A NSW potato seed company has rapidly expanded into international markets with the help of good partners and alliances.
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Entrepreneur: David McDonald, Managing Director
Company: Technico Pty Ltd
Business type: Agri-biotechnology
Founded: 1995
Turnover: About $15M
Head office: Moss Vale, New South Wales
Contact details: + 61 2 4869 4588
The Technico Story
An innovative potato seed production technology and astute business alliances have yielded impressive export returns for the agri-biotechnology company, Technico. Now, says the company, it is time to use its existing international operations to underpin a new push into overseas markets.
After starting as a small research venture in 1995, Technico says it is now the world’s leading high-technology seed potato company. It is a good niche to occupy, servicing a $US100-billion global industry. The company employs 250-300 staff, most of them overseas. Turnover is about $15 million - with $45 million in turnover projected for 2007. After securing footholds in several global markets, Technico has changed focus.
Technico’s managing director, David McDonald, says: “We’re still growing but our method now will be to take advantage of where we’ve transferred the technology and made it successful. In particular, we want to use our low-cost, major production facilities in China and India as key export bases to Europe and the Middle East.”
The company plans to build a new production facility in southern Europe and is negotiating to build a new wholly owned facility in Canada. That plant will supplement its five other operations in Australia, the United States, China, India and Mexico.
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Key learning points:
- Choosing markets - If you have a proprietary technology, establish where your markets are. Don’t get carried away with the size of the market unless you have a real application there.
- Risk management - In pursuit of revenue growth, make sure that the risks you take will be properly rewarded. The market that respects you for revenue growth will punish you if you fail to produce profits.
- Personal presence - There is a big difference between talking with someone on the phone and sitting in their office in China or India. If you want to go global, get used to aircraft.
- International strategy - Try different strategies - at the same time. What works in one market may be unsuitable elsewhere. Do not bet the business on one strategy.
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Technico’s export success relies on its proprietary TECHNITUBER® technology. The company produces high volumes of disease-resistant miniature seed potato varieties, which are about one-tenth the size of normal seed. The reduced size means a substantial advantage in storage and transport. The technology also dramatically shortens the usual production cycle, providing supply-chain flexibility and speed to market.
Effective partnering has been crucial. Technico’s early decision to license its technology to the multinational food giant PepsiCo/ Frito Lay gave it credibility and clout. There was another very tangible benefit: PepsiCo, in effect, sponsored Technico’s entry into China.
McDonald says: “We never went in there with a big, blue-sky attitude. We locked up our customer before we even built. We didn’t have to concentrate on trying to develop our market, we already had it. Our major customer was taking 60% of our production capacity. We had no distribution worries, they picked up the product from our wholly owned facility.”
Technico’s new facility in India has the capacity to produce over 18 million TECHNITUBER® seeds each year. The project is a joint venture with a prominent Indian fertiliser company and is Technico’s most important alliance.
Establishing the Indian partnership took time. McDonald says: “We took nearly four years before we built our facility in India and that was after working with the same partner for that time on trials, bringing them out to Australia, and taking them to different parts of the world where we were producing. So we built a very strong relationship before signing.”
Technico also licensed its proprietary technology in India. However, the company did not just bank its license fee; it used the money to buy a 50% share in the Indian operation. “Because of its fertiliser operations, our partner had the distribution and marketing already in place,” McDonald says. “Given India’s logistics, this meant we could rapidly bring our product to market.”
McDonald, who makes at least 15 overseas trips a year to keep in close contact with Technico’s international operations, has learnt much about how to open new markets in other countries. Understanding your market, he says, is absolutely critical.
But equally important is understanding risk. McDonald says: “We don’t take both market and financial risk together. We’ll take one or the other but we won’t take both together.
“We don’t say, ‘Here’s Canada, a good seed market, let’s spend $5 million, build a facility and then market ourselves’. We always try to underwrite at least part of our market before entering, even if we only just break even.”