How Are Biostimulants Companies Mitigating the Impact of High Raw Material Costs?
Editor’s note: Each year, 2BMonthly’s State of the Industry feature includes a Q&A with executives from leading biocontrol and biostimulants companies worldwide. The 2023 feature touched on a wide range of prevailing topics including the biologicals M&A climate, critical success factors for scaling biologicals companies, and the ongoing challenges facing biocontrol registrations in the EU. In the excerpt below, experts offered their insight on how the increased prices of raw materials have strongly impacted production costs in the biostimulant sector and how companies are approaching this challenge.
Q: Increased prices of raw materials have strongly impacted production costs in the biostimulant sector. Passing those increases along the chain without affecting sales behavior is always difficult. How have you approached this?
Enric Bonet, CEO, Manvert: Passing the costs through but not increasing the margin in percent, but only keeping the absolute profit value than previous years in terms that we lose margin, but we keep the customer confident with us stablishing that we are beside him under bad circumstances also. Profit is not only in the short term.
Jim Thompson, Director of Business Development, Portfolio Management Biologicals and Non-Crop, AMVAC: In 2021 and 2022, we saw some significant increases in certain raw materials and transportation costs. We have seen this situation stabilize in 2023, and we have been able to pass on these costs throughout the supply chain, as most companies have. We don’t see the same pressure in 2023 and 2024 around these raw material costs, so we believe our gross margins are stable and will moderately increase as we grow our sales volumes.
Eduard Vidal, CEO, Sustainable Agro Solutions (SAS): The increase of raw materials was huge, so our strategy has been not passing through all this cost. This has also been the approach from the rest of the distribution chain in many cases, so that finally farmers have a cost increase in their biostimulant purchases, but it is not including the real raw materials increase that has been partially absorbed. However, at the end the price is higher for farmers, and the same happened for other agri inputs. The farmer budget is more stressed by this general increase, we have increased our efforts in convincing that the investment in our biostimulants is a good choice in the farmer’s investments budget.
Loading ...Ludwik Pokorny, CEO, Bioline: We are not in biostimulants but rather in biocontrol but still have been affected by cost increase especially energy and labor cost. We have basically looked at efficiency gains and yield increase in our processes in order not to impact prices. This has meant extra CAPEX and a longer ROI for our shareholders.
Vladyslav Bolokhovskyi, CEO, BTU-Center: The cost has increased. There is an inflationary increase in prices. But we look at it from the point of view of the use of biologicals. We cultivate more efficient forms, seek lean technologies and solutions for production and for supply chain too. We constantly monitor the prices of raw materials, looking for a good time to buy. The selection of strains affects the effectiveness of biologicals. The constant work of our microbiologists with strain makes it possible to eliminate the risks of reduced efficiency.
View more expert insight on the state of the biologicals industry here.
Get The Newsletter Today!
