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Rural Industries Research & Development Corporation |
Thirty Australian Champions
Shaping
the future for rural Australia
edited by Keith Hyde
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RIRDC's major publication documenting the experience of thirty outstanding Australians who, through their business enterprise, vision and perseverance, are making a significant contribution to the welfare and economic growth of rural and regional Australia. Each chapter is presentedf as a separate html file which you can view, download and print.
Botanical Resources Australia
“Good advice is cheap, ”says Botanical Resources ’Ian Folder, “but gratuitous advice is worthless. ”This strategic advice was delivered to Ian by a Melbourne solicitor, and received at a crucial point in the development of Botanical Resources and the purchase of the former Commonwealth Industrial Gases (CIG)pyrethrum project from its new owner British Oxygen Company (BOC).
Ian moved to Tasmania over
14 years ago and readily admits that he was not overly enthusiastic about
business in Tasmania at that stage. However, his wife had grown up
in the area and wanted to return to the family region. In fact, Ian ’s
first project in Tasmania was not with CIG or BOC, rather, he bought
an old house and wanted to spend as much time as possible working on it.
But his attention was captivated by the CIG ’s Managing Director at the
time, Gordon Scott, who Ian describes as far-sighted.
Ian Foulder, Managing Director of Botanical Resources Australia
The CIG Legacy
In 1981, CIG entered an agreement with the Tasmanian Government and the University of Tasmania to establish a pyrethrum industry in Tasmania. This was a visionary decision by Gordon Scott. He wanted to make CIG a billion-dollar company and one of the ways to achieve this aim was the development of an agricultural division.
Pyrethrum was a logical choice for the company because CIG had developed a new product called “Pestigas”, which was a commercial, bulk-use pesticide consisting of natural pyrethrum and carbon dioxide. The supply of the natural pyrethrum from traditional sources in East Africa had been very unreliable and CIG could see advantages in growing natural pyrethrum in Australia to provide a vertically-integrated opportunity to expand the pest control business.
CIG recognised that pyrethrum has advantages in being a natural product. It is safe to humans but very effective against a wide range of insects and, because of the nature of the product, there is a low risk of resistance with continued use.
CIG could also see other advantages, including the strong engineering expertise available to help with the development of manufacturing operations such as extraction and refining and process automation for plant propagation.
Over the next 15 years, CIG (and then BOC) invested some $30 million on the pyrethrum project in Tasmania. During the early/mid-1990s, the economic environment for CIG changed dramatically and CIG was taken over by BOC, its majority shareholder. BOC considered the pyrethrum project to be a non-core operation and BOC decided to either sell the project or close it down.
Champion Qualities
- Natural product advantages in competitive marketplace
- Skilled ‘new industry ’farmer base
- Focus on quality control
- Customer service
- Sound financial advice
- Rapid adoption of research results
To Tasmania ’s benefit,
BOC kept funding the pyrethrum project for a number of years, before finally
pulling out. “They were great, ” says Ian. “They didn ’t starve us when
they knew their involvement would cease. We ’re indebted to BOC for that.
” Yet after most of the BOC machinery was sold and the contracts with the
growers were terminated, Ian realised that he couldn ’t walk away from
the business.
The Management Buy-out
Ian Folder was the Operations Manager of the BOC pyrethrum project at the time and could see that the project was a “well-managed, loss-making venture with the potential to be nurtured into a business with a glimmer of profit ”. When he realised that a successful overseas buyer for this project was unlikely to be found, Ian decided to organise a staff buy-out from BOC.
Ian recalls that his best decision at the time was to seek good-quality, professional advice and support for the management buy-out from a solicitor in Melbourne. This Melbourne office processed all the negotiations regarding the sale and the funding arrangements, and a very commercially sensible and mutually beneficial outcome was achieved.
A field of pyrethrum
in flower in northern Tasmania.
