Agrow Reports

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CHAPTER 1 - OVERVIEW

1.1 Background to reports

Generic pesticides and the companies that produce them are becoming an increasingly important part of the agrochemical industry. A combination of the general decline in the discovery of new pesticide active ingredients (ais) and the steady loss of patent protection on existing ais means that the generic pesticide industry is growing faster than the R&D-based agrochemical industry.

This growth is in terms of both numbers of available ais and total sales. There are no authoritative figures available for the size of the generic pesticide industry, but in 1996 it was estimated to account for around 10% of the global agrochemical industry. In 2005, it is likely to account for 20–30% of the global agrochemical industry, which means that it now generates annual sales of $6,000–$9,000 million.

This report is the first in a set of three investigating the current state of the generic pesticide industry and market. This first report contains profiles of 100 of the most important generic pesticide companies in the world today. The second report contains profiles of 100 of the most important generic pesticide ais. The third report provides a detailed analysis of the generic pesticide market and industry, and explores the forces that will drive the development of the generic pesticide industry over the next few years. These three reports are updated editions of similar reports on the generic pesticide industry that Agrow published first in 1998 and then, as a new edition, in 2001.

In these current reports, a generic pesticide company is defined as a company, or division of a company, that undertakes as part of its business the manufacture of pesticide ais for which the patents have expired. For the first time in this set of reports, the author has not excluded companies that held the original patents to those ais, which means that Monsanto is now a profiled company. Agrow Reports considers the differentiation between ‘post-patent’ products and ‘generic’ products and unhelpful artefact.

1.2 Outline of Companies report

The 100 companies that are profiled in the first report are listed in Table 1.1. In deciding which generic pesticide companies to profile, the main criteria used was generic pesticide sales, and for the top 50 companies this proved to be the only necessary criteria.

However, the generic pesticide industry is made up of only a relatively few companies with annual sales over $100 million, and hundreds of smaller companies with sales under $100 million (most of which have sales below $20 million). Deciding which of these companies to profile proved much more difficult, especially as sales figures for many of these companies were unavailable. The author chose the bottom 50 companies based on the quality and quantity of information available. Information was obtained from company web sites and from stories that have appeared in Agrow. Nevertheless, the profiled companies provide an accurate picture of the current state of the generic pesticide industry.

Table 1.1: List of profiled generic pesticide companies

India is another developing country with a large number of generic pesticide companies and home to the second largest number of profiled companies in this edition of the report. However, the actual number of profiled companies has fallen compared to the previous edition, from 27 to 22. This implies that the generic pesticide industry in India is at a later stage in its development than in China and is already starting to consolidate. Indeed, a number of Indian companies that appeared in the previous edition have since either spun-off or sold their generic pesticide businesses.

In China, however, there are still a vast number of generic pesticide companies, with new ones being established all the time. Some sources estimate that there could be around 1,500 separate factories in China producing technical grade pesticide ais. However, this large number of companies is an essential component of a fairly unique feature of the Chinese generic pesticide industry. There are lots of small companies, each of which manufacture only a few pesticide ais, but many of them actually sell a very wide variety of ais, which they acquire from each other. This level of co-operation and interconnectedness between different manufactures is only really found in China, and means that industry consolidation, as is happening elsewhere, may not occur in quite the same way in China.

In western countries, however, consolidation is in full swing, much as it is in the R&D-based agrochemical industry. Much of the impetus for this consolidation is coming from India and China, where manufactures are able to supply pesticide ais at highly competitive prices. This is forcing the larger generic pesticide companies in the developed world to find ways to improve sales and reduce their costs.

Much of the consolidation has involved the two largest pure generic pesticide companies, Makhteshim-Agan and Nufarm, which have acquired a variety of pesticide businesses over the past few years. Other companies contributing to the consolidation include Isagro and Albaugh.

This consolidation is the main reason behind the great increase in the number of Chinese companies in this edition of the report. Although a large number of generic pesticide companies have been established in China since 2001, driven by a fast growing economy and fairly weak patent and environmental regulations, this has simply added a few more to the huge numbers that already existed. The reason that more Chinese companies have appeared in this edition of the report is that they have simply taken the place of developed world companies that have been acquired, merged or simply stopped producing generic pesticides. What is true, however, is that the large number of Chinese generic pesticide companies meant that they were the first choice to take the place of the developed world companies.

Europe contains a surprisingly large number of generic pesticide companies, but many of these are based in less developed parts of the continent, such as eastern Europe and Turkey, which has four profile companies. Nevertheless, there are quite a few smaller companies in western Europe, demonstrating that small generic pesticide businesses can still suceed in a developed market.

Also quite surprising is the small number of generic pesticide companies in Latin America, which seemingly has much in common with the developing countries in south-east Asia, where the generic pesticide industry is much larger. However, it may be that the major R&D-based agrochemical companies and the larger generic pesticide companies have too strong a presence in Latin America.

1.9 Industry changes since previous edition

Of the 100 companies profiled in this report, 29 have changed since the previous edition. Much of this change has been driven by the consolidation of the global generic pesticide industry, with companies that appeared in the previous report having been acquired, merged or spun-off their generic pesticide businesses.

A number of acquisitions have been made by the two largest pure generic pesticide companies, Makhteshim-Agan and Nufarm. Since 2001, Makhteshim-Agan has acquired Feinchemie Schwebda (Germany) and Proficol (Colombia), and Nufarm has acquired Agtrol (US) and Agtrol International (France), all of which were profiled in the previous edition.

Caffaro (Italy) and RPG LifeSciences (India) were both profiled in the previous edition, but have subsequently been acquired by Isagro, which was not profiled in the previous edition because it only formulated pesticide ais that it acquired from other manufacturers. However, through its purchase of Caffaro and RPG LifeSciences, it acquired two pesticide manufacturing facilities and so is profiled in this edition.

In a similar vein, Albaugh did not appear in the previous edition, but it has since acquired Atanor (Argentina), which was profiled, and so Albaugh does appear in this edition.

A number of companies have spun-off their pesticide business into a separate company, which means that the profile of the original company has been replaced by one for the spin-off company. Excel Industries (India) span off its generic pesticide business to form the similarly-named Excel Crop Care, primarily to allow Nufarm to acquire a 14% stake in the new company. UCB (Belgium) span off its methylamine business, which produced a small range of pesticides based on methylamine derivatives, into the new company, Taminco. Pliva (Croatia) span-off its animal health and pesticide business to form Veterina.

LG Chemical (South Korea) split itself into three and then span-off its life science business to form LG Life Sciences, which produces pharmaceuticals, pesticides and animal health products. EID Parry (India) did something slightly different: it merged its generic pesticide business into its wholly-owned fertiliser business, Coromandel Fertilisers, in order to allow it to focus on its main sugar, biopesticide and bathroom fittings businesses.

Mergers seem to be fairly rare within the generic pesticide industry, but a version of a merger happened between Mitsu Industries, which was profiled in the previous report, and AgrEvo (now part of Bayer CropScience). AgrEvo acquired a majority stake in Mitsu Industries, which was owned by the Bilakhia Group, to form a joint venture called Bilag Industries, which is profiled in this edition.

Some general chemical companies that appeared in the previous edition have subsequently stopped manufacturing generic pesticides, including Kemira Fine Chemicals (Finland) and Borregard (Italy). Only one profiled company is known to have gone out of business, Cedar Chemical (US), but there are a number of other companies that no longer seem to be active.

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