S D
SEED
INDUS
STRY
Y
Sec
ctoral Reporrt, 200
09

Nattional Ins
stitute off Agriculltural Ex
xtension Managem
ment (MA
ANAGE)
Hyd
derabad
 CONTENTS
An Overview of the Industry 3
- The Global Scenario 3
- The Indian Seed Market 4
- The Hybrid Seed Industry 5

Understanding Market Dynamics 9

- A Case of Hybrid Rice 9
- A Case of hybrid Cotton 10
The Distribution Channels 12
Promotional Tools 13
The Way Forward 16

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An Overview
Seed is the most important input component for productive agriculture. In the significant advance
that India made in agriculture in the last four decades, the role of the seed sector has been
substantial. The expansion of the seed industry has occurred in parallel with growth in
agricultural productivity.

The global seed market:

The seed industry is undergoing a significant change towards providing farmers with high-yield
seeds and reduced production cost. GM seeds are expected to grow up from the fringes of crop
protection into newer potential applications, thus increasing the presence of biotechnology in the
industry.

The size of the world industry is USD 30 billion. It is expected to triple to USD 91 billion soon.
World seed market is projected to exhibit a CAGR of 4.27% over 2001-2010 and settle at about
US$42.2 billion by 2010. Europe, win an estimated share of 34.57% in 2008, is the largest
market for seed worldwide. In terms of growth, however, Asia-Pacific is forecast to surpass all
other regions with a forecast CAGR of 5.85% over the 2001-2010 period.
Grain seeds, with an estimated 2008 share of 32.70%, forms the largest product category in the
global seed market. In terms of growth, however, vegetable Seeds, with a CAGR forecast at
4.99%, are expected to outpace all other categories of seed.
(Source: Global Industry Analysts, Seed Quest News Section)

The Major Global Seed Players are shown below:

Company Seed Sales(USD % share of Global market

million)
Monsanto (US) 4964 23
DuPont (US) 3300 15
Syngenta (Switzerland) 2018 9
Groupe Limagrain (France) 1226 6
Land O’Lakes (USA) 917 4
KWS AG (Germany) 702 3
Bayer Crop Science 524 2
(Germany)
Sakata (Japan) 396 <2
DLF Trifolium (Denmark) 391 <2
Takii (Japan) 347 <2
Table 1: Source – www.seedquest.com

Global breeding programmes integrate different sources of elite germplasm and biotech traits to
produce new hybrids and varieties which can beadapted to local conditions. Elite germplasm
remains the foundation of plant breeding, but the new tool-box of biotechnology provides the

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means to characterise and use it more effectively. Breeding cycles can be reduced, allowing new
products to be developed more quickly and with greater confidence.

The Indian Seed Market

The Indian seed industry is currently valued at Rs. 5000 crores and is growing at 12-13%
annually (According to Mr. Prabhakar Rao, President of National Seed Association of India, 9th
Nov, 2008, Asian Seed Congress). However the rate of growth of hybrid seeds in India is 13%
per year. Japan ranked first, India second and China third in the region in terms of trade volume
of seed business. If we look at the production capacity 70% of India’s seeds’ sales come from
farmer bred seeds, 26% from those bred in publicly financed institutions, and only 4% from
researched hybrids. The home market works out to about 3.7% of the global market.
As the organized Indian seed industry is just forty years old. Yet, its growth has been
phenomenal. India is among the few countries where the seed sector is already reasonably
advanced.

Evolution of Indian Seed Industry:

The Private Sector: The private sector in the seed industry is highly fragmented with an
estimated 300 players. The top 10 companies account for 25% of the total volume. (The Hindu
Businessline, 20th February, 2009) An estimated 250 companies operate as trading firms and
these generate an average turnover of Rs. 5 crore annually. The private sector accounts for 70%
of the market in terms of market turnover.  The private sector accounts to 50% of the total
certified seed production.

