Sowing the seeds

Agrium Inc, a Canada-based wholesale producer and retail supplier of agricultural products, recently took its first Chinese business steps in Beijing by establishing a representative office. It offers unique eco-friendly products for China, and is poised to partner local companies to pursue growth opportunities. Mike Wilson, president and CEO of Agrium, in an exclusive interview with China Business Weekly reporter Zhang Qi, shares the company's growth ambition and strategy in the country.

Q: Why has Agrium come to China at this time and in what way can your products help in promoting more efficient use of fertilizer?

A: There are three things you need to understand our company before answering the question. One is who we are, the second is our growth ambitions, and the third is China.

Agrium is the only global company that publicly traded, listed in NYSE and TSX stock exchange, crossing the entire adding-put value chain, which means we supply whatever the farmers need. We supply fertilizer, nitrogen, potash, chemicals, pesticide, and seeds.

We are a large manufacturer and marketer of fertilizer. We manufacture eight million tons of fertilizer in the world, but we market 18 million tons. We market significantly more than manufacturing.

We are also one of the largest retailers in the world. We sell direct to the farmers. In North America, we are three times bigger than the second largest supplier. And in that business, we sell fertilizer, seeds, pesticide and chemical. We sell three billion dollars of seed and chemical last year. And we are going to expand our seed business over 20 percent each year.

We are also the world leader in selling environmental-friendly products. We have nutrients that release very slowly for the plants. We sell a fertilizer called ESN Smart Nitrogen ground with coating which releases in 12 and 16 weeks. So when the wheat crop is growing, the roots start to come out and they slowly take the fertilizer according to its growth rate.

If you look at how we grow, we go through acquisition, building new plants, global distribution, and sales. In the last two years, we made seven acquisitions. We also hold a 20 percent equity position in a Chinese fertilizer company, Hanfeng Evergreen, with whom Agrium has licensing agreements for sulphur coated urea technology in China.

We are currently building a new plant in Egypt, one of the world's largest nitrogen makers. The last is we sell nitrogen around the world. We bought distribution companies so we can sell around the world everywhere except Russia.

Now we are in China because China is a very large agricultural market and there are opportunities for us to grow.

We can help China to import and export products. China need potash, we can help China with potash. China has environmental problems, and we can help China with that problem.

Q: How would you propose to sell your products in the Chinese market? If you choose to go the way of joint ventures, what are your requirements for a partner?

A: Chinese farmers are very traditional. It takes a long time to educate them to change.

The first thing you do is to educate them what you have, and the second is to ask them to try it. Then they will buy it. In North America, it will take 12 months. But in China, it may take longer time.

We are looking for partners who want our products, our expertise, environmental knowledge and distribution technology and who know how to distribute and have production access in China.

A partnership is like a marriage. You don't go just for the weekend or for a year. You want going for the long-term relationship. So it's important that you have similar values, which include the values of the farmers, community, and shareholders.

Q: What do you think is your challenge in this new market?

A: In China, there are about 700 million farmers. It is very difficult to communicate with such a huge population while the population of farmers in North America is relatively small.

China is going through changes. More and more people coming from the countryside to the cities, and over time, the farming population will come down. In that time, there may have to be an agriculture revolution in China. In order to enhance the agricultural efficiency, China needs to move farming to the big scale, and be able to use auto-machines, so as to upgrade the production efficiency. In that way, we will have fewer farmers to communicate with, and we are able to bring our technology and efficiency to the farming population.

Another challenge is environment, but it also means opportunity. How we can support the government policy? For example, the government wants more efficient food production because of food inflation.

We need to make sure that we understand these challenges.

Q: There are already domestic fertilizer companies that have the lion's share of the market. What's your competitive edge in the Chinese market?

A: The way we can get a piece of cake is by offering some products and services they do not have today. We can help them access to another country very efficiently. We have lots of experience working with farmers and increasing the production efficiency.

We are not just a fertilizer company but we also buy chemicals from China to ship to America today. Our advantage on potash is a very big advantage that Chinese companies do not have.

Another advantage is we operate across the entire supply chain or value chain of fertilizer supply. We go all the way to mining, production, distribution and retail. We sell directly to farmers, so we are able to get feedback from farmers. We are able to tailor our products and services more effectively and be more competitive. In the short term the farmers make a lot of money, and in the long term the environment is helped.

There are many slow release products. But there is no comparison to ours as no one has the same product in China today

Chinese fertilizer companies tend to be fragmented. That's their historical development. In the past, they were separated into distribution or production or sales to farmers. In China today, there is no company across the whole supply chain.

Q: Are there any specific goals you aim to achieve in China for a specific period of time?

A: The first thing is when people in China think of environmental-friendly fertilizer, they will think of Agrium and Agrium's partnership.

(China Daily 05/12/2008 page5)