In 1996, Botanical Resources Australia Pty Ltd (BRA), a private company, took control of the pyrethrum business. The vast majority of the staff showed confidence in the new management and remained with the pyrethrum operation. After all of the uncertainty associated with the last few months of BOC ownership, there was a significant degree of relief and enthusiasm to “get stuck in ”and make a success of the new business.
The company now employs the equivalent of 50 full-time staff (although employee numbers increase during harvest time)and has completed construction of a new processing facility at Ulverstone in northern Tasmania. Ian believes that the business will “grow three-fold ”over the next eight to ten years.
This period of time will undoubtedly see an increase of competition, and Ian says that he will need to address the important issue of further reducing cost and strengthening BRA ’s — already considerable — service to customers. . “We currently supply 25 to 30 per cent of the market. A lot of small producers are looking at expanding into pyrethrum, but the larger companies are not interested in playing the game unless they have reliable supply chains. When the supply becomes plentiful, the big guys will get involved. In terms of competition, there are large developments in Chile, Uganda, China, France and South Africa. However, most of these are based on low technology and, as such, are not very responsive to research and development. But pyrethrum is popular, and there is now a worldwide shift to natural product. We will stay ahead through our research, our supply chain management and our customer service.
The skill base of the staff is very high, with university graduates in chemistry, economics, chemical engineering and agricultural science. BRA recognised the need to gain exposure within the educational environment to attract highly qualified, future employees and has recently instigated a scholarship program with the University of Tasmania to provide some $50, 000 in student scholarships for the next four years.
The employment level is expected to grow with the business. Ian Folder recognises that “there is a continued need to challenge and have growth and development opportunities for all of the staff ”.
BRA is actively looking at new opportunities that have synergies with the existing business and utilise the core competencies of the pyrethrum industry to the maximum. These include new plant extract crops, toll refinery opportunities, laboratory analytical services and downstream value-adding of products.
Industry Development
Since the formation of BRA in 1996, the pyrethrum industry in Tasmania has grown from 750 hectares to over 2, 000 hectares in 2000 — a three-fold increase in four years. The industry expects to grow to 3, 500 hectares by 2002/03. The success of BRA is due to many factors, including the passion and commitment of the staff, support by the growers, support by the overseas customers, research and development (R&D)funding support by the Federal Government, and highly focused management by BRA.
Success with the research and commercialisation of the results have led to ground-breaking improvements in the field production and harvesting, and the refining of the end product.
Very timely and significant R&D funding support was received from the Horticultural Research and Development Corporation (HRDC)in particular, as well as AusIndustry, to allow this research to be adopted and be of immediate benefit to the industry.
“The HRDC provided additional funding to address the concerns of the new operation at a critical period in the life of the new company, ” says Ian. “This research was a major breakthrough for us, it kept the business alive. ”The new refinery at Ulverstone is based on the prototype. techniques that had been tested with HRDC support. Previously, the crude product was sent to the United States of America (USA), a practice that was proving far too expensive.
The registration of the refining process in the USA was another strategic advance. “We expected the registration to be a major exercise, but our agent in America got the submissions through the EPA [Environment Protection Agency ] in almost record time, ” says Ian. “This was a huge breakthrough and allowed us to sell the higher valued product in the US.
Recently, BRA has been awarded an AusIndustry R&D Grant to further develop its unique extraction processes for pyrethrum.
Success with direct-drilling of pyrethrum arising from R&D has enabled the industry to very substantially reduce the costs of crop establishment and increase the final yield, thus making this crop much more financially attractive to both growers and BRA. Very focused research with the harvesting options trials has successfully highlighted the importance of the timeliness of harvesting and has led BRA to develop and utilise the largest fleet of harvester machines for the one job anywhere in Australia. During the last harvest, some 28 combine harvester machines were utilised for the concentrated pyrethrum harvest. All of these machines were near-new machines and very capably harvested the whole crop in a record short time.
BRA ’s Chemical Engineer,
Joseph Coleiro, and Director of Manufacturing,
John Boevink, discuss
processing technologies in BRA ’s Ulverstone, Tasmania, factory complex.
