Antibiotic-free farms: An opportunity goes begging
Charlie Munger, a leading US investment guru and stock market expert once said: "Too little attention in economics [is given] to second-order and even higher-order effects. This defect is quite understandable because consequences have consequences and consequences of the consequences have consequences and so on."
The animal health industry has a lot to learn from this message. One such lesson could be in shape of an opportunity presented by the gradual shift of food animal producers towards antibiotic-free production.
Additionally, Tyson Foods plans to reach complete ABF status by the end of 2017.These early adopters have proven the system is a viable and sustainable model in the US food industry.
Dr Sandeep Juneja
Dr Juneja is the managing partner of HyPro Foods in Mumbai. He also runs www.animalhealthindia.com. He has previously worked in senior management for Boehringer Ingelheim Animal Health India, Bayer HealthCare Animal Health in Mumbai and Fort Dodge Animal Health in Chennai. His career in animal health exceeds 17 years. Contact: firstname.lastname@example.org
In anticipation of a significant shift in consumer sentiment, as well as activism by the regulatory authorities across major countries including emerging markets, most commercial food animal producers are developing several options for future including aligning their rearing processes to be compliant and equally commercially successful.
Herein lies the opportunity for leading animal health companies. Some of these businesses would do very well to latch on and consider including replacements or alternatives to antibiotics in their portfolios. Such an approach has the potential to result in multiple benefits at various levels.
Redeem the reputation: Almost all of the top 10 companies in the animal health industry have antibiotics, antimicrobials and to an extent anticoccidials as significant part of their portfolios. Most of these products may not be sold as 'growth promoters'. They are essential for treatment and well-being of animals, and companies have stewardship policies in place.
However, customer perception matters more than the reality and animal health companies are maligned for this perception. Having antibiotic growth promotion alternatives will only help strengthen the image of companies apart from yielding commercial business benefits. In addition, this approach could also help leading players meet their corporate social responsibility targets smartly.
Sound commercial benefits: Alternatives for antibiotic growth promoters are already a clear and present opportunity, which will only swell in size with time. Leading animal health players with deep market penetration and strong customer relations built over time have the opportunity to capitalize big time. Significantly less R&D expenses on alternatives to antibiotic growth promoters could lead to disproportionately higher returns. Leading animal health players are better positioned to gain from existing deeper access to markets, can capitalize on long-term customer relations and offer sales reps an additional argument in armory.
Step towards 'total animal health': As animal nutrition gains increasing importance in an ABF production system and rightfully so, leading players have an opportunity to lead the concept of 'total animal health'. Complementary co-existence of nutritionals and therapeutics is the way forward for an industry seeking additional avenues of business growth. Phytogenic-based alternatives are a fast-growing segment and an opportunity worth exploring for an industry looking for new product ideas.
Portfolio compatibility: Antibiotic growth promoter alternatives, a majority of which are phytogenics, broadly tick all the right boxes for an effective inclusion in portfolios of leading players.With the promise of efficacy coupled with no risk of development of resistance and free of withdrawal period requirements, phytogenic alternatives are a marketer's dream and hence are receiving increased interest.
The animal health industry is increasingly a parimutuel system, wherein one is betting against other smart competitors. In such a system, it pays well to think differently and find opportunities in adversities such as declining usage of antibiotics and adoption of ABF production systems.
Thinking about the first-order effect of a ban on antibiotics in animal feed is easy. However, thinking about second- or higher-order effects is hard. This is where bigger opportunities lie for contrarian thinkers – à la Charlie Munger.