MEXICO - Agriculture
José Ignacio Escalante de la Hidalga was born in Mexico in 1953 and studied Veterinary Medicine at the UNAM. He also has a degree in Business Administration and finalized his studies as a Doctor in Literature. He worked for Merck Sharp&Dohme in the agrochemical and veterinary area and for Velsicol de Mexico. He joined Velsimex in 1988. He is the founder, CEO, and Chairman of Board of the company. He has written three books and visited more than 70 countries.
We started 26 years ago by importing just one technical product; chlordane. I had been working at Velsicol Chemical Corporation, which sold 80% of the company to Sandoz. Velsicol did not sell chlordane to Sandoz, and so we created Velsimex to distribute chlordane. It was a strong product and was used against termites, but as a technical product it faced opposition in the market and was withdrawn because it was highly persistent. As Velsicol was the only manufacturer in the world, we had been turning a good profit from the product and constantly reinvesting our profits to register and import new products, having observed independent companies from China and India. This all enabled us to compete with the multinationals at that time, 26 years ago. Global companies always have new products to launch in the market, which is their major weapon. Our major weapon has been my word, because everyone can sell a commodity, but if you honor your word you are standing by what your company promised.
Approximately 26 years ago, Mexican companies were purchasing many of their products from multinational companies locally, or from a local government company called FertiMex, which manufactured about six insecticides. In the beginning, we were buying the technical product, passing it to another company that formulated it for us, and then marketing the product under our own label. Later on, we purchased our own plant and started to formulate the products ourselves. That was how we managed to compete with the multinationals; we imported technical-grade product, formulated it, and went to the market under our own label. We improved our market share by providing credit and offering conditions that customers welcomed. At the outset we tried to sell close to the price of the multinationals, while offering a much lower price to distributors. When one of our distributors sells a non-multinational product at the same public price, they enjoy the highest margins. My thinking 25 years ago was that if I gave healthy profits to our distributors we would establish a distribution network for the future, which is precisely what happened. Today, Velsimex is the biggest supplier to 60% of our 350 customers, which gives us the opportunity to create long-term relationships.
We are developing a loyalty plan, similar to an airline points systems. It is very sophisticated and took eight to 10 months to establish. We have also split the company up into different parts. Now we have a company that only sells green, or organic, products. For example, Agricola Innovacion sells pyrethrum, which is a plant-based insecticide derived from the Chrysanthemum. Pyrethroids, based on pyrethrum, are a very important line of insecticides in the world now. We are selling it in its natural state, and it has some very specific markets. We also extract neem,which comes from a tree that grows in India. We have another company called Quimix that sells human health products, for example products to control mosquito problems, such as malaria and dengue fever. Quimix was started in 2000 and is now the most important public health company in Mexico as a supplier.
They are separate. If we put the sales of Agrícola Innovacíon, Quimix, and Velsimex together with the plants, then we are the third or fourth largest company in the market. When we say that we rank sixth we are purely referring to Velsimex.
It is ours and it has been widely innovative, for example in plastic irrigation hoses for carrying treatments against fly problems in garden plants. Or, if you have a summer house, you can program the system to periodically distribute insecticide over the surrounding garden to keep the mosquitoes away from your house using a mobile phone to connect to the system. This company is very innovative and we are very strong in the market in terms of malaria and dengue fever products, and also with our products for cockroach control. One of the plants formulates Temephos, which is a larvicide used to kill mosquito larvae. In general, we try to innovate with gels and are very interested in those areas.
We have grown very fast as a result of importing technical products in our earlier years. However, these days many other companies are doing the same, particularly from India and China, and we are facing strong competition. Our plan is to continue developing registrations and manufacturing technical support at such a rate that we become the first or second seller of every product we offer, thereby increasing our margins. Another plan is to synthesize some technical insecticides, fungicides, and herbicides. These are the two pillars on which we are planning to build the future of the company. Between our two plants, Agrícola Innovacíon, Velsimex, and Quimix we have more than 400 employees. That has all happened over 26 years.
In Mexico, agriculture is not treated with the importance it deserves, and accounts for only 4%-5% of our economy, but more than 40% of the Mexican population lives in rural areas. At the beginning of the 20th century, there were 1.6 billion people in the world. There are now around 7 billion people and the acreage is a little more or less than same. The real difference is agrochemicals, the use of which produces a much higher yield. Major developments are coming from new agricultural practices that include the use of agrochemicals such as fertilizers, insecticides, and fungicides. If more agrochemicals were used correctly in Mexico, the country’s crop production could improve significantly. For example, in some areas one hectare produces more than 14 tons of corn, while in Chiapas there are lands where the yield is only 800 kilograms per hectare.
At Velsimex we believe we have a social commitment, and we invest in scholarships for our employees and their children. We also invest in other kinds of social benefits for them.Besides that, Mexican and global companies are concerned about new foreign companies coming to the agrochemical market. We are creating an official norm that obligates these companies to follow the same safety procedures that we implement. We want to have an organization that has an open telephone line 24/7, with a doctor to provide antidote/treatment information for any cases of agrochemical intoxication. If all Mexican and multinational companies are paying for this, then any new company must have a similar program to protect the public. Another example is that our products expire in two years, after which they have to be taken off the market. Some small foreign companies are unconcerned when a product expires; they should be obligated to be responsible. Campo Limpio was created as a joint venture between multinationals and local companies to clean up Mexican fields of the bottles used to contain agrochemicals. I am glad because although these are not Mexican companies, they invest in Mexico because they care about their subsidiaries and their Mexican employees and Mexican agro-producers. Campo Limpio is doing a great job of recovering and recycling packaging. When we first started, the multinationals and the Mexican companies were recovering less than 20% of the total packaging that was reaching the market. Last year was my second year as President of the Association and the fourth year of Campo Limpio, and we managed to recover 59%, almost 60%, of all the bottles that we used. This year the objective is 65%.
© The Business Year – June 2014
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