Nitragin: focus on plant health nets growth.

There aren't many crop input manufacturers that can claim a 65 percent sales increase in the past three years. Nitragin, the world's leading developer of legume inoculants and growth promotants, can!

Bolstered by new product formulations, new technologies, expanding markets for its products, more sophisticated customers and smart marketing, the company has been on a serious roll since 2002 with annual sales topping $30 million for the first time in the company's history. And now with its recent acquisition of Agribiotics--a Canadian-based firm specializing in the development of biologicals for agriculture--Nitragin is gearing up to grow its business fourfold over the next five years.

Headquartered in Milwaukee, WI, Nitragin is owned by Merck KGaA, Darmstadt, Germany, a global pharmaceutical and chemical company with sales of EUR $5.9 billion in 2005. Merck's history began in 1668 and has 29,133 employees in 54 countries. The former U.S. subsidiary, Merck & Co., has been completely independent of the Merck Group since 1917.

THE PRODUCTS

Inoculating legumes (soybeans, peanuts, etc.) with rhizobia to stimulate the production of nitrogen, is not exactly a new agricultural practice. In fact, Nitragin introduced the technology with its founding in 1898.

The worldwide market for inoculants is estimated at $85 million annually with $50 million of that in the United States.

"The crop enhancement business can be cyclical," explains Nitragin President Tom Winkofske, who has been with the company for over 30 years. "The early plant health technologies we are making available today are very different from the inoculants we pioneered years ago. When I first started in the business, inoculants were used only on land that was growing legumes for the first time or hadn't grown them in several years. The products being marketed at that time were simply bags of inoculated powdered peat that a farmer would pay 50 cents per acre. These products were messy and inconvenient to use. Further land grant universities were divided in their recommendation for the use of legume inoculants.

"So, sales were flat during the 1980s," he continues. "However, the business began to grow again in the 1990s. During that decade we introduced liquid formulations--for a more convenient application. Also, because of the success of the development of earlier varieties, soybeans were planted in new areas such as the Dakotas. We also got active in South America and that business has grown significantly because of all of the new soybean acres that are being planted in that country. It now represents a very substantial portion of our volume.

"But the most exciting changes so far have come during the last three years. We have commercialized several revolutionary crop enhancement products that are giving growers a significant return on investment by improving plant health in the early growth stages.

The cornerstone of these products is patented LCO Promoter Technology[TM] marketed under the Optimize[R] brand. This product isolates the LCO (lipo-chitooligosaccharide) molecule, which gives plants an amazingly strong start. It activates a number of genes within the plant that begin and enhance cell division and growth. Plants that begin the growth process earlier, are healthier and produce higher yields. Soon, this innovative technology will extend into several non-legumes. The growers who have seen how our Optimize products work are really looking forward to using LCO Promoter Technology on their corn, wheat and other crops.

Along the way, Nitragin also began a major effort working with universities to conduct more scientifically-based research on the benefits of inoculants. The result of that effort: the company can now show solid proof that using crop enhancing technologies can boost soybean yields by five bushels per acre.

"Because of the new products and research," Winkofske reports, "the number of treated soybean acres in the United States has grown from 10 percent of the market to now more than 25 percent. In addition, farmers are now paying an average of $4 per acre for the product."

The company continues to introduce new technology to additional crops. "Optimize was launched into the soybean market in 2003. Last year we began marketing it in the peanut market," says Dr. Scott Fleetwood, VP marketing and sales, who joined Nitragin in 2002 and has 24 years of experience in the ag arena with Bayer CropScience, FMC and American Cyanamid. "This year we introduced LCO Promoter Technology in the pea/lentil and alfalfa markets.

"Now with our retail-applied liquid formulations," he continues, "farmers have our products applied with other seed treatments, which, of course, saves them time, hassle and improves yield.