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The Puublic Sectorr: Like man ny agricultuurally develooped Asian nations, Inndia has sizeeable publicc
and priivate sectorr seed busiinesses. Giiant public sector playyers includde the Natiional Seedss
Corporaation (NSC C), the Statee Farms Coorporation of o India (SFCI) and thhe thirteen State Seedd
Corporaations (SSCCs). NSC wasw the firsst public seector organization, esttablished in n 1963, andd
remaineed virtually the only aggency for seeed producttion for around 13 yeaars. Its role extended too
several developmeental program mmes incluuding traininng, quality control andd extension activities inn
seeds. This
T was foollowed byy the settingg up of thee SSCs undder two connsecutive pllan periods,
supportted by the World
W Bank, and these largely adoopted the rolle of the NS ndian States.
SC in the In
These corporations
c s engage priincipally inn productionn and markeeting of seedds of high yielding
y andd
hybrid seeds
s developed by thee public secttor.

The Hyybrid Seed Industry

I

Hybrid seeds cam me into beinng with maaize in 1920s and beccame extendded to vegetables and d
flowerss, and moree recently too field cropps and som
me forage crrops. India is the firstt country too
introducce hybrid ccotton seedss for commercial cultivvation. Pressently, the hhybrid seed
d industry iss
growingg at a rate of
o 13% per annum.
a

Marrket Shaare of Hybrid Fiield Cro
ops in te
erms of 
Vaalue in 2
2008

Rice Cottton
8%
Corn
n
Rice
Corrn
19%%
Mille
et
Cotton
59% Sunfflower
Sorgghum
Sudaan Grass
 
Figure 2: C
Crop‐wise Market Share of Hyybrids (Field Crrops) in value teerms. Source: N
National Seed A
Association of India 

The graaph shows that cottonn hybrids arre most poopular amonng Indian farmers
f andd comprisess
about 59%
5 of the total hybridd seed mark
ket in termss of value. Corn
C sharess comprise 19% of thee
market followed byy rice with 8%
8 share.

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5  
 
Crop Market Size (in MT) % Hybridisation
Cotton 10350 80
Corn 65000 47
Rice 18500 <3
Millet 15000 43
Sunflower 6500 >95
Sorghum 5000 >85
Sudan grass 30000 >95
Table 2: Market Size of Hybrids (Volume) Source: NSAI

The above table shows that hybridization in rice is minimum (<3%). This shows that there is
enough potential that can be realized if hybridization in rice can be improved.

Contribution of Public and Private Sector in Hybrid Seed Market in terms of Value in
India (2008):

100%
90%
80%
70%
60%
50%
40% Private Sector
30% Public Sector
20%
10%
0%

Field Crops  Vegetable Crops 
 
Figure 3: Contribution of Public and Private Sector in Hybrid Seed Market in terms of value.    Source: NSAI, 2008 Report 

The private sector is mainly in hybrids that are low in volume but high in return. Public sector
participation is particularly higher in millets, sorghum, sorghum-sudan grass and rice. Its
participation in hybrid vegetables market is negligible.

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Growth
h Trend of Key Field Crops in th
he Hybrid Seed Mark
ket:

Growth Trend
d in Hyb
brid Field Cropss
2
2005 2008 2013
80
0

65

4
45
40
0
30
23
19
14
4
9

Co
otton Corn Rice
 

Figure 4: G
Growth Trend o
of Major Field Crops in Hybrid
d Seed Market in ‘000 MT(forr Corn&Rice), M
Million Packets for Cotton 

The abbove graph shows thaat the 3 main m hybrid field crop
ps (in terms of value)) has good
d
opportu
unities for growth in thee days to co
ome.

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7  
 
 Hybriid Vegettable Crrops Maarket Sh
hare in tterms off 
Vaalue in 2
2008
To
omato 
Okkra
Tomatto 
25% Ch
hilli
Caauliflower
Cab
bbage
8
8% Okra Caabbage
16% Go
ourd
Cauliflower
11% Chilli Watermelon
W
15%
Cu
ucumber 
Brrinjal
Otthers
 
Figure 5: H
Hybrid Vegetab
ble Crops Markket Share in terrms of Value.  SSource: NSAI  

  

Crop Markett Size (MT)) % Hybrridisation

Tomatoo 50 20
Okra 900 23
Chilli 40 14
Cauliflo
ower 40 11
Cabbagge 50 85
Gourd 130 15
Waterm melon 70 40
Cucumb ber 25 3
Brinjal 25 8
Market Size in tterms of Volum
Table 2: M me (MT) and % H
Hybridisation in Vegetables in
n 2008 

Hybrid vegetable seed indusstry in India is expectted to be around a USD D 40 millio

on. Tomato o
occupiees nearly 255% of this followed
fo clo
osely by Okkra (16%) an nd Chilli (15%). Howeever the ratee
of hybriidization is low in casee of the abovve 3 crops aand has trem
mendous oppportunities in future.

