6 October 2022 – Late in August Novus International announced that it would be moving to an indirect business model to service its customer base in China. According to the US feed additive maker, the move – which is aligned with the company’s Project Destiny business strategy – will allow the organisation to further expand its footprint in Asia and better service its core markets in the region.
“This critical business decision allows us to focus on the expansion of our business in Asia and focus our direct investment where we have tremendous growth potential,” said Dan Meagher, Novus CEO and president, in a press release announcing the move. “Our investment and focus on our core Asia markets have never been stronger.”
But with China being such a major player in the feed additive and protein production spaces, Feedinfo was curious to find out why the country does not form part of these core markets for Novus. We also wanted to dig into what exactly the company’s expansion plans are for the region and how it is planning to undertake this in the face of current global supply chain pressures. We put these questions to Novus’s Vice President and Managing Director for Asia, Vaibhav Nagpal in our recent Industry Perspectives chat and here is what he had to share with us.
[Feedinfo] China is a huge player in the animal nutrition and protein sectors. So, what was the thinking behind changing to an indirect business model in the country? Why does this make sense for Novus?
[Vaibhav Nagpal] China is one of the largest animal protein markets in the world. We greatly respect our customers in China, and it is our honour to serve them. This decision has less to do with China’s position in the industry and more to do with our effectiveness as a company. Moving to an indirect business model in China is in line with Novus’ strategy to simplify operations and create a direct presence and investment with partners in markets that are aligned with our core strengths. This shift, and all those we’ve made during Project Destiny, create sustainable business growth. Working with partners in China allows Novus to be more effective in reaching the huge customer base there and gives us more flexibility and agility to help our customers through established local vendors, which are favoured in that country.
[Feedinfo] To be extra clear, what does a move like this actually entail? How long will it take? And what does it mean for your Shanghai production plant or your office there?
[Vaibhav Nagpal] Moving to an indirect sales model in China means we will close both our Shanghai office and local manufacturing facility. Novus customers in other parts of Asia and around the globe will not be impacted by this change. The process has already started and may take a few months to complete based on the local legal requirements.
[Feedinfo] What measures are you considering/have you put in place to ensure that there will be no disruptions to product availability in China during this business model switch?
[Vaibhav Nagpal] We are actively engaged in discussions with partners to finalize the agreements and transition the business. The Novus team has already notified customers in China about this change and is helping them through the transition by ensuring they have the Novus products they need.
[Feedinfo] In your announcement, you say that this decision will allow the company to invest in other parts of Asia and to invest in markets that “are aligned with its core strengths for driving sustainable growth”. You are currently operating in India and the Asia Pacific region. What are these other markets in Asia that you are eyeing and what would investment there look like?
[Vaibhav Nagpal] Novus has had a strong presence and business in Asia/Pacific for many years. We have direct sales in India, Thailand, Indonesia, Philippines, Taiwan, Japan, and Australia, and committed partners to serve the industries in Bangladesh, Nepal, Pakistan, Malaysia, Vietnam, South Korea, and other areas in the region. Asia presents huge growth opportunities. Reports suggest India is expected to account for 5% to 10% of the growth in poultry globally. Indonesia, the Philippines, and Vietnam are expected to account for another 10% increase in poultry demand.
The Novus minerals portfolio, including MINTREX® bis-chelated trace minerals, received registration in Japan two years ago and offers us the opportunity to further work with customers to help them address meat quality, reproductive performance, and eggshell quality.
Also, our initial investments in dairy operations in the region have shown very encouraging results and we are devoting more attention in this sector.
[Feedinfo] Supply chains continue to be under pressure and remain a concern for the industry due to the pandemic, the conflict in Ukraine, extreme weather events, and labour shortages/disruptions. How is Novus planning to navigate this as it looks to grow its footprint in Asia?
[Vaibhav Nagpal] Novus’s core technologies are manufactured in the US and Europe. We supply these technologies as either singles or blends to our customers. Blends are created per customer requirement with manufacturing partners in the region where our customers are located. Singles are shipped directly from our manufacturing facilities to regional warehouses, which keeps inventory close to the customer.
Everyone can agree the last two years have been a challenge due to the many reasons you mentioned, but it has been really encouraging to see how quickly the Novus Global Supply Chain team has been able to adapt to each situation. Their quick action has enabled us to continue providing our solutions uninterrupted. It also shows us how we can continue to be agile in the future. These challenges provided us with a unique opportunity to look at each and every aspect of our supply chain and take steps to mitigate impacts. These steps ranged from moving production to our manufacturing partners in certain regions, strengthening our demand planning process, evaluating our inventory storage, and shifting shipping routes. Perhaps most important of all was reaffirming our commitment to our customers through transparent communication. And it is gratifying to receive letters of appreciation from our customers for providing them with uninterrupted supplies during challenging times.
[Feedinfo] In terms of species, Novus customers in Asia operate primarily in the poultry and swine sectors. Is there still room to grow in those sectors or is Novus turning its attention to others?
[Vaibhav Nagpal] Yes, Novus has always had a strong presence in the poultry and swine sectors. As there is an emerging middle class in most of the markets in Asia, meat consumption has been growing steadily and it continues to provide opportunities in both sectors. Dairy and aqua are other growing sectors that have been providing a livelihood to marginal farmers as well as major sources of protein for consumers. Both these sectors are emerging very fast with more organized farming and value-added products. Our initial investments in dairy have shown very promising results and we are continuing to invest in that sector across the region, including in India.
[Feedinfo] Let’s chat a bit more about your dairy ambitions in India. What has been your dairy strategy there up until now and how will it change? What solutions will form part of it?
[Vaibhav Nagpal] India is the largest producer of milk in the world with production at 187.7 million metric tonnes (2018-19 FAO stat), a compound annual growth rate of 6% and a 22% share of global milk production. Just this month India’s Prime Minister, Narendra Modi said that dairy employs more than 80 million rural households in the country with the majority being small and marginal farmers as well as the landless.
More than 80% of milk in India is produced through an unorganized sector and fewer than 10% of dairy animals consume compound feed. For many years there has been increased focus on genetics and nutrition, allowing the animal population to remain the same while milk yield steadily increases. All these facts mean dairy farmers in India are looking to optimize production, which makes India the right place for Novus to be with our strong dairy management knowledge and our portfolio of nutrition solutions. Our strategy is to bring our knowledge of nutrition and management from our customers in developed markets and work with educational institutions, co-operatives, organized producers, and channel partners in India to help impart that knowledge and know-how to marginal farmers to improve their livelihood. We’ve already begun working with dairy producers there to help them become more efficient and profitable by strategically managing feed costs and showing them how feed additives can optimize milk yield and components, improve reproductive performance, reduce the incidences of lameness and mastitis, and reduce somatic cell counts.
[Feedinfo] Does this mean there are plans to extend Novus’s dairy focus beyond India? If so, where? And how far along are you in those plans/discussions?
[Vaibhav Nagpal] Yes, with the encouraging results we have seen so far, we plan to make investments in the dairy sector across the region and elsewhere in the world.
Published in association with Novus International, Inc.