2019
Although generic products already account for about 60% of the global market, there is still distrust of these products. What prevents farmers from fully trusting such products, and how can they be convinced of their effectiveness? How high-quality can generic crop protection products be, and what rules, norms and standards do manufacturers follow?
Latifundist.com spoke with representatives of Nutriсhem, a company that manufactures products for multinational companies and also produces most of the products of LNZ Group's DEFENDA brand: Nutrichem Chief Operating Officer Ellen Yu and Qingfeng Branch General Manager Cindy Lu.
Latifundist.com: Tell us about the history of the plant. How did it all start, and what has been achieved so far?
Ellen Yu: Nutrichem was founded in 2003. Initially we focused on Good Laboratory Practice (GLP) research centers, as well as on trade. Three years later the company became the first GLP-certified laboratory in China recognized by the Organisation for Economic Co-operation and Development (OECD). Today we are developing our production capacity and already have nine sites in different parts of China, mainly in the east of the country, and a headquarters in Beijing.
Latifundist.com: What quality standards apply at your production facilities? Tell us how you monitor compliance in the laboratory.
Ellen Yu: First, we must comply with the requirements and regulations of each importing country, that is, meet registration standards. For Nutrichem, consistent product quality and compliance with standards, and with China's production standards in general, are essential.
Ellen Yu, Chief Operating Officer of Nutrichem
Cindy Lu: Our product goes through 2 stages of inspection. The first takes place at the plant. We have an internal system for checking the quality of raw materials supplied by the vendor against technical data. Our proprietary products also undergo physical and chemical testing, followed by random sample checks at headquarters.
Latifundist.com: How is your product portfolio divided (in percentage terms)? Companies in which countries do you supply?
Cindy Lu: We produce herbicides (60%), insecticides and fungicides. We also have more than 40 of our own AI plants (controlled by artificial intelligence). In the past, our main markets were North and South America. About 5 years ago we expanded our supply geography and entered Eastern and Western Europe and other markets.
Ellen Yu: Recently we have also found many partners in Ukraine. We do business with many multinational companies — Corteva, Bayer, ADAMA — and are one of the suppliers to large companies.
Latifundist.com: What is Nutrichem's market share in China and internationally?
Ellen Yu: A large part of Nutrichem's business is now export-oriented — about 80%. On the domestic market we also sell some technical and proprietary products. As for last year's ranking (based on 2018 profit), we are second only to ADAMA in China and are among the TOP 10 crop protection companies worldwide.
Latifundist.com: Do you plan to expand the company's portfolio, increase profitability and net sales, or focus on increasing production?
Ellen Yu: We started with herbicides. Due to recent acquisitions of companies in this field, we have expanded our range to fungicides and insecticides. So today we have a fairly large portfolio. However, we continue to work with farmers to find out their needs and market demand for the development of new products.
Cindy Lu, General Manager of Qingfeng Branch
Cindy Lu: Our goal is to do business, so we work everywhere. We are certainly growing together with our partners. We focus on production, they focus on sales, so the cooperation creates a mutually beneficial relationship between us.
Latifundist.com: Do you plan to expand the geography of cooperation and supply of Nutrichem products? Do you intend to stay in Ukraine over the next 5-10 years, increase sales and strengthen partnerships?
Ellen Yu: Alongside our long-established markets, we are also looking at some emerging markets. We are making great efforts to develop new markets such as Ukraine. Moreover, your country is a core and important agricultural market in Europe. Over the past 5 years we have been working with several partners, including in Ukraine.
Latifundist.com: Do you feel government support for export expansion? Are there programs in China for crop protection exporters to support business within the country, such as VAT refunds?
Ellen Yu: There is a VAT refund, but it is also international; it is not a Chinese practice. I would say that in China it is more like market competition, but there is no special support.
Latifundist.com: In China, plants producing active ingredients are closing, and state policy is aimed at tightening environmental requirements for crop protection production. Do you feel pressure on your business as a result?
Ellen Yu: Environmental, health and safety (EHS) standards have become very important in recent years. The government is definitely trying to raise standards, so it is now pushing very hard. It is very important for us that our plant complies with environmental regulations and is reliable. We are trying to modernize our production and meet the highest EHS standards. Our company is trying to improve the process, make it cleaner and reduce waste emissions. This is also one of the important rules for Nutrichem.