The existing grower base in Tasmania and new growers gave the industry much support in the turbulent times. In 1996, they grew about 250 hectares of new plantings in the first year. This was a very high level of grower commitment because the growers carried all of the costs of growing the crop. BRA was a small, under- capitalised company at that time and there was no ‘big brother ’ such as BOC behind BRA, as was the case in earlier years. These early supporters have reaped very good returns in more recent years from their pyrethrum crops.
The growers also recognised the value of R&D, especially for a new industry, and all growers have agreed to contribute a hefty, voluntary levy of five per cent towards R&D. BRA staff worked very closely with the research teams and extended all of the research outputs direct to the growers.
The success of the R&D and commercialisation of the refinery were major achievements for this new company. The refinery utilises the highest standards of computer and manufacturing capabilities and is the only refinery of its type to be used with pyrethrum in the world. The ability to undertake this final value-adding operation in Tasmania enabled BRA to sell the final product at a much better price, enhanced cash flow and allowed BRA to sell to a much wider customer base throughout the world.
Now that the industry ’s initial problems have been ironed out, Ian is a lot more confident and relaxed about the future of the industry. “When we need to solve a problem, the amount of fellowship between people is just extraordinary, ”he says. “It ’s amazing in Tasmania because there ’s a lot of experience in new industries. There is such a short and open line of communication in Tassie — everyone is so enthusiastic and supportive of a new development. It’s so easy to network with people."
Below: BRA’s Research
and Development Manager, Brian Chung, inspects
a maturing crop of
pyrethrum in northern Tasmania
Management Flexibility
The shift from BOC to BRA has also provided major benefits with respect to greater flexibility and response time by senior management, and short and open lines of communication throughout BRA and between BRA and the growers. In addition, there is an “extraordinary amount of cooperation and goodwill between BRA and all segments of the community in Tasmania — from growers to contractors, researchers, and local and State government ”. People recognise that pyrethrum is a new and local industry and everybody is keen to see it succeed.
Before the buy-out, one of the more persistent problems was the large amount of product lost during harvesting. Such obstacles have now been teased out and corrected. Ian says, “The reason we ’ve been successful is that we are now able to break the process down into small parts, work closely with all sectors of the industry, look for the weaknesses and address them. We ’re much more flexible with making changes now than when we were with BOC.
BRA management recognises that risk management is a key factor for the continued growth and profitability of the pyrethrum industry.
In a single-product company, and in the chemical field, it is essential to control all of the intellectual property within the company as there will always be someone looking over as soon as you become successful.
There is also a very important need to look after the customers, understand their needs and problems and gain an understanding of the whole supply chain, as close as possible to the end user of the products. BRA has been very successful in gaining long-term supply contracts with the major customers and this had provided a certain level of stability for all concerned within the industry.
Similarly, there is a need to fully understand the situation of the growers, their cost structures and cropping options. Most important is the need to fully develop, challenge and reward the staff of BRA.
It is critical that all of the stakeholders of the industry remain profitable and are rewarded for their contributions and that BRA is managed on a very conservative basis so that there are always sufficient reserves to withstand and recover from a hiccup in any part of the operations.
Marketing is a primary concern for Ian. There is currently a shortage of pyrethrum from East Africa — one of the world ’s major producing areas — and he is positioning BRA as a reliable and efficient supplier. “Traditionally, the level of service to customers has been limited, ”he says. “We are differentiating ourselves from the rest of the market when it comes to service. We plan to show that we ’re responsive to innovation and intend to be the lowest cost producer.
Ian is incredibly enthusiastic about pyrethrum, and although he credits BOC with much of the early work, particularly working through the teething problems, he appears happier with the structure of Botanical Resources. “The beauty of having effective control of the business, ”he says, “is that I ’m able to change the mindset fairly quick. I can just focus on the issues and address them. ”
