How Distribution is an Important Element of Agrochemical Supply Chain

With the population of 1.3 billion, food security is an arena that requires grave attention of the government. The chemical industry is aiding the agricultural sector to ensure food security and crop protection, agrochemicals being a major contributor. The inception of agrochemicals in order to increase crop protection was earlier seen in a bad light as chemicals were supposed to degrade the quality and fertility of soil. However, recent developments in agrochemicals have reduced the risks of infertility and are helping the soil to regain its fertility, hence increased demand of agrochemicals by big players of the industry.

Many insiders of the industry believe that agrochemicals supply chain is amongst the most complex chains as factors like are seasonal demand, unpredictability of pest attacks and high dependency on monsoons hinder the inventory and distribution of products. However, an effective distribution is the key to the effective supply chain of these products. Distributorship opportunities in this field are immensely lucrative as there are no signs of slowing down of the agrochemical industry for a long stretch of time in the future.

Indian Agrochemical Supply Chain: An Overview

As already mentioned above, the supply chain of agrochemicals industry is one of the most complex chains. The Indian Agrochemical supply chain constitutes of technical grade manufacturers, formulators producing end products, distributors and end use customers. According to sources, it is revealed that there are about 125 technical grade manufacturers, including about 10 multinationals, more than 800 formulators and over 145,000 distributors in India.

The top 10 companies capture the share of 75-80% in the whole market. The market share of large players depends primarily on product innovation and effective distribution channels. The market witnesses a number of mergers and acquisitions with large players buying out small manufacturers. Many companies seek distributors and form strategic alliances and partnerships in order to expand their market reach.

Growth Catalysts of Agrochemical industry

Globalisation of agrochemical industry creates a huge impact on the Indian market. The export-import culture has also given a hard push to the agrochemical industry.

With the high rate of population growth, the need for food production increases. The demands can only be fulfilled through improved product performance and productivity due to factors like land scarcity, soil degradation and water scarcity. So, agrochemicals are more essentials for farmers in order to meet the high demands of consumers.

How Distributorship can help the Industry Flourish

As already mentioned, there are so many barriers in the way of effective distribution of agrochemicals. There is a need to fill critical gaps in the channel information to make it more manageable.

With high inventory and end month skews (fall in monthly distribution), distribution of these products seems to be a little tricky. But, most companies have planned their distribution and have forecasted demand, planned protection, set sales targets and are competing to push stocks to distributors based on primary sales, without having an idea of actual demand and consumption by farmers.

Larger companies have a large distributor and retailer network, and partner more often to distributors by offering distributorship opportunities to aspirants. However the lack of efficient distribution system makes it difficult for smaller companies to reach farmers, hence more and more distributorship opportunities are created in the field of agrochemical distribution. Agrochemical distributorship has a long way to go due to its ever increasing value in the market and emerges as promising business opportunity for aspirants.