The cou untry can bbecome a major

m groweer of transggenic rice an nd several genetically engineeredd
vegetabbles by 20100. It is emerrging as an important
i d
destination f both biom
for markers andd validation
n
servicess. There is an increassing use off molecularr markers in i crop breeeding and a growing g
realisatiion that som
me of these new techno ologies will lead to futu
ure growth in the produuctivity and
d
quality of crops suuch as rice, wheat, eggp plant (brinjal), tomato and okra. TThe agri-biootech sectorr
is also reliant on a strong partnering
p m
model. Indiaan and US/European companies can derivee
synergies in combining g their researchh and commerciialisation expertise.
Howeveer, this woould not be b possible without activea supp
port from alliances
a among
a seed
d

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8  
 
companies. Alliances are becoming increasingly important in seed industry to bridge the gap
between the field experience and emerging technologies.

It is this symbiotic relationship that fuels an increasing number of opportunities. It also brings
opportunities to operate collaborative R&D programmes in biotech, especially, in genetically
modified field trials. As farmers face a limited choice of new seed traits, seed companies are
looking forward to developing projects that are required to supplement their product pipelines.
Biotech leadership of the country will certainly play a vital role to bridge the gap in the days to
come.
Understanding The Market Dynamics

The proliferation of product choices, information sources, distribution channels and marketing
platforms has made the market a complex place for the buyers as well as the sellers. In the highly
competitive seed market it is imperative for a company to focus on customer psyche to provide
the right product to the right person.

Figure 1: Customer Buying Process. 

The diagram illustrates how the potential customers make their choices and falls into the basket
of different companies. Thus, a seed company has to target its customers in the proper way so
that more and more customers fall into its basket.

In this context two cases have been discussed in detail.

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A Case of Hybrid Rice:

The Indian Council of Agricultural Research (ICAR) had started a mission mode policy on
hybrid rice in December 1989, with the technical support of the International Rice Research
Institute (IRRI). Since then the hybrid rice market in India has gone a long way.

However the rate of adoption of hybrid rice was far below than what was expected. Hybrid rice
was accepted in small pockets of the country and mass production of hybrid rice is still not
prevalent. Under such circumstances, it becomes imperative for any company dealing in the
hybrid seed industry to find out the customer preferences and to understand the reasons for poor
adoption of hybrids in many regions of the country.

Speaking about buying behaviour: It must be mentioned at the onset that the competitor of a
hybrid rice brand is not another brand of hybrid rice! At the present market scenario, the main
competitor of hybrid rice is other OPVs. Thus companies marketing hybrids must understand
why the farmers are not going for hybrids rather than inbred and, of course, to tackle these issues
in favour of the comapny.

In several studies, the most prominent reason cited by the farmers for not cultivating hybrid rice
is poor cooking quality. However there are several regions where the awareness about hybrids is
also very poor. The farmers complain that the hybrid rice after cooking is sticky and this is a
negative attribute among Indian rice consumers. Some farmers also complain about higher
disease and pest incidence in hybrids. Therefore the market is in demand of a disease resistant
hybrid capable of providing an yield advantage over OPVs.

The question now arises that which are the markets that a hybrid rice company should target?

Since cooking quality is not acceptable, the best segment would be enterprising farmers whose
staple diet is not rice. Thus, Punjab, Haryana, parts of Chattisgarh and Western UP would be
good markets. For understanding the districts which would emerge as high adopters of hybrid
paddy, a survey may be made to estimate the yield advantage and profit advantage of hybrid rice
over the popular inbreds of the region. Wherever the advantages of growing hybrids are higher,
the rate of adoption is expected to be higher. These districts may be targeted by the companies.

Hybrid paddy growers generally do not consume the rice they produce. They grow hybrids to get
a yield advantage and by selling a larger volume, they expect to get a profit advantage over
OPVs. Thus a farmer is expected to switch over to hybrid paddy if he is ensured of a good price
for hybrid paddy. So areas with a price premium for hybrid paddy may be targeted.