"In addition," Fleetwood adds, "direct application of our LCO Promoter Technology provides our customers an average Return Of Investment (ROI) of nearly 8:1. As sophisticated businessmen, the progressive producer can see the financial benefit of our products. In addition, this year we confirmed that Optimize Credits provide a potential for increased yield and ROI on corn following Optimize treated soybeans. A 4.9 bu/a increase on the following years corn crop means an even higher ROI for the combined corn and soybean crop. Very few crop inputs deliver that degree of crop value enhancement.

"Retailers have benefited by selling these crop enhancement products, as well," Fleetwood continues. "Our formulations provide the most flexible application window in the industry today and we are continuously working to expand this window. Since many retailers already have the application equipment from other seed treatments they are selling, handling crop enhancement products is a natural for them.

"Additionally, because their crop protection sales have decreased over the past few years," Fleetwood continues, "retailers have been looking for ways to replace those lost dollars. Plant health promoting products provide clear benefit to their customers, and give them the opportunity to make a couple of extra dollars per acre."

SALES AND DISTRIBUTION

"We currently have 14 full-time sales people and six consultants serving the Unites States and four consultants in the Canadian market," Fleetwood says. Like many agribusinesses, the Nitragin sales force has a wide range of experience. Several have been with the company for over 20 years. Others have been here for five years or less, but have strong backgrounds in the industry. Because of the numerous opportunities we have identified for our new technologies, we plan to expand our team in the United States and Canada over the next several years.

"The distribution of our products is very similar to that of crop protection chemicals," he says. "That is, we sell to a distributor, who re-sells it to a retailer, who resells to the ag producer."

As far as marketing programs to encourage retailers to crop enhancing products, "Up until a few years ago, our industry didn't have programs like those being offered by the crop protection chemical industry," Fleetwood reports. "The vast majority of our customers' profit on our products comes from an upfront margin. This will continue into the future. We did implement incentive programs a few years back, but they differ from programs that pay off at the end of the season. Our programs are based on upfront commitments such as early pay or early take programs. In Canada, we are offering customized programs that we design in conjunction with our customer.

SMART MARKETING

"We look at the distribution channel to push our products," Fleetwood says. "But we know that they need help, so we also devote resources to pull it through."

However, the North American agricultural producer market is a huge, vast market segment that can require a sizable investment to attract and keep their attention.

"When we were ready to launch Optimize," Fleetwood says, "we were operating with a very limited budget. So to stretch the dollars, we decided to concentrate on a couple relatively small, but very influential, decision makers: professional farm managers and crop consultants.

"Over half of the U.S. farmland is now owned by somebody other than the farmer, such as inheritors and investors," Fleetwood explains. "Many times those absentee owners will hire a professional farm manager who in turn hires farmers who are operating in the farmland's vicinity. Each professional manager handles around 60 farms, so we figured that if we could convince the managers of the value of our product, they would multiply our efforts over their farms.

"Also," he continues, "most of their farm operators farm additional land than what they handle for the professional manager. So if they used our product on the professionally managed land, we figured they would use it on their additional acres.

"I had learned about the professional manager market in my days at Cyanamid," Fleetwood says. "They helped us achieve remarkable success and fast market penetration with Pursuit herbicide."

Crop consultants were also a ready-made audience for Optimize. Crop consultants are hired and paid a fee by farmers to recommend crop inputs. A typical crop consultant handles 30 farms. Similar to the farm manager, Nitragin calculated that if they could convince the crop consultants of the benefits of Optimize, they would convince their farmer-clients.

To get the marketing ball rolling, Nitragin became a sponsor of a series of seminars for professional farm managers and crop consultants that were organized and hosted by AgProfessional magazine. "The seminars gave us the opportunity to present our educational material and to personally interact with the managers and consultants who were in attendance.

The result? "We were extremely pleased with our strategy," Fleetwood says. "At one meeting in Illinois, we were able to personally have contact with a group that managed/consulted nearly 20 percent of that state's total soybean acreage. That was a great day."

As sales of Optimize grew, the company was able to devote marketing and communications resources on the ag producer segment. "Going forward, we are placing additional emphasis on 'ag producer pull through,'" Fleetwood says. "We use grower and retailer publications, direct mail and we are just starting out on farm radio.

