Monday, July 30, 2012

Unified Management Bothers Traditional Pesticide Sales Model

Since the policy, namely Regulations of Professionally Unified Management on Pest and Disease (Regulations for short), has been carried out by the Ministry of Agriculture of China from 1 Aug., 2011, China has largely promoted unified management on pests and diseases in the whole country. So far, some provinces in China have well implemented the Regulations and achieved good effect on pest and disease management, based on CCM International’s latest issue of Crop Protection China News.

Although the policy has been well implemented and largely supported by peasants in some provinces in the past few months, it, in deed, brought impact to traditional pesticide sales model in these areas.

Take Hunan Province for example, the number of the professional organizations providing unified pest and disease control services reached over 1,313 in 2012. The total management areas in the contract signed by these organizations with peasants for offering services reached 1 million ha., accounting for over 20% of the total crop planting areas in Hunan Province this year.

As the professional team's demand for pesticide is much larger compared with that from single peasant, usually they'd rather choose to directly purchase pesticides from pesticide enterprises than from retailers and dealers. By this means, pesticide purchasing of professional teams avoids paying extra cost not only to retailers, but also to those pesticide dealers in the middle link of traditional pesticide sales model.

Since the large amount of pesticide sales has been suddenly cut off by unified management services, many pesticide retailers suffered great loss in the past few months. It is reported that over 8,000 pesticide retailers have went bankrupt in Hunan Province since the Regulations was carried out.

Actually, not only pesticide retailers and dealers suffered loss in the large promotion of unified management services, but also some of the large pesticide enterprises may confront big challenges.

Shenzhen Noposion Agrochemical Co., Ltd. (Noposion), one of the large pesticide formulation enterprises in China, now owns two different sales models. One is that Noposion directly sells pesticide to county-level distributors. These county-level distributors then sell pesticides to retailers. This kind of sales model contributes to most revenue of Noposion.

In late 2009, Noposion started to build another sales network in consideration of its long term development–selling pesticides directly to retailers. Aiming to build up the new sales model as fast as possible, Noposion continuously added a lot of investment in the past two years which led to a decline in net profit growth year by year.

Although Noposion has disclosed that the construction of the new sales model was still under way, some insiders doubted that the new sales model will not perform as well as the company imagined. And they believed that the pesticide sales model of unified management services which ignores the sales links of pesticide in traditional sales model will become one of the main factors that impact Noposion's new sales model.

Another pesticide enterprise in China, namely Jiangsu Huifeng Agrochemical Co., Ltd. (Jiangsu Huifeng), also considered unified management services as one of the main impact factors of its IPO project, namely the county-level pesticide marketing network construction project.

Considering the difficulties it may face in the process of building up so many retail stores and the impact from unified management services, the company decided to change the raised project into building up Shanghai marketing center.

Aiming to cut down the number of sales links, directly supply pesticides to retailers and decrease the cost of peasants, Jiangsu Huifeng planned to widely promote the new sales model in China, namely Pesticide Direct Supply and Sales, by raising money from IPO (it got listed on 27 Oct., 2010).  The final aim of the new sales model was to build an ERP (Enterprise Resource Planning) information management system and set up over 20,000 retail stores in county level. 

As China now dedicates itself to developing modernized agriculture, the promotion of unified management is considered to be an irresistible trend. The traditional sales model in China may experience great changes in the first place during the promotion process. Large pesticide dealers in China may make some changes to their pesticide sales model or set up professional management teams to adapt the trend. Laying effort to build up good relationship with large professional unified management companies is also considered to be a good choice.

Background information

Professionally unified management on pest and disease is a kind of socialized, large-scale and intensive pests and disease control services which are led by professional teams with well-trained and experienced technicians. Eyeing the better effect on pest and disease management and lower cost it brings to peasants, it has been successfully promoted in many developed countries in the world. Although China has tried to promote this kind of measure years ago, it failed to wholly promote it to the whole country. The releasing of the Regulations is considered to be Chinese government's first official policy to promote professionally unified management on pest and disease and it also showed the Chinese government's great ambitious of wholly promoting the management measures in China.

Source: Crop Protection China News 1213

Content of Crop Protection China News 1213:
Unified management bothers traditional pesticide sales model
HS Code classification of paraquat TK raises dispute between enterprises and GAC
Total import volume of corn increases sharply from Jan. to May 2012
Use of abamectin ointment may be legalized
China accelerates integration of pesticide industry
Anhui Huaxing to relaunch reorganization
Jiangsu Yangnong may see good performance in 2012
More and more pesticide manufacturers set foot in fertilizer industry
Sipcam Agro China to put pesticides into Chinese market

Crop Protection China News, a semimonthly publication issued by CCM International on 15th and 30th(31st) of every month, aims to gain a deep insight into Chinese market, supply the latest market data and strategy support, analyze the newest legislation and policy and grasp the future market trend.

About CCM
CCM is dedicated to market research in China, Asia-Pacific Rim and global market. With a staff of more than 150 dedicated highly-educated professionals. CCM offers Market Data, Analysis, Reports, Newsletters, Buyer-Trader Information, Import/Export Analysis all through its new proprietary product ValoTracer.
For more information, please visit
CCM International Ltd.
Guangzhou CCM Information Science & Technology Co., Ltd.
17th Floor, Huihua Commercial & Trade Mansion, No.80 Xianlie Zhong Road, Guangzhou 510070, China
Tel: 86-20-37616606

No comments: