© All rights reserved to Makhteshim Agan Competing for the ...innovation.technion.ac.il/upload/fjcfdmy-evhtfv_pl_epvjd_7f2ncr1a3r.pdf© All rights reserved to Makhteshim Agan China

© All rights reserved to Makhteshim Agan

Competing for

the FutureStrategic Innovation

September 21st, 2011

Technion

Erez Vigodman, CEO Makhteshim Agan


...תנסו לדמיין לרגע

שמעולם לא היו מהירים וחזקים יותר, ענף שחווה קצב ועצמה של שינוי.

שחייבת להשתנות ,(ואפילו אחת החברות המובילות)חברה מצליחה בענף

.כדי לא להיקלע למשבר וסחרור

אבל כל מהלכי השינוי שהתבצעו , החברה כבר ביצעה הרבה שינויים בעבר

תוספתייםובשיפורים , (לעיתים נרחבת)התרכזו בהתייעלות , עד היום

.(לעיתים משמעותיים)

סגירת , במקרה הטוב ולאחר תהליך כואב ומתיש, כל אלה יאפשרו הפעם

. שבינתיים ממשיכים לרוץ קדימה, מול המתחרים" פערי עבר"

2


...תנסו לדמיין לרגע

החברה הזאת צריכה להמציא את עצמה מחדש. הפעם נדרש משהו אחר ,

.שהם חדשים לענף, להגדיר וליצור מודל עסקי ומרכיבי בידול

עדיין לא , האנשים בחברה עדיין לא מסתכלים למציאות בעיניים, בשלב הזה

את הצורך , הטמיעו באופן מלא את כל המשמעויות של השינויים שהענף עובר

...בשינוי כל כך גדול

החברה הזאת היא החברה שלכם .

תעבור את התהליך הזה בשנים הקרובות , כי הרי כל אחת מהחברות שלנו

…אם היא לא עברה אותו כבר

3


אז איך יוצאים בכלל למסע הזה?

מה נדרש מאיתנו במהלכו?

ואיך כל זה קשור בכלל לחדשנות?

4


The World is Changing…

5


Key Mega Trends

Changing

Demographic

Landscape

Shifting center of economic

gravity to emerging countries

Connectivity-the technological

revolution changes the way

we live and interact

New Consumers

Social costs of

globalization and free market

Overburdened public sector

Growing pressure on

natural resources

Global debt burden and sustained recession

6


3,937

5,231

World Population

2003 2050

335 448

372483

921

1,998

729 691

Source: UN Population Division

North

America

South

America

Africa

Europe

Asia

7


Changing Demographic Landscape

Source: UN Population Division8

0

1

2

3

4

5

6

7

8

9

10

Billio

ns

Developing Countries

Developed Countries

Urban Population


Huge gaps in labor cost among various countries around the worldPayment per labor hour, production employees (in $), including benefits

0 5 10 15 20 25 30 35 40 45

India

China

Mexico

Brazil

Czech Republic

Korea

Spain

Japan

U.S.

France

England

Germany

2006

2016

Source: Oxford Economics / Haver9


Shifting Center of Economic Gravityto Emerging Markets

10


The Dynamic of Global Growth

-5

-3

-1

1

3

5

7

9

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

E

2012E

European Union

US

Emerging Markets

Source: IMF

Pe

rce

nta

ge

of g

row

th

11


China Leads in Scientific Developments

Number of patents in the field of nano-technology

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

12,000GermanyChina

USA

Japan

World-Total

Number of articles in scientific journals

0

400

200

600

800

1,000

1,200

China112,318

Brazil30,021

USA332,916

India38,366

Russia27,605

Source: Journal of Business Chemistry , 2010, 7 (1); Financial Times12


Most of Today’s Consumption is Still in Developed Countries65% of global consumption in 2010 was in nine of the biggest countries

29.6%

9.0%

5.7%

5.4%

4.6%

3.7%

3.1%

2.3%

2.0%

USA

Japan

Germany

China

France

Italy

Brazil

India

Russia

13


But Consumer Landscape is Changing DramaticallyThousands of $B

B6China, India, Russia, Brazil,Mexico, South Korea

G6U.S., Japan, Germany, England, France, Italy

14

9,035

2,256 2,068 1,755

1,483

734 455 291 250 203 162

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

$ B

illio

n

2000

2008

2010

Major Challenges in the World after the Economic CrisisDebt burden remains almost unchanged

75,915,676,499,200$ 2007:

2010: $72,438,984,187,499

Government Debt

Estimation of International

Debt Burden

Source: OECD STAT15


Poverty and Inequality - 2011

20% of humanity lives on less than one dollar a day (1.4 billion people)

950 million people suffer from malnutrition

1.1 billion people do not have access to clean drinking water

2.6 billion people live without adequate sanitation

Approximately 101 million children (mostly girls) never went to school

In the last decade, 30 million children died from diseases that could have been prevented: measles, malaria, and cholera-before the age of 5

Source: UNCTAD, UNICEF16


Current Technologies Cannot Support Future Food Demand

In order to meet the projected demand, yields will have to increase at a faster rate (37% on top of current yield improvement rate)

1000

4000

3000

2000

19

61

19

70

19

79

19

88

20

42

20

06

20

15

20

24

20

33

Past production Future needs

To

tal glo

ba

l ce

rea

l p

rod

uctio

n

(Mill

ion

s o

f to

ns)

Supply

Demand

Sources: The Environmental Food Crises, UNEP 200917


Commodity and Food Prices

18

Crop Prices, 1992-2011 Average Food Price, 1991-2011

IMF

Food P

rice index

Price index

0

100

200

300

400

500

Cotton Corn Soybean Wheat

60

80

100

120

140

160

180

200

Source: IMF



What does this mean for the business world…

19


Dynamics of global growth.....

GDP per capita (1990 dollars)

X years ago

Source: J. Bradford De Long20

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

1000 900 800 700 600 500 400 300 200 100 Now

Source: J. Bradford De Long


“Somewhere out there is

a bullet with your

company’s name on it.

Somewhere out there is a

competitor unborn and

unknown, that will render

your strategy obsolete.”

Gary Hammel

21


Bill Gates

“Microsoft is always

two years away

from failure”

“The Way Forward” (1995)

“Today’s internet is not the

information highway I imagine,

although it is possible to see

the start of it”

22


ChangingThe Rules of The Game

23


Over the last 10 years, which companies took best advantage of changes in your industry?

New competitors

My own company

Traditional competitors

38%

31%

26%

Source: MCI/Gallup “Competition 2000” Survey24


Are the strategies of the 4-5 largest competitors in your industry getting...

More alike

More dissimilar

Neither

45%

32%

21%



Have the most successful newcomers in your industry succeeded by...

Executing better

Changing the rules

31%

62%



Ag Chem IndustryWhat is it About?


How would the world

look like withoutcrop protection products?

28


Nematode

contamination

Healthy

Our solution:

Nemacur

29


Corn Earworm

will destroymore than 90%of the sweet corn yields

And it's just one of 10,000 species of plant-eating insects

Our solution:

Diazinol, Pyrinex

30


The Monilinia Fructicola fungus

will lead to a loss of 75%of the sweet corn yields

And it's just one of 3,000 species of nematodes

Our solution:

Captan

31


And not just food;In the absence of crop protection products cotton production and textile industry will

decrease by 70%32


But this is NOT the only roleof crop protection products…

33


Environmental Solution Products enablehealthy animalsby eliminating fleas, ticks, and chewing lice

34

Among our solutions:

Fipronil


Environmental Solution products enable

safe drivingby eliminating weeds from railroad tracksand highways


Imazapyr, Diuron

35



Chlorthalonil, Imiacoloprid

Environmental Solution products

maintain thegreen spaces:lawns, playgrounds,parks and public areas

36


Environmental solution products

defendthe water reservoirs

37


Ag Chem Competitive Landscape


Crop Protection Industry is Sizable

Ag Chem industry revenues - 1999-2010

$ Billion

28.1 27.8 25.8 25.2 26.730.7 31.2 30.4

33.4

40.537.9

43.5

4.0 4.24.1 4.2

4.5

4.7 4.9 5.2

5.4

5.75.9

7.1

2009

43.7

2008

9%

Crop

Protection

Non Crop

2013F

50.6

+7%-3%

+2%

2006

36.1

2005

35.6

38.8

2007

46.1

2004

35.4

2003

31.2

2002

29.4

2001

29.9

2000

32.0

1999

32.1

Decline Recovery Acceleration Steady

CAGR

44.2

2010

5.9

38.3

Sources: Phillips McDougall 39


Never Has the Pace of Change Been Greater

40

GenericsChinese Chemical Industry

Chemical R&DSeeds &

Genomics


MAI Overview


Global Development & Registration Network

Brazil

Israel

Germany

Switzerland

Colombia

US

6 development and registration hubs

Development capabilities in all regions

Local registration capabilities in over 100 countries with 130 registration FTEs worldwide

Full registration dossier building capabilities42


MAI’s global manufacturing footprint

Synthesis

Formulation

Italy (Kollant)

Spain (Aragro)

Poland (Rokita)

Greece (Alfa)

Columbia (Proficol)

Brazil (Milenia –

Taquari)

Israel (Makhteshim)

Brazil (Milenia –

Londrina)

US (CSI-Huston)

Israel (Agan)

South Korea (JK)

India (Gujarat)Mexico(Bravo)

US (Bold-Ocilla)

US (Bold-Tifton)

43


Constantly Gaining Market ShareGeneric Companies Market Share

Percentage of the Crop Protection Market

Sumitomo

2000 2001 2002

0

1

2

3

4

5

2003 2004 2005 2006 2007 2008 2009

FMC

6

MA Industries

United

Phosphorous

Nufarm

Cheminova

Sources: Nomura Research44


MAI’s Unparalleled Off-patent Global Footprint

HQ

Subsidiary

SalesSales in over 120 countries

More than 50 subsidiaries in close to 40 countries

45


MAI’s Sales

0.89

1.18

1.54

1.74 1.78

2.08

2.53

2.21

2.36

0

0.5

1

1.5

2

2.5

3

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011E

46


MAI Regional Sales Spread

2010 total sales - $2,368M2009 total sales - $2,215M

MAI Sales – 2010MAI Sales – 2009

47


MAI Holds a Significant Global Generic Market ShareCrop protection off-patent market by company – 2010 ($ millions)

Generic market total value = $18,985m

$M

illio

n

(Ma

rke

t S

hare

of g

ene

rics –

2010)

2,1802,003

1,599

1,242 1,170 1,092 995 934

11.5%

10.6%

8.4%

6.5%6.2%

5.8%5.2%

4.9%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

0

500

1,000

1,500

2,000

2,500

Source: Phillips McDougal, MAI analysis

*Excluding Seeds and Biotech

48

http://www.fmc.com/


Competitive Landscape

49

Large Scale RBC

Off patent 2010 Agrochemical sales, $ billion

8.9

8.1

5.34.9

2.92.5

2.22.01.6

1.21.21.10.9

Source: Phillips McDougal

http://images.google.com/imgres?imgurl=http://www.tx.ncsu.edu/organizations/student/ttsc/dupont_logo.jpg&imgrefurl=http://www.tx.ncsu.edu/organizations/student/ttsc/industry.html&h=275&w=423&sz=19&hl=en&start=1&tbnid=1nK74cStGT6zAM:&tbnh=82&tbnw=126&prev=/images?q=dupont+logo&svnum=10&hl=en&lr=

http://www.fmc.com/


MAI Market Share and Position

7.5%

4.8%

7%

2.4%

4.7%

Europe

NAFTA

LATM

APAC & Africa

Total

Total sector

market share

Off-patent

market share

25%

12%

19%

4%

12%

Europe

NAFTA

LATM

Asia

Total

Off-patent

position

1st

2nd

1st

5th

1st

Total sector

position

5th

8th

7th

10th

7th

Sources: Phillips McDougall , MAI analysis50


Key Challenges (Q1 2010)


MAI – Key Challenges (Q1 2010)

52

Cost structure of AI’s and products

Global supply chain effectiveness

Brazilian operation

U.S Ag Chem penetration

Business model (in an ever changing industry)

New vision, purpose and clear direction


2010 Summary

Key Initiatives


Background - 2010 Execution

New organizational structure

Optimizing manufacturing network –

Project Horizon

Global supply chain optimization

JDA system, S&OP projects,

formulation network

strengthened - US, India

Restructuring Milenia

Enhancing our business model in the US

New organization, new leadership,

Monsanto collaboration

Tapping the potential in APAC

New organization, improving

profitability in key countries,

penetrating Korea, Vietnam

and Indonesia

Reprioritization of

products portfolio

Add on acquisitions:

Mexico, Korea, Diuron

MAI Way Process

Transformational transaction

(business combination with ChemChina)

54


MAI Way


MAI Way Project

Our

Basics

Our

Values

Our

Leadership

Our

Purpose

Our

Visionary

Goals

Our

Company

Identity

Our

Organizational

Culture

One Company – One Identity – One Culture

56


Get it Done

Creating Simplicity

Passion

Empowering People

Our Values

57


Creating

In Agriculture SIMPLICITY

Our Core Purpose

58


LEAN MAJOR

Visionary Goals

Becoming the First


Strategic Direction

Main sources for breakthrough innovation and unique business model

Investigate discontinuities

Challenge the dogma

Leverage underutilized strategic assets and competencies

Explore unarticulated customers’ needs

61


Strategic Direction

Visionary Goals:

Becoming the First Lean Major

Core Purpose:

Creating Simplicity in Agriculture

Core Values:

Creating Simplicity, Getting it done,

Empowering People, Passion

Operating Plans

The Strategic Funnel

62



New Emerging Business ModelLean Major

A Winning, Unique and Sustainable Business Model

R&DSynthesis \

Sourcing

Formulation and Mixtures

Distribution\

Marketing

63

Crystallizing our Business Model

Product Quality & High Level Service

One Stop Vendor: For Unparalleled Solution Offering

Product Distinctiveness

• Innovative Products

• Advanced Formulations and Mixtures

64



65

Translating

the Visionary

Goal into an

Action Plan

Lean Major Value Chain


Business Combination with ChemChina



Where to CompeteFrom Products to SolutionsFrom AgChem to Agriculture


Leaders Make the Future

Vision

Inspiration

From the

future

backwards

Cultivate

trust

People

people

people

Execution

discipline

Look reality

in the eye

68


Thank you


Documents

© All rights reserved to Makhteshim Agan Competing for the ...innovation.technion.ac.il/upload/fjcfdmy-evhtfv_pl_epvjd_7f2ncr1a3r.pdf© All rights reserved to Makhteshim Agan China