Reaping the seeds of success in China

With plenty of on-the-ground international market experience under his belt, Mark Lyons – son of Alltech founder Pearse Lyons – explains that while markets such as Mexico, Brazil or Serbia prepare you, “the scale in China and numbers involved mean there’s simply nowhere that can compete.” He believes what really separates the Chinese market from the rest of the world is its scale.

He says: “When you are in China and then go to other countries to try and identify opportunities, it is very difficult to find any you would say are better than China.”

But he adds while there is a big macro picture of China, it really is about the micro picture. “It’s not an easy place to do business … it really is a grinders game and it’s the small details that are key,” according to Lyons.

A big problem with the larger farms in China is generally that the land around the farm is not owned so applying manure cannot happen. Where it does happen, it can damage the soil. Lyons says that very high levels of heavy metals have been found in animal feed in China which then end up going back into the soil, creating a vicious cycle. “We are trying to change the animals’ diet, which changes the manure profile, and then take the manure and balance it,” he says.

He also sees the high use of chemical fertilisers as an area where Alltech can play a key role, not only in China but in other regions around the world. He says: “There is massive overuse of chemical fertilisers and I think soil is polluted.” He believes there is huge potential in soil rehabilitation. He says they are developing technologies that could replace chemical fertilisers completely with organic fertilisers.

Historically, Alltech’s core business has been to focus on improving animal health and performance while also placing a strong emphasis on improving both human health and the environment in the process. However, he sees huge opportunities in the crop science side of the business, which “could potentially dwarf other parts of the business in the future”.

One child policy

It was expected that the lifting of the one child policy would lead to an increased demand for food. “The second child policy has not had the impact it was expected to have, I think because they waited too long,” according to Lyons.

He says that many Chinese think if they have a second child they are dividing the money that they have between two which will lead to the two children only being half as successful.

Furthermore, he adds that there are a lot of young professional women who have had one child, have returned to their careers and do not want to leave again.

Food quality

Incomes throughout China are continuing to grow; Guangdong, for example, had the highest per-capita income in China, which was not far off European levels. Today, 10% of the Chinese population has €10,000 disposable income and by 2030 that will be 35%. “That 25% increase is bigger than the entire population of America, so the Chinese are going to have a lot more money and they want to eat quality products,” according to Lyons.

Breaking into China

“It’s very difficult”, was Mark’s initial response to the opportunities for Irish agricultural companies trying to break into the Chinese market.

“I mean, we are very fortunate because we have been on the ground for so long, since 1994. However, we were already selling product for 10 years before this so the name Alltech was well-known in the Chinese market which makes it a bit easier.

“That said, the Chinese do like the Irish image, they get along with Irish people, our sense of humour and our way of connecting really fits with the Chinese ways. Another advantage is that there is no major geopolitical issue with the Irish Government, which is actually a huge benefit. That’s a big advantage for the Irish delegations as they actually can work.

“My suggestion to Irish companies is to connect with Chinese companies. Because, ultimately, any government office that is deciding whether a company gets a licence or not will ask around and see what the people and business is like.

“I think the green image of Ireland and the traceability aspects of the Irish systems are very important. If there is more focus put into innovation in decreasing environmental emissions, there is the potential to develop exportable technologies that are all very exciting,” Lyons says.

The sheer scale of Alltech’s global operation is immense with its targeted rate of expansion even more staggering. Currently doing business in 128 countries worldwide, a turnover of $3bn was recorded in 2016. The aim is to grow this to $5bn by 2018 through an aggressive acquisitions strategy, which it hopes will bring the company and its products closer to the end users, the farmers.