Latifundist.com: Because of environmental problems and EHS standards, many crop protection manufacturers are leaving the market. Those who remain continue to work on EHS and improve the process. Do you think this will affect product prices?
Ellen Yu: Yes, in the second half of 2018 and the first half of 2019 we saw some industrial production facilities close. This does cause some supply problems. Supply and demand are not balanced. Yes, EHS standards will affect some production costs and lead to price increases. But over time the situation should stabilize.
Cindy Lu and Ellen Yu
Latifundist.com: According to experts, patented and off-patent products hold about 40% of the global market, and generics 60%. How much and how quickly, in your opinion, will the shift in favor of generics happen?
Cindy Lu: To develop 1 molecule, we spend almost 10 years and about $300 million. That is a big investment in research and development (R&D). Finding new molecules is now a difficult task. If you look at data for the last 5 years compared with figures from 10 years ago, the number of new developments is significantly lower. Because you spend more money, it takes more time, registration becomes more complicated and standards rise.
There are two groups of multinational companies. The first is the TOP 5-6 companies that drive science; they will continue to develop new solutions for the market. And this is very important, because solving food problems requires new technologies. But on the other hand, farmers need affordable options. At the same time, companies producing generics need to have high-quality products. Crop protection products should help achieve better harvests. But at the same time, food products need to be healthy and have low levels of pesticide residues.
Latifundist.com: A few years ago many large companies turned their attention to biologicals. How quickly, in your opinion, will this area gain momentum, and will it have a significant impact on generic production?
Ellen Yu: I think it diversifies needs. If you look, the world's population is growing and at some point will reach 7 billion people. However, there will be no significant expansion of agricultural land. Perhaps land will increase in Brazil and Ukraine. Meeting people's needs requires enough food.
Ellen Yu, Cindy Lu and LNZ representatives
Latifundist.com: Do you feel this war between generic and multinational crop protection products, that is, originators? Is it as relevant in China as it is in Ukraine? Do farmers believe that originators are of better quality than generics? Do you feel this problem within China, globally or among partners?
Cindy Lu: Multinational companies advertise new products every year. They spend a lot on research and development, as well as on advertising and marketing, to win consumer trust and shape farmers' perception of crop protection products. With generics there is not as much advertising, but that by no means says anything about their quality. So it is not so much a question of quality as of political advertising. It is important to pay attention to how you communicate with your customers, how you interact with them, how you understand your product, what makes it special and how it solves farmers' problems.
Ellen Yu: On the suppliers' side, there is a need to meet standards: multinational, technical, quality and patent. But it will take time to change people's attitude towards generics. That is why trial applications of crop protection products are necessary. If farmers see the difference in products, perhaps this will become a prerequisite for full-scale use of the product in the fields.
Latifundist.com: Have you encountered the problem of counterfeits of your products?
Cindy Lu: On the local market we may have a few counterfeits. But not internationally.
Ellen Yu: The presence and detection of counterfeits depends on whether the government continues to implement and improve its anti-counterfeiting policy and carries out more checks when issuing export permits. But overall, the situation has improved significantly over the past few years.
Latifundist.com: Name the main reasons why farmers should prefer generic products.
Ellen Yu: I think farmers will eventually become agronomists. They will calculate how much 1 ha costs them: the cost of seeds, fertilizers and crop protection products, and how much they will be able to get in return. After all the calculations, they will compare which solution is the best and most cost-effective. They will begin to evaluate their approach to choosing particular products based on the profit they can get in the future.
Cindy Lu and Ellen Yu
Latifundist.com: How open is Nutrichem? Do you share videos or images of the production process, and do you invite customers to the plant so they can see for themselves the quality of the products and their compliance with standards?
Cindy Lu: For the last 2 years we have been hosting large delegations at the plant. Large farmers have seen the production process and visited the laboratories.
Latifundist.com: How long have you been working with LNZ Group? What are your plans for future cooperation?
Cindy Lu: We have been working together for about 3 years. We have a good and close relationship with LNZ. We want to supply them with more products in the future.
Ellen Yu: We work together as partners, support LNZ and grow. Our company provides good-quality products so that they can help local farmers.
Latifundist.com: Thank you for the conversation!
Anna Ombodi, Latifundist.com