The market is still riddled with subcontracted buying behavior of the customers. Thus push
strategy remains as the key factor to promote sales. However the market is slowly moving in a
direction of brand awareness. Thus the right mix of push and pull strategy would work well.

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Extravaagant expennditure on promotion would onnly increasee costs andd might no
ot result in
n
phenommenal sales.

The Waay Forward::

The hyb brid rice seeed market iss highly in need

n of a prroduct that would satissfy the desirred cooking
g
quality parameters for large sccale cultivattion of hybrrids all overr the countryy. The commpany which h
is able to bring ab bout a techn nological brreakthroughh in this respect wouldd emerge as a leader in n
this secctor. Howev ver till this product
p commes up, the kkey to succcess would bbe proper pllacement off
the prod duct and connsolidation of market share.
s

A Case of Hybrid Cotton:

After thhe advent oof Bt techn

nology, Indiia experiencced a phen
nomenal groowth of areea under Btt
cotton.

% Area Under Btt Cotton
n
70

60 66

50

40
41.5
30 % Area U
Under Bt Cottton

20

10 14.2
2
0.3 1.1 7.3
0
2002 2003 004
20 2005
5 2006 2007
 
Figure 6: FFoundation of Biotechnology Awareness and Education

BGI: Thhis cotton pproduces thee Cry1Ac in

nsect contro
ol protein. Itt provide eff
ffective prottection from
m
feeding
g damage by b lepidop pteran insecct such as American n cotton boollworm (H Helicoverpaa
armigerra), pink boollworm (Peectinophoraa gossypielaa), and tobaccco bud worrm (Earias spp.),

BG II: This cotton n produces both Cry1A Ac and Cryy2Ab2 proteein which pprovide equ uivalent and d
increaseed control oof major inssect pest off cotton (tob
bacco bud worm,
w pinkk bollworm,, and cotton n
bollworrm) comparred to BGI. With addittional contro ol of second
dary lepidoppteran insecct (beet and
d
fall arm
my worm) annd sucking insect
i pest.

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1  
 
Talking about market dynamics, there is a change in buying behavior in hybrid cotton farmers
that is becoming popular. Instead of purchasing seeds on the advice of the dealers, the farmers
are increasingly becoming brand aware. This means that the companies must try to strengthen
their brands as much as possible in the days to come rather than only depending on dealers’
‘push’.

The level of involvement of the farmer in the purchase of agriculture input (in our case hybrid
cotton ) is a high involvement one as the farmer tries to convience and confirm himself that the
brand he is buying is the best available in the market and the most profitable one in terms of all
the attributes he is looking for.

According to a study, 80-85 % of farmers depend on their prior experiences as well as the advice
of fellow farmers. 10 % on advice of dealers and 5-10 % on company persons etc. It is at this
time that who ever is able to convince the farmer wins his confidence and the farmer prefers the
variety told by him.

It was also seen that there is a shift of farmers from BG-1 to BG-2 cotton.
Year BG I BG II
2008-09 70% 30%
2009-10 60% 40%

Way Forward:
Thus it would be prudent for a company to emphasise on BG-2 in the days to come as greater
number of farmers would use it. It would be more important to promote the brand of seed they
are marketing than depend on ‘push’ strategy only.

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 Distribution Channel Of Seeds

 
Lending against offtake contract
  Seeds

 
Contract Seed Growers Term lending/WC
 

 
Contractual agreement Seed Company Lending against stop sales
  agreement

 
Short term lending against
Distributor
 Preffered distributor liquid collateral

 
          Dealer Crop loans
Credit sales

Farmer

Explanation:

Seed is marketed through a network of distributors and dealers by the private companies as well
as public sector corporations. The dealers are appointed at the district level. In some districts
they are appointed on non exclusive basis, which means the dealers can deal the products of
other companies or even in other commodities.

The distributors, retailers and dealers are paid commission by the companies on sales. Normally
15-20% commission is given to distributors who pass 12- 17% to dealers while the retailers get
9-14% gross discount on sales. In some cases the companies directly deal with the dealers who
are paid at par with the distributors. The distributor/dealer indent seed with the companies well in
advance as the ensuing kharif season orders have to be placed in December. The companies
insist on full payment on delivery of stocks. However, depending on the track record of the
distributor or dealer the companies may offer on credit.

