One exciting innovation in agricultural technology is biological control products. Not only do these pest management products have huge market potential, but they also are environment-, farmer-, and consumer-friendly alternatives to traditional chemical pesticides. Unlike synthetic pesticides, biological control products are derived from natural materials such as animals, plants, and microbes, and are consequently less toxic and more targeted, while remaining highly effective at plant protection.
This market has experienced rapidly accelerating growth. Since 1993, biological products have grown from being a $100 million to a $3 billion industry, and are projected to reach $5 billion by 2020 and $11 billion by 2015. In the future, the biological control market can potentially capture a $34 billion share of the $60 billion total plant protection market.
Despite this enormous potential, there are still a number of challenges both for companies hoping to enter this industry and for companies hoping to commercialize biological products in smallholder markets. First, there are a huge number of companies already competing, some, like Monsanto and Syngenta, already dominate the agricultural input industry and have significant resources and expertise. This means that market access is a significant barrier for smaller or local companies who do not have the same access to financial and human capital. Second, smallholders are often unaware of biological control products and are accustomed to using chemical pesticides, or no pesticides at all. This means that companies must invest in developing product knowledge and demand.
Whether you hope to enter the market or are a small biological control producer hoping to scale-up or expand across countries, we have identified a number of important considerations you should look at first:
1. Understand what the global and regional market trends are. North America and Europe represent the biggest shares of the market, while Latin America is the fastest-growing. While as a whole Africa represents a smaller share of the market, some countries that are already major agricultural exporters, such as Morocco, South Africa, and Egypt, have active biological control product markets. When considering the biological control product market in different countries, it is important to consider the type of crop, how it is used (if it is domestically consumed or exported), and the price-point of farmers.
2. Understand the key market drivers, and what market potential it offers you. The main driver of growth is consumer demand to reduce chemical pesticides. Consumers increasingly consider the health and environmental impact of their food, and biological control products offer a safer solution. Manufacturers are drawn to biological products due to the significantly lower cost of development, reduced pest resistance, and fewer regulatory hurdles. While new synthetic pesticides can take over 11 years to go from development to market and cost upwards of $286 million, biological products take only 3-5 years and cost between $25-50 million. Farmers, in turn, are driven to use biological control products because they are safer for themselves, their families, and their lands. In addition, the products are also proven to increase crop productivity and quality, allowing them to sell and export more. Knowing these key drivers is essential to develop a targeted marketing plan and business strategy.
3. Understand the intellectual property framework. If you are developing a new innovation, or hope to expand into foreign markets, it is very important to consider intellectual property laws and patents. Patents play a key role in helping small companies compete, promoting innovation, and protecting inventions. For companies hoping to patent biological control products, there are several important considerations. First, in order for your invention to be eligible, it must be different from what occurs normally in nature. For example, if you alter microbes, or combine microbes that are not naturally found together, then you could patent them. However, if you just take a microbe out of nature and do not change it, you would not be able to patent it. Second, you must do extensive research to ensure that your invention is not already patented. Third, different countries and groups of countries have different intellectual property laws and standards, so you must research what is required in each country prior to expanding. Fourth, understand the difference between patents – which, while expensive and have expiration dates, offer formal protection – and trade secrets – which are free and have no expiration date, but require you to protect them.
4. Understand your comparative advantage. While large companies may have more capital and resources, local companies can use their knowledge of local markets, customs, and environment to their advantage. The most competitive producer of biological products in Chile, for example, is a company which developed a product derived from local organisms and as is such is especially adapted to the local climate and conditions.
To get the full story about global trends in the biological control product market and how they could impact your company, watch the recent Tech Talk: