February 26, 2023
In a country the size of China, how do you effectively reach every grower with seed treatment technologies and services? Historically, Bayer would manufacture seed treatments, and they would pass through a national or provincial distributor, a more ‘local’ second-level distributor, in some cases a dedicated treater, then a retailer, and finally reach the grower. If the treatments were not applied to the seed by one of the companies in the supply chain, they would be applied on the grower’s premises.
This fairly complex supply network was designed to serve a fragmented customer base, dominated by smallholders with as little as 1-2 hectares. However, in recent years the status quo has changed. A new class of grower has emerged, with at least six hectares but often as large as 10-20ha, and this group is expanding rapidly, especially in field crops. As a result, the market is now less fragmented. Also, with the average age of farm workers increasing, more and more farms are reporting labor shortages, especially at the sowing stage. This leads the trend of farm consolidation to accelerate further.
“When it comes to farming operations, including seed treatment on those farms, the key customer pain point is shortage of labor. At the same time, customers seek the benefits of seeds treated with SeedGrowth products to help them control soil-borne pests and diseases,” explains Yong Cheng, Greater China Rice & Field Crop Lead, Bayer. “Normally these growers will have two crops in rotation: corn and wheat, or rice and wheat. After they harvest the corn or rice, they need to sow the wheat very soon, giving them a narrow window in which to treat seeds. The trend for farms increasing in size means this is going to involve more work for the farmer than before. If farmers have to do the treatment themselves, it will be extremely difficult – not to mention inefficient – compared to treating seeds more centrally using larger-scale industrial equipment. To address this, we now provide them a service in a more direct way.”
Bayer’s marketing, market development and sales teams co-operated with external partners to launch a new model for engaging with growers: SeedGrowth-as-a-service (SGRaaS). To enable this, Bayer provided machinery to local distributors or retailers, enabling them to treat wheat seeds with the appropriate SeedGrowth products on their route to growers. For many growers, seed treatments had previously been a product they needed to buy and apply separately; now, they are a service provided to them. Not having to treat seeds is a big time-saver, and is also convenient because both wheat seeds and seed treatments can be bought through a single point of contact.
The model also enables Bayer to deliver better performance with each seed, as Yong Cheng explains: “Seed treatment quality affects performance in the field. Getting it correct requires the right application technology, and people who know how to use the products and machinery correctly. It’s much easier to achieve this when you are working with a smaller number of treaters or retailers, which the sales and MD teams have selected specifically.”
The SGRaaS project began in wheat in 2020, and has already attracted 300 customers at retailer level. At farm level, its footprint is already significant: around 130,000 hectares of enrolled agricultural land.
But moving to the SGRaaS model isn’t as simple as supplying machines: it took a concerted effort involving all relevant value chain actors, to gain a detailed understanding of customers so the right seeds could be treated with the right SeedGrowth products to accurately meet local needs. “We were working with a lot of growers. We needed to segment the market and identify farmers by location, size and budgets so we knew where our key targets were and how much treatment capacity each one required,” says Yong Cheng.
“That was crucial in overcoming the first challenge: explaining to the treating partners why they should partner with us in this model. If they were going to spend time delivering the treatment service, they would understandably want reassurance that they could do so at a large enough scale to make a sufficient profit. If they only end up treating for one or two growers, they will feel like the switch in business model isn’t worth it.”
“The answer is that we understand the customer segmentation in a given area, enabling treaters to accurately forecast demand, batch products accordingly and provide the right treatments in an efficient manner. We selected our participating treaters smartly from the start, ensuring they had enough demand in their area to fill their available machine time (but not overload them) – and we monitor and manage this on a regular basis.”
Clear future for SGRaaS
Despite the complex challenges involved, SGRaaS is delivering value where it counts: for growers in the field. “At partner level and among farmers, the model has already achieved high recognition,” Yong Cheng reveals. “We really addressed the farmers’ pain point – that’s why feedback has been so good. When SGRaaS is delivered, it’s good for the farmer, and it’s good for the distributor or retailer providing the service since they can increase their market share as farmers are more willing to buy seeds from them too. It’s a win for everyone involved!”
And it is already set to expand in future seasons: “We have detailed future plans! SeedGrowth-as-a-Service is evolving to focus more on the quality of service. The data we collected during the pilot phase will enable us to create a new integrated, digitally-enabled service for meeting both crop protection and seed treatment needs. Through this platform, growers will be able to book a seed treatment service, fulfilled by their local SGRaaS treater. Auxiliary services can be added, such as offline advisory, crop protection sales and scheduled product pick-up. Service ratings and grower incentives can be built in, and the resulting data is fed back for training and future improvement purposes.”
“We are also planning an online and offline campaign inviting more growers to get involved, and new grower engagement channels, such as videos and group calls to facilitate knowledge transfer.”
It’s a powerful model that very few companies would be able to offer: it takes a combination of a broad and high-quality portfolio, a proven service model, access to application technology, and channels to farmers. This combination is what sets Bayer apart from many others. And Yong Cheng is convinced that SGRaaS was the right move: “Service is even more important in seed treatments than it is in most other areas. It’s how you differentiate from the competition. This project is significantly beneficial for our farmers and for our go-to-market channels, and when it becomes digitally enabled, it will be more scalable too. So far so good!”