What next for the Australian agrochemical market?
People who follow the Australian agrochemical market may have noticed the rapid developments taking place in the Australian agrochemical industry over recent years. What are the reasons and implications behind these changes? What future effects will they have on the Australian agrochemical market? What inspirations can these changes bring to companies in other countries?
1. Mergers of traditional channel a major cause
LANDMARK's acquisition of CRT RURALCO and ELDERS' acquisition of AIRR were finally completed, becoming the biggest news in the Australian agrochemical market in 2019. Australia's traditional top six distribution companies were restructured into top four, that may still change in the future, as three distributors will be adequate for Australia's traditional distribution industry.
As the main source of Australia’s supply chain, the Chinese agrochemical industry has experienced strict environmental regulation that caused the industry to become centralized and standardized, leading to the consolidation of traditional Australian distribution channels, which had to adopt to changes in the Chinese market. Due to the drought affecting Australia over the past three years, the level of inventory held by large companies has increased considerably. In order to avoid destructive competition, the shareholders of major distributors are trying to ensure their future monopoly position in their core businesses by consolidating their distribution channels.
At the same time, mergers and acquisitions represent an excellent plan to divest non-performing assets. Through consolidation, the number of small town agricultural supply and services providers in Australian planting regions has been reduced, and ineffective franchisees and businesses have closed down.
The respective advantages of merging two channels have become more prominent, ensuring the creation of a strong alliance that will have a leading influence in the overall market. Therefore, major business players can dominate the integration of businesses in the agrochemical, agricultural machinery, water resources, farm product trading, insurance and finance sectors, ensuring that they can attain a strong market position that cannot be challenged by competitors in the short term. A new era for major enterprises is coming.
2. Both generic product suppliers and local distributors will suffer
Acquisitions by large companies will reduce the chances of survival of generic product suppliers in the future. With the improving quality of Chinese products, the Australian market no longer doubts the products made in China while the availability of high quality formulations from Chinese manufacturers will also make distribution channels more confident in distributing Chinese products.
Through the availability of internet services and the current global strategy of Chinese companies, as well as the fact that business information is becoming more transparent, companies can now make money at various pricing categories. Generic product suppliers need to review their business strategies to find the right niche in the market after it changes, therefore, survival conditions can still exist in the future market.
Farmers running independent family businesses can also face the same problems, and independent companies, whose core competitiveness is based on local distribution networks and social cultures, may be ruthlessly pushed out and excluded from the market by large distributors backed by big capital.
These shop owners are currently thinking about their future. The possibility of being taken over is not high, but the possibility of merging is much higher. Who is going to manage this consolidation? How can they draft a distinctive model of consolidation that is different from traditional models? The future market is hard to predict.
3. Changes taking place in the Australian agricultural market
The agrochemical industry is only a small part of the wider agriculture sector. It is not easy to find effective ways of making operational breakthroughs if a business is confined to a niche agrochemical industry. With an insight into Australia's agricultural market and its developments over the past few years, potential business orientations may be foreseeable, which will guide the future of the agrochemical industry.
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