"We are also active with several of the key grower associations," he says (see sidebar).

THE NEW NITRAGIN

This spring, the company announced the acquisition of Cambridge, ON, based Agribiotics. "It is a terrific company and we were both involved in similar technology," says Winkofske.

Like Nitragin, Agribiotics had a history of developing and selling inoculants. Also, like Nitragin, they are active in researching and in the process of commercializing the exciting new LCO technology--a signal molecule that begins and enhances growth in the root and shoot of the plant.

"We're very excited about the LCO technology," reports Nitragin's VP of Research and Development Dr. Stew Smith who has been with the company 26 years. "We have been applying small amounts of LCO to the seeds of various crops, and we're able to demonstrate positive effects on seed germination, emergence and general plant growth. After years of testing, we have determined how the technology can be used and applied for the benefit of a variety of different crops."

"And that's big news for us," says Fleetwood. "Up until now, our markets have been limited to the legume crops. LCO Promoter Technology is effective on nearly every crop, including big acreage crops like corn, wheat, cotton and canola. In ours, and others trials, it has consistently produced yields of more than five bushels per acre for corn and soybeans. We have also observed excellent responses on various vegetable and horticultural crops and plan to launch into these markets in the next several years."

"The Agribiotics acquisition is a natural fit for us," Winkofske says. "Nitragin has taken the lead role in the movement toward the recognition, research and development of plant health-focused technology. Our focus on plant health, as a determinant of value, recognizes the importance of optimal early plant health right out of the ground to the final return the growers see on their investment. Agribiotics provides us with more of the tools we need to accomplish that goal."

With that laser beam focus, and by providing true value to their customers, Nitragin has a bright future.

ABOUT NITRAGIN

1898 The Nitragin Company was founded after a Milwaukee entrepreneur purchased the rights to a commercial process for the production of nitrogen-fixing bacteria.

Early 1900s Nitragin products distributed by a farmer dealer network. Primary product focus was alfalfa.

Post WWII Company sales force formed. Sales efforts changed from farmer dealers to distributors.

1960s Sales volume grows to $1 million.

1982 Allied Corporation purchased The Nitragin Company.

1986 LIPHA purchased The Nitragin Company from Allied Corporation. Name changed to Lipha Chemicals. Proprietary rodenticides products added to traditional legume inoculant line.

1990s First liquid inoculants, Cell-Tech[R] and LIFT[R], introduced. Merck acquired LIPHA. Company name changed to LiphaTech. South America production site established near Buenos Aires, Argentina.

2000 Introduced soybean inoculant for retail application, Cell-Tech SCI[R]. Acquired rights to patented LCO technology for use in legumes.

2002 Rodenticide business divested. Returned to Nitragin corporate name.

2003 Optimize[R] LCO Promoter Technology[TM] launched into soybean market.

2004-2005 LCO Promoter Technology launched in peanut, alfalfa, and pea/lentil markets.

2006 Acquisition of Agribiotics Inc. Gained exclusive rights to LCO technology in legumes and non-legumes, for both on-seed and foliar applications.

PARTNERING WITH ASSOCIATIONS

Nitragin reports that one key part to its success is developing programs with farmer trade associations. One example is its sponsorship of the American Soybean Association's (ASA) Regional Exchange and Awareness Program (REAP). The program features tours and meetings for ASA farmer members. Goals of the program are:

* Exchange of producer and industry information.

* Enhance grower knowledge and skills.

* Highlight ag production that is unique to a region.

* Develop comradery among soybean growers from different growing regions.

* Help ASA directors to become more effective in Washington, D.C., through a better understanding of soybean production throughout the United States.

Nitragin also works with ASA to encourage increased participation in the organization. The company donates free products as an incentive for new member sign ups. In addition, it has sponsored ASA's Award Banquet at Commodity Classic the last two years.

Lynn Henderson, Editorial Director