also conveys — accurately — the sense that the growth of pesticide use outside crop production has comfortably outstripped the crop protection market over the last 17 years.
In total, beyond agriculture (BA) is worth more than US$22 billion at end-user level today, up from about $4 billion to $5 billion in 1990 — a testimony to ordinary people’s desire to control bugs in their homes, fight back against vector-borne disease, eliminate weeds wherever they occur, and to make better turfgrass surfaces for athletic fields and golf courses.
Despite mostly hostile governments and media, consumers have elected to spend a small but growing part of their disposable income on unfashionable pesticides. This is because as yet there are often no better ways to deal with the pests that interfere with our lives and our health. Health is key to this trend despite the fact that it contradicts our ever more precautionary attitude to life and its risks. At the first suggestion of a mosquito-borne disease, communities demand the use of pesticides to deal with the offending vectors, and aerial application at that. The truth is we are all somewhat schizophrenic about pests and pesticides; we don’t want pests around us, but we don’t much like pesticides either.
Here lies the opportunity for smarter companies in our sometimes beleaguered pesticides industry. If conventional synthetic chemicals are no longer accepted widely, could it be within our reach to devise biological substitutes, or even wholly non-chemical solutions to this dilemma? Some such as neem and garlic, and of course Bacillus thuringiensis, are beginning to make an impression, but there is a long way to go to overcome the status quo.
Pushing more pesticides into crop production seems an unlikely business strategy these days, but because we eat almost none of the pesticides that go into BA, the regulatory hurdles are marginally less severe. In addition, as well as convenience, there are many safety and health arguments in favor of an expanded use of pesticides in BA; for example, keeping rail tracks free of weeds and controlling rodents and disease-carrying insects are key health and safety issues.
How BA Stands Today
The top 10 actives are: glyphosate, permethrin, allethrin, prallethrin, pendimethalin, pyrethrins, resmethrin, tetramethrin, 2,4-D and carbaryl. Of the 700+ actives in use, the top 10 account for 37% of the BA market by value. The rest are spread across more than 7,000 branded products for sale. Of 7,000 brands, there are only 10 with sales of more than US$100 each; it’s a market with a very long tail.
Consumer
Consumer, $14.2 billion: Reality check: Almost two-thirds of today’s BA business is in consumer use, mostly home insecticides, rodenticides and garden products — what you and I buy for our homes and our gardens. These feature small packs, long distribution chains and high margins for manufacturers and distributors alike. Interestingly, the top-selling brand contains the old active carbaryl; the top 10 brands account for 20% of the market and heavily feature allethrin, prallethrin and permethrin.
Consumer is becoming the prime driver for all non-crop, although cross-fertilization of development products to make new brands for other market segments has only just begun. Per-capita expenditure is growing in the US, reaching $11 per person. China and India are prime growth markets, presently spending less than $1 per person. And global growth projections bode well for this category.
The Raid brand from SC Johnson is the highest value international pesticide brand after Roundup. And in Asia, the regional Goodnight and Fumakilla brands are as well known there for insect control as the d-CON brand is in North America for rodent control.
Access to these markets does not happen overnight nor without building true long-term partnerships with specialist companies that dominate these markets. It would be fair to say that to enter these markets, many pesticide companies must give up a level of control over their molecules and accept that the consumer marketing companies can be as good, if not better, product stewards and may well budget for market research on par with leading pesticide players.
Turfgrass
Turfgrass is a $1.8 billion market, fueled mostly by the US, Canada, Japan and Australia — and spreading to other countries where golf is increasingly a TV hit and other turf sports like rugby and soccer are catching on. Golf course superintendents are among the best informed and trained applicators of products because golf course greens are managed so intensely. In Japan and other parts of Asia, spending on products can easily reach $50,000 per course, and even higher in limited-availability but high-demand courses like those in Singapore.
Turf in many markets increasingly means a service business to the home-owner where the quality of the manufacturer’s product, often supplied by the speciality chemicals divisions of the major crop protection companies, is enhanced by the service brand such as TruGreen, whereby the service company comes to rely totally on the quality of the brand, but the visible brand to the end consumer belongs to the service company.
Pest Control Operators
Pest control operators (PCO) is expanding rapidly — and developing as a service business where the chemicals alone account for about $1.7 billion out of a total service value of $15 billion (at the level charged to the house owner by Rentokil, Orkin or Terminix). As well as providing uniform standards of efficiency and performance across continents in the commercial market for hospitality and the food industry, PCOs provide the general public with a professional pest control service to protect their biggest investment and asset — their home.
