eFeedLink - Executive Talk: Zagro versus MNCs

May 4, 2011

Executive Talk: Zagro versus MNCs - Who has the edge?

An eFeedLink Exclusive

Poh Beng Swee, Chairman/CEO, Zagro Asia Limited

Singapore-based Zagro is adopting a divergent strategy for its businesses, by providing customers with a broad range of product solutions. This, as Zagro believes, provides the Group with a unique advantage over its multinational competitors, whose focus could be different.

In the following interview with Zagro, Chairman/CEO, Poh Beng Swee elaborates on the company's business model and success strategies.

Zagro's company history can be traced back to Zuellig Agri Healthcare of Zuellig Group. How different is Zagro's current position compared to when it first started in 1953?

When Zagro first started, we were more of a distributing agency, basically representing multinationals and doing local distribution. Over the years, it evolved to the extent that we are a full-fledged manufacturer, with distributors and agents in the Asia Pacific region, and also expanding to others like Africa, Middle East, and Latin America. We have a presence in about 50 countries.

From the time Zagro first started as a distributing agency, has the product line changed a lot over the years?

Yes it has changed, but the changes are very gradual. Especially in the agribusiness and food industry, it's not an overnight thing - corn is still corn, rice is still rice, and meat is still meat.

A good example is antibiotics: In the 1950s and 1960s especially, they were very predominant. However, over the last 50 years, the predominance of antibiotics is slowly disappearing - it's an evolving process, not a revolution. Human beings naturally want to live longer and longer, hence the trend for natural products and natural source of supplements and health protection.

What are the key competitive strengths that Zagro has created over the years?

We are manufacturing a broad range of products compared to our competitors, the multinational companies who have generally limited products. Our products are broader and more varied, and we have a larger product range to cover many categories. Customers are now looking for a comprehensive solution to all of their needs and therefore our advantage lies in being a wide-range agrisolutions provider.

This will give customers a reason to approach us regularly as opposed to other suppliers.

The group has five core business units, including animal nutrition, animal protection, crop nutrition, crop protection, and public health. What is the nature of the business in each unit?

We have five business units due to the inter-relationship among them. From a business model point of view, their back-end and front-end processes are all related. For example, insecticides can be used in agriculture to kill insects in plants, crops, and vegetables. Insecticides are also used in animals as ectoparasite. Insecticides can also be used in the house to kill mosquitoes, cockroaches, and rats, which falls under public health. There is a cross-pollination of technology in different business units.

What is the contribution of each business unit (in percentage terms) to the total financial performance of the company?

They are quite equal, except for the public health unit which is lower. They are balanced and stable across many countries, so in many ways it is a stable business. This "spread" is a safety net for us: If a particular region or business unit falters, we can still remain profitable in other aspects.

Since 1998, low-cost Chinese vitamins have put tremendous pressure on global prices. What was Zagro's strategy against such a backdrop?

Zagro as a manufacturer sources its intermediaries all over the world. For some intermediates, China has its low cost advantage. In all our sourcing, quality must come before price.

The Group has reported strong financial performance in FY2010, with net earnings at SGD9.6 million. What are the key factors for the results?

There is a growing acceptance of our quality of products and reliability in service. I think this is because our processes-in-place are better – for example ISO standards, HACCP, and so on. Better processes leads to a better brand, which means a better market share.

If you have the process and the desire to continuously improve, and the passion is there, you just have to keep pushing yourself towards success.

How do you initiate this spirit for continuous improvement across the whole company?

When you have enough critical mass of people with overlapping roles, and new blood coming in, ideas will ferment and there will always be the spirit of wanting to do better. It is natural after you employ many talented people. Talented people enjoy working with even more talented people.

Zagro has started a premix manufacturing plant in Vietnam this year. What factors prompted this move?

Vietnam is going to be an important food basket of Asia, after Thailand. Of course, Vietnam has many problems this year such as high inflation rates and interest rates. However, we are looking at the long-term, not the short-term. Vietnamese people are intelligent, and the country has the capacity to catch up with Thailand as the bigger market. So definitely, we need to have a presence in Vietnam based on market needs.

Why not China?

China is a very big market, but currently, no opportunity has presented itself. Zagro has been searching and is very keen to work with local Chinese companies in the agribusiness industry.

In a very resource scarce country as Singapore, to be able to operate a feed related business successfully certainly requires good business planning and strategy. Can you share with us how Zagro does it?

It is important to consistently provide quality products and reliable service. We are in this business since 1953 and it's an everyday battle to improve the standards of your quality & service, globally. Consistency in quality of products and service over the year enhanced our brand. You must never focus on costs alone, because there will always be somebody who can sell their products cheaper than yours.