Seed margins have to be attractive enough to provide the dealer with an incentive to stock and
sell. Where there is competition, seed marketing companies compete by offering more attractive

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trading terms. This encourages dealers to stock their products and give them prominence. If
farmers go to buy seed, and are undecided about the variety, the dealer will recommend seed
from the most profitable supply source.

Sales Promotion

It is the term given to describe a variety of techniques designed to encourage customers to buy.
They complement advertising and other promotional activities. They are tactical devices that
provide incentives to 'buy now', thus sales promotion is short-term (to achieve an immediate
effect) whereas advertising is a longer term communications process. The techniques used to
achieve these short-term effects can be divided into either selling to the market channel or selling
out of the marketing channel. There are two types of sales promotion activity:

1. Selling to the marketing channel

These are the techniques which, by providing incentives and support, enhance sales to the trade
and encourage the distributors and dealers to stock the product. Some examples follow.

Dealer 'loaders'. These are ways of encouraging dealers to build up their stocks in sufficient
time, so that inadequate supplies and last-minute transport problems are avoided. Examples are:
offering discounts on orders taken early and progressive, volume discounts on large orders
(quantity discounts). These discounts can, of course, be passed on to the customer.

Point-of-sale materials. These are materials supplied by the seed company to the sale points to
support sales of their product range. They are used to display and attract attention to the product
range as well as to provide information. This form of sales support encourages the dealer to order
stocks. Examples of point-of-sale materials include colourful display boxes in which seed
packets are placed, particularly vegetable seeds, product information leaflets, seed catalogues
and audio-visual displays, such as slides with sound tracks or videos.

Dealer competitions. The larger seed companies can afford to offer significant prizes linked to
dealer sales' performance. It is also an established technique in the more developed countries to
hold dealer seminars in attractive locations. While it may not be realistic to expect companies in
developing economies to incur the high levels of expenditure necessary to organize dealer
seminars, some form of incentive scheme may be worth running. Overseas suppliers could also
be asked to support such schemes by inviting the 'dealer of the year' to visit the producing
country. A dealer will also value the status of seeing his name in print so press releases and
dealer names featured in catalogues and advertisements can be used.

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Dealer training. Training dealers in the use and benefits of the product is a vital form of support.
A dealer will attract customers and sell more if confident and knowledgeable about the product.
Training should also cover product care in store and stock rotation as well as retail presentation.

Credit. This again encourages higher stocking and can be used selectively to promote certain
product lines. Credit can be used as an incentive to dealers where companies have to compete for
shelf space.

Sale or return. This is particularly relevant for the stocking of new products as it provides an
element of risk-sharing. However, it can be costly to the supplying company. A return system is
used to promote preferential stocking but simply stocking the dealer on a sale or return basis
should be avoided as the dealer will have no commitment to sell. Such a system should always
provide an incentive to take stock. Thus, for example, returns could apply only to stock taken
over and above the previous year's sales. There are, of course, quality considerations and
companies may prefer to collect unsold stock for secure storage and relabelling to avoid the
possibility of farmers complaining of poor germination in a subsequent year. This can be
provided as a service to the dealer with the product remaining the property of the dealer. It is
important that the supplying company protects its name and image at all times.

Promotional gifts. Small gifts (give-aways) can be given to dealers as added incentives. The
seed company's name can be promoted on pens, cigarette lighters and calendars. These serve the
purpose of keeping the company and its brand names in the dealer's mind. Small value items can
also be passed on to farmers when they purchase their seed. Larger value items may be given to
dealers as presents in return for orders for new products, achieving higher volumes or even for
displaying a company's seeds in front of its competitors' products. Many of these techniques may
only seem relevant to the more sophisticated and competitive market situations but marketing
managers should be aware of the techniques that are used to encourage dealers to stock and to
promote one product in preference to another.

2. Selling out of the marketing channel

These are the techniques which assist the retail trade in promoting and selling products to the
final consumer. Some examples follow.

Free samples. Dealers can give out samples of new varieties. The indiscriminate use of free
samples can be counterproductive, however, as the farmer may not achieve a good result and
blame the variety or may not use the sample as it was free.

Seed exchange. Seed can be exchanged for farmers' grain to overcome initial resistance to
buying and using improved seed. This is perhaps more of an extension practice which should be
organized by the seed company on a direct basis.

