Friday, Dec 15, 2017
Agriculture | Middle East | Israel

Insight Into Agriculture

“We aim to be number one in the market that may be number one in the world within the next 10-15 years”


2 years ago

Chen Lichtenstein, President and CEO of Adama Agricultural Solutions
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Chen Lichtenstein

President and CEO of Adama Agricultural Solutions

President and CEO of Adama Agricultural Solutions Chen Lichtenstein talks about Israel’s outstanding achievements in the agriculture sector and the company’s forward-thinking integration with the Chinese public holding ChemChina, as well as providing a global perspective on the upcoming pressures facing the industry on an international level.

 

Israel’s economy ranks one of the first in the world. What explains this success both in resilience and success of the national economy? What are the factors that you would like to define?

Ingrained in Israeli society are several crucial elements to our success and resilience: a dedication to excellence, education, and critical thinking.

The agricultural sector in Israel has evolved from the original kibbutzim (collective agricultural communities) that were founded by an extremely well-educated population. The earliest pioneers were educated, trained professionals, with parents and family members that were often thought-leaders within their communities. These educated professionals decided to go back to the field and farm the land, and of course, they applied their knowledge and critical-thinking skills to develop better and more innovative ways to farm. In this fertile environment, many new ideas and concepts developed, beginning with a very advanced agricultural system, followed by advances in industry, and eventually the development of the “startup nation” with major advances in the high-tech sector.

In the early decades of its existence, Israel went through some volatile economic times, with occasional periods of high inflation, unemployment, and other challenges. During the last 30-40 years, however, we have benefited from relative economic stability that was achieved by a combination of government, industry, and labor unions working in concert.

The Israeli government has developed policies to restrain inflation and allow for the free flotation of the currency, ultimately creating an environment in which industry may flourish. The vast number of extremely successful Israeli start-ups that have developed over the last 20 years, as well as the ongoing success of more mature industries such as agriculture, chemicals and pharmaceuticals, is clear evidence of the impact this approach has had on Israeli economic growth and stability.

More recently, natural gas was discovered under the Mediterranean Sea; we expect that this will provide another engine for the country’s economic and technological growth.

 

The agricultural sector in Israel, a sector that is traditionally lost in big economies globally, is doing exceptionally well in Israel and also exporting technologies to other countries. What are the opportunities that you would assess in the agricultural sector here in Israel?

Innovative technology is a strong area of expertise in Israeli agriculture. Historically, the kibbutzim led a movement of placing people with very high aspirations and strong educational backgrounds in touch with the land and in touch with agriculture. These early Kibbutz members had studied agronomy, chemistry, and other areas relevant to agriculture, and then applied those skills and their knowledge to Israel’s burgeoning agriculture areas, bringing advanced technology into the agricultural space. One historical example is Aaron Aaronsohn who made the highly significant discovery of wild emmer (Triticum dicoccoides), also known as the “mother of wheat”, as early as 1906.

Israel has historically suffered from a scarcity of water, so we needed to invent creative solutions for this problem. Mekorot, Israel’s national water company, created massive national waterway systems to transport water from the north of the country to the south. Then, over time, the company switched to reusing wastewater, and today Israel is the world leader in agricultural irrigation using recycled water. Indeed, Israeli scientists have continually been at the forefront of the development of sophisticated desalination and irrigation technologies, which have been exported worldwide and are contributing to agriculture and the environment globally.

Israel has also achieved tremendous success in chemical research, which ultimately created the foundation for Israel’s highly successful pharmaceutical and chemical industries. Israel is well represented in both the fertilizer and the crop protection spaces, the latter being our area of expertise at Adama. Throughout our company’s 70-year history, Adama has produced countless leading chemists and talented agronomists, who together have created the advanced agrochemical solutions we sell around the world.

Even though the agricultural sector is responsible for less than 2% of Israel’s total exports, the quality of Israeli agricultural products is very high, as are many of the other services and products we provide to the world. Both chemical and agricultural R&D are true areas of excellence in Israel.

 

How do you think your upbringing has influenced the way you lead Adama?

Farming has always been important to me. I grew up on an agricultural kibbutz, and I absorbed the culture of farming throughout my childhood. While in high school, I was part of the team that grew and harvested cotton. As an adult, I moved abroad to study and work for several years, and eventually returned to Israel. When I came back to Israel, and was considering what industry I should choose to work for, I felt a strong affinity to Adama because of my agricultural upbringing. Agriculture is a business that is connected to basic human needs, and it makes the world a better place. I gain enormous satisfaction from having the opportunity to connect to my roots, and at the same time to the future of the world; to make a difference in the lives of millions of people.

The agricultural sector touches people across the world, and Adama is truly global in the sense that our customers around the globe play an important role in shaping our offering. We aim to meet the needs of farmers in all markets, which requires us to be as close to them as possible, and to stay attuned to their needs. However, the market needs in places like China, India, Brazil and Argentina differ widely from each other, and their importance as markets changes over time. For example, today Brazil is the largest market for agriculture and agrochemicals, but that was not so a decade ago. China was about $2 billion in sales 10 years ago, but has grown to close to $5 billion in sales today. In another decade, China will be closing in on Brazil, and a larger crop protection market than the United States. The wind is clearly blowing in the direction of China, which has led us to have “From China Forward” as a pillar of our strategy. We intend to be the bridge between China and the rest of the world for the crop protection market.

 

As you mentioned before, Adama is a truly global company but what other competitive advantages would you identify for Adama apart from this one?

Farming is complex and full of challenges. We work closely with farmers, agronomists, distributors, and the wider farming community to find ways to simplify farmers’ lives and agriculture in general. We constantly question convention to move farming forward through simple, practical, and innovative solutions in crop protection.

We are a very lean company, and we collaborate extensively. A key company value is “get it done”; that is, put your ideas into action, connect things, and make something happen. Our level of execution is very high, and this gives us a competitive edge.

Our farmer-centric approach is also critical in this sense. We are very close to the end customers. As we access markets, our company’s approach is to get to know our customers intimately. This is an approach we apply globally. We learn about our customers’ needs, and then we return to the lab and come up with new ideas to meet these needs. It is the key to our success in India, for example, where our sales people go all the way into the fields to talk to farmers and to deliver them solutions that meet their needs. This is the key to our success in each market.

By entering into a dialogue with our customers, we can invent unique solutions that are tailor-made to meet their needs, such as with unique mixtures and formulations. We think first about what is it that customers need, before we think about our products. This allows us to win the hearts and the minds of our customers.

 

How do you see the trend towards more organic foods and farming, and its impact on your business?

We are embracing the movement towards safer and more environmentally friendly food and farming, and we invest a great deal in making our products more advanced and safer to use. We are also investing tremendously to make our production capabilities and our production facilities safer in order to diminish our carbon footprint.

There’s not enough food on the planet. An analogy that may clarify the direness of the situation is if we compare the food situation with energy. It could take decades to deplete all the energy reserves in the world, even if no new types of energy such as renewables were discovered or invented. In contrast, if the farmers around the world completely stopped growing grains, there are enough food reserves for perhaps two to three months. Just think about that for a minute.

For crops that are untreated with any type of crop protection, the yield would potentially fall by more than 50%. For some key crops, like soybeans or cotton, that figure is closer to 70%.

With just three months of reserves, if you stop treating fields with crop protection, the end result is that there will not be enough food to feed the whole world. It is a simple calculation. While there will always be a market for organic produce, and we embrace that, crop protection products are necessary and the entire industry must strive to make the entire value chain of food production as safe as possible.

We also must consider the environment in which we operate – such as the manufacturing plants, logistics, and so forth. With this in mind, at Adama, we have a very advanced corporate social responsibility program. With our focus on CSR, we are consistently improving in all aspects.

 

Many people don’t know the difference between a fertilizer and agrochemical. Could you please demonstrate that difference?

Simply put, fertilizer is food for plants. Agrochemicals enable protection of plants as they grow, similarly to how medicines protect the human body against disease, keeping us healthy. Fertilizer is the food, and agrochemicals are the medicine, for plants.

 

What is the importance of the U.S. market for your company, not only economically but also strategically, considering the future IPO that the company is preparing?

We had planned to IPO in the U.S. last year, however we realized that they way to China doesn’t necessarily go through New York. With that in mind, we decided to change course and we are currently in the process of merging our business with a Chinese public crop protection company, Sanonda, which is also part of the ChemChina group, our shareholders. By merging with Sanonda, we will become publicly traded in the Chinese capital market, in both Chinese currency and Hong Kong dollars, which is very unique. Being publicly traded in the vibrant and liquid Chinese equity market should provide us with many benefits going forward.

The U.S. as a market is still very important for us. The U.S. market is the benchmark for innovation and thought leadership. Innovations succeed or fail worldwide based on their reception in the U.S. Many cutting-edge researchers and technologies come from the American universities. From all of these perspectives, the U.S. market is very important in our space.

The U.S. is tremendously innovative in the seed space, in seed technology, agro-chemistry, fertilizer, and other areas. As long as the U.S. continues to be the fertile ground, to invite people to come over to study, to share ideas, to work, the U.S. will continue to be the driving force for the world in many respects, due to its economic might. From this perspective, the U.S. is critical in many industries and also in our industry.

 

Could you describe your professional path up to the point when you became CEO?

I have been with the company since 2006. In 2014, I took over as CEO. Before I took over as CEO of Adama, I was Deputy CEO for Adama, responsible for the integration between the Chinese business and our business. ChemChina invited me to run the entity above us, the China National Agrochemical Corporation (CNAC) which is 100% controlled by ChemChina, the parent company. I worked there for about a year in Beijing running that business and managing the integration with Adama, together with responsibility for seven other Chinese entities, two of which are publicly traded in China. This is a very different approach from what we are used to seeing.

 

It’s the opposite of what used to happen everywhere.

Yes. It was very forward thinking of the leaders at ChemChina.

This is an example of the Chinese management striving to make their business better. They are extremely open-minded from a business perspective. If you can do it, come do it.

 

How do you see the future in the medium term of the company regarding this new alliance and the new structure that it’s put in place?

Today, the agricultural sector faces some headwinds. There are low soft commodity prices, global currency pressures, and various other challenges. It’s a cyclical industry. With ChemChina behind us, we benefit from tremendous strategic and financial support, to grow the business, keep innovating and modernizing, both globally and also in China. ChemChina’s approach is to create a global champion in chemistry and life science. Within that goal, we at Adama are playing a very important role.

China is the third-largest agricultural market in the world, and it is growing very fast. There is tremendous innovation in the China agricultural space, which provides a huge opportunity for us to connect to new sources of innovation.

Our relationship with ChemChina also provides a springboard for us into the Chinese domestic market, which is highly fragmented. The Chinese are looking for innovation, for advanced products from the world to adopt locally. For us, under the umbrella of ChemChina, it’s a very natural process. We will also be able to benefit from the operational advantages that the Chinese market has to offer by setting up local hubs that will enable us to supply products of greater quality, and more quickly and competitively to growers, with better availability worldwide and a wider portfolio to deliver both advanced and basic crop protection products.

There is a huge opportunity ahead of us to enter into this vast market and ultimately become a leader there. We aim to be number one in the market that may be number one in the world within the next 10 to 15 years. 



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