Playing to Win for Ag Retail in a Generic World

This week I was reading the CropLife article, Off-Patent/Off-Kilter: How the Patent Cliff Is Redrawing the Crop Protection Playbook), which talks about what the wave of patent expirations means for the channel, a hot topic of course in ag media, but one we have all known is coming for years.

Active ingredients such as chlorantraniliprole, pinoxaden and prothioconazole have all came off patent, along with Group 15 herbicides like pyroxasulfone. The article estimates that this will push the share of off-patent active ingredients in the U.S. market to upwards of 90%.

There is an expectation of price declines from 20% to 60% depending on the category — with higher numbers in the realm of group 15 pyroxasulfone for example.

That leaves less dollars per acre for retails, more competition for retailers and R&D manufacturers and increased optionality for the farmer.

This is at a time when there is increasingly new technology (eg: See & Spray), consolidating farm size and a rising interest rate environment. These all challenge ag retailers and agribusinesses.

The prescription in the article is for retailers is to do things differently: build the business around service-based agronomy such as scouting and integrated pest management, bundle biologicals with traditional crop protection, build "generic-plus" portfolios that pair trusted generics with enhanced service bundles, partner with manufacturers that have strong regulatory assets and formulation capabilities, invest in AI and drone-enabled application services and, for those with the resources, evaluate private label.

I agree. Retailers need to do different things, and have been emphasizing similar since the beginning of Upstream, whether it is in Navigating Strategic Development, Strategy Tax and the Opportunity in Uncertainty in Agribusiness, Finding Asymmetric Upside in Ag Retail and Agribusiness, Building Information Advantages in Ag Retail, Proprietary Product Strategy Is Evolving, and many more.

But it isn't about merely adding services for the sake of services, or bundling for the sake of bundling. I do not think simply doing things for the sake of doing them is the best answer.

Retailers need to take a detailed look and their business and figure out where they are differentiated, what they are willing to stop doing and who they want to target, as just a few starting points. Roger Martin's Playing to Win framework is key for that (more below). Then they need to think through what technology, capabilities and partnerships are out there and what they can do to be effective.

A generic-plus portfolio means something very different to a cooperative moving volume through owned infrastructure than it does to an agronomist-led crop protection specialist, and a service that fits one may be a distraction and money-loser for the other. The Purdue Agribusiness Review gives us a useful framework for thinking through this initial step.