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Coupon offers. Refundable coupons can be used offering 'money off' the next purchase to
encourage repeat orders or purchases of other products in the company's range.

Price reductions. This will obviously be popular but the danger is that revenue will simply be
reduced without significantly increasing sales so the technique needs to be used selectively.

Competitions. Competitions only create interest if they capture the imagination, e.g. a yield
competition and membership to a 'yield club' for a certain achievement. They can be organized
on a village level or directed at a certain group, such as young farmers.

Premium offers. The offer of an extra product for a promotional price can be made. This could
be a joint promotion with a non-seed product or linked to seed of another species that could be
grown by the farmer.

Field demonstrations and group discussions. These are both very effective ways of promoting
seed products and supporting the local dealer. The demonstration must involve proper seed and
fertiliser usage, soil and water management practices, weed control and plans protection
measures and, if necessary, security measures.

It is important that, before embarking on promotional activities, the marketing manager is given
the necessary support within the supplying organization as well as among the distributors and
dealers. There is obviously no point in starting a promotion without ensuring that sufficient funds
and materials are available and that there is the necessary administrative organization.

3. Personal selling

While seed products may be well advertised and promoted, a high degree of personal selling and
service will always be required. Seed company staff and, where possible, dealers should always
be provided with adequate training and familiarization with the products they are selling and the
market they are selling into.

A good presentation of the company and its product range is important in making the sale. The
company should provide the necessary visual material that can be used in both informal one-to-
one and more formal group presentations. A ring binder with sequenced seed product leaflets and
photographs is a useful way of conducting a one-to-one presentation. A good seed catalogue is
also useful, especially for a product group with a large range.

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Striking The Right Mix

It has been seen that the credibility of field demonstrations has been highest as a promotional
tool. Since promotional activities involve a lot of cost on the company, striking the right mix of
the promotional activities is an imperative. The right mix is decided by the depth of awareness
required by the company among farmers and the budget allocated. It differs from place to place
and between small and large farmers as well. The promotional strategy also depends on the
competitors’ strategy as well as the distribution channel that the company is using. Marketing
research in this respect may be conducted to get the right mix of promotional activities for a
particular region.

Way Forward

In the last few years, the seed industry has seen a substantial number of mergers and acquisitions
and an increase in vertical and horizontal integration. The structural changes underway in the
seed industry are due to a number of factors. Some of these factors are common to all industries
and have no specific link to biotechnology. For instance, the mergers and acquisitions in the seed
industry are at least in part a result of the need to consolidate costs and rationalize industry
capacity, a desire by the management of the firms involved to extend their sphere of influence,
and a wish by some firms to pre-empt other firms from taking over valuable assets.

The horizontal mergers and acquisitions that have occurred in the seed industry can also be
linked to R&D costs, economies of scale and scope created by intellectual property rights, and to
regulatory costs. The increased vertical linkages in the industry are connected to the product
complementarity that is increasingly present between seed and chemical products, as well as to
the difficulty in enforcing certain types of intellectual property. In other cases, the rise of better-
defined intellectual property rights has been a factor in the joint ventures and strategic alliances
that have occurred.

The pricing behaviour of the large firms in the seed industry appears to be strategic in nature,
with pricing being influenced by competition from other products and the value created by their
products. There is substantial evidence of price discrimination, whether it is in the form of
Technology Use Agreements, differential pricing, or tied sales. The key impact of this strategic
pricing is not on the total economic surplus created as a result of R&D, but rather on the
distribution of this surplus Structure, strategic pricing and the distributional impacts of this
pricing are important considerations of public policy. In particular, because a great deal of the
structural issues in the industry are linked to intellectual property rights, the question arises as to
the proper degree of protection that should be provided through IPRs. Intellectual property rights
are granted to companies and individuals as an explicit element of public policy. They are
specifically designed to encourage innovation and to provide incentives for the development and

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diffusion of new products and technologies. The empirical evidence suggests that the
establishment and strengthening of property rights in agriculture has led to an increase in private
investment in agricultural research. Intellectual property rights also provide benefits by creating
economies of scale and scope, which in turn mean lower costs for those firms that can expand
production. At the same time, IPRs can be linked to higher concentration, which in turn lead to
deviations from marginal cost and average cost pricing. Intellectual property rights thus represent
a trade-off between the potential negative effects of market power and the benefits from greater
R&D.

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