Prasad Kulkarni of Aranca shares his thoughts on the emerging trends and opportunities for agrochemicals toll manufacturers in the post-COVID world
Emerging opportunities for agrochemical toll manufacturers
Prasad Kulkarni of Aranca shares his thoughts on the emerging trends and opportunities for agrochemicals toll manufacturers in the post-COVID world
The global agrochemical value chain has been undergoing steady transformation since the beginning of the COVID-19 pandemic , which led to extended lockdowns in key locations across Asia , severely impacting the supply chain . Surging logistics costs , rising geopolitical tensions and increasing trade barriers led to a spike in variable product costs . For instance , manufacturing costs for generic active ingredients ( AI ) increased by 75 % during 2020 – 21 .
Meanwhile , volatile oil prices and higher prices of coal in China compounded the problems of agrochemical manufacturers globally . To counter these challenges , they started assessing the resilience of their supply chains and pursuing strategic options that could potentially hedge the risks .
Localisation of manufacturing
Agrochemical manufacturers have realised that assigning responsibility for the entire supply chain to a toll manufacturer could help to reduce stock and control delivery . Local procurement and fulfilment also help to achieve better control of variable costs .
This realisation has led to increased preference for an asset-light model and scaling back investments in capacity expansion . Agrochemical manufacturers are now optimising the utilisation of in-house capacities to manufacture high value products and outsourcing the manufacture of other intermediates . Furthermore , higher development costs and uncertainty around commercial success of the developed molecules are driving companies to explore toll manufacturing .
Applicators are increasingly demanding adjuvants that are simple to use and multi-functional in nature . This has led to agrochemical manufacturers trying to meet demand across diverse cropping systems with fewer additives .
Furthermore , with the aim of improving the overall efficacy of agrochemicals , formulation is moving from single to multiple AIs . However , a lack of training and knowledge at the applicator ’ s end represents a major challenge . Consequently , agrochemical manufacturers are investing in mandatory application training to ensure steady uptake for new cropping systems .
Shift to larger molecules
Agrochemical manufacturers and major toll manufacturers are shifting towards larger molecules to remain competitive in a consolidated industry . Toll manufacturers are investing in developing robust formulation research and manufacturing capabilities .
Securing intellectual property ( IP ) has become a major concern for agrochemical manufacturers seeking to work with these toll manufacturers . A risk always exists of the toll manufacturer emerging as a competitor in the long run . For this reason , collaborative development of larger molecules has not yet picked up and the larger integrated agrochemical manufacturers prefer to undertake this process in-house .
Agrochemical manufacturing in Europe has come under increased regulatory scrutiny over the recent past . Regulatory bodies have been seeking updated toxicological data for a few popular agrochemicals . Reregistering these products in Europe would cost a significant amount of time and capital .
To avoid these complications , manufacturers are exploring options to shift the manufacturing base of these products away from Europe . However , this shift is relevant for postpatent products since concerns over the protection of IP persist .
E-commerce integration
The growing trend of e-commerce platform integration between
20 SPECIALITY CHEMICALS MAGAZINE ESTABLISHED 1981