In the food industry, the goal of ever higher hygiene standards is driven by international audit procedures with the threat of close down for the presence of pests. In the hospitality industry, the fast traveling, frequent-stop tourists and business people continually present new problems as they spread pests like bed bugs around the globe. It is not just chemical treatments that need to evolve to meet these challenges but the whole process of environmental pest management.
The control of termites is an excellent example of how the BA industry has rapidly evolved to meet growing environmental concerns of the legislator and home owner, and at the same time increased the value of the market worldwide for both manufacturers and service companies alike. Less than 20 years ago, all chemical treatment was direct on to the soil. These treatments are now more often limited to “critical zones” only. Alongside this, the evolution of new bait treatment systems to control termite nests and the use of chemically impregnated plastic that can potentially be rolled up and taken away later have all contributed to a growth market.
Timber Treatment
Timber treatment benefits with the use of actives that include copper, arsenic, boron and creosote, and generally it has its own distribution system. It has benefited from the search for renewable materials — with the beginnings of a switch toward timber in construction and away from cement, metal and plastic. Right now the building industry is in full retreat from the economic recession, and timber pesticide sales are down, but over time this preference for timber looks set to become more permanent with corresponding opportunities for chemical suppliers, provided new and improved products can replace the long outdated actives being used.
Nursery and Ornamentals
Nursery and ornamentals is the fastest growing of all noncrop businesses over the past decade, and it has been the segment that most closely resembles the crop business with many distributors serving both segments and using the same products. Increasing urbanization and wealth combine to drive demand for potted plants for indoor use or on balconies. Amateur gardeners look for shrubs, trees, annuals and other plants grown from seed by commercial producers and ready for direct establishment in their gardens. As a leisure activity, gardening is increasingly popular, especially with an ageing population.
Vegetation Management
Industrial vegetation management is crucial in many developed countries that own railways and roads; municipalities and regional governments have switched to pesticides instead of mechanical cutting and burning to control weeds. Chemical maintenance of public land is often less expensive than other methods, and it creates fewer carbon emissions, depending on the method of application.
Public Health
Public health is being transformed in developing countries thanks to organizations like The Bill and Melinda Gates Foundation. Determined to rid the world of malaria, The Bill and Melinda Gates Foundation funds the development of new active ingredients to control mosquitoes, which the pesticide manufacturers would never have done on their own with such a small market. Already the effects have been dramatic and the treated bed net business, for instance, has grown five fold in just a few years.
Mosquito abatement will be an area of growing public awareness in the future, driven by the threat of disease transmission, not only in Sub-Saharan Africa but into higher income markets, as has already been observed in the US through the presence of West Nile virus. The forward thinking companies involved in the BA market are not only building product sales but a positive image for their companies in alignment with growing consumer awareness.
Forestry has two facets: ground clearance before planting, and outbreaks of insect pests such as gypsy moth or pine processionary moth. The insects’ occurrence is unpredictable, and there is no practical alternative to insecticides if wholesale damage is to be avoided. On the other hand, weed control can be done mechanically, but the same case for and against can be made as with industrial vegetation management. Much of the world’s maintained forests are owned by national or regional governments.
On to 2015
Can the rapid growth of the last decade be maintained? Examination of the evidence suggests that two of the most important drivers of change and growth have been education and wealth. As people are better informed they learn how and where to avail themselves of pesticides to improve their quality of life, and as they get richer they have the means to purchase the branded products to bring this about.
Faced with the current global recession, there has definitely been a reduction in purchases in all segments of the BA market and in all countries, more where it concerns convenience or leisure such as golf course fungicides, and less when human health is involved such as mosquito control programs. But even where reductions have bitten deep – as in nursery and ornamentals – there seems to be something of a ‘ratchet effect’ in which the cutback is severe but does not undo all the additional expenditure that purchasers have grown accustomed to over past years. Hence, it looks probable that when the economy picks up again, BA pesticide sales will recover and expansion will be resumed.
Our current projection is that by 2015 with growth at only half the rate that we saw from 2003 to 2007, the global Beyond Agriculture market will be worth around $37 billion. This translates to an overall global average spend per person will be about $7, with China rising to about $5 and the US climbing to $25.
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