Most patients no longer think twice when pharmacists ask if they want their prescriptions filled with generic, rather than brand-name, drugs. Opting for a lower out-of-pocket expense for virtually the same treatment and effectiveness as a branded product is a no-brainer, especially for patients with little or no insurance coverage for prescriptions.

The acceptance and use of generic crop protection products among agricultural retailers and growers will likely take a similar path. Farmers are interested in generics already and spent more than $1 billion on them last year. And as their comfort level rises, and knowing that as much as two-thirds of all branded chemistry will be off patent in a few years, industry sources predict retailers will find opportunities, along with a few challenges.

“If you look at the products on the shelf in a grocery store, the branded product usually sits next to the store brand, and consumers make a choice about which product they will purchase,” says Scott Addy, director of marketing for Griffin LLC, Valdosta, GA. “Offering a generic alternative gives farmers more options to buy and dealers more options to make a sale. With time, dealers and farmers will become even less concerned about brand, and generics will become more attractive to both parties.”

Griffin offers several generic product lines to dealers, including fungicides, herbicides and coppers, which are available in most crop markets. About two-thirds of Griffin's products are off patent. “If a product will work in our portfolio, we take a serious look at it,” Addy says. “Generics are only going to grow in use and are critical options to the profitability of farming because of the shrinking margins we see in agriculture.”

Andrew Dunlop, general manager, Nufarm, Houston, TX, has a similar philosophy. “Product differentiation is going to be key to the success of dealers, and generic product differentiation is critical for the long-term sustainable profitability of retailers,” he says. Nufarm offers predominantly generic herbicides, including 2,4-D, MCPA and glyphosate, through a sales structure that includes various customer programs. “In general terms, we can expect the crop protection market to maintain a brand leader. Alternate brands will be available for the price-sensitive market segment, although the low cost of goods may ultimately limit the number of alternate products sold.”

The low cost of goods and competition can affect retailer margins, confirms Duane Mol, chemical manager, Crop Production Services Inc., Galesburg, IL. “If handled correctly, generics can improve margins, but if used as a price-only deal, margins can deteriorate,” he says. “Similarly, if generics are handled correctly, cash flow improves because retailers should generate a better gross margin than they can on branded products. This is preferable to waiting for rebates on the ‘back side.’”

Mol believes that for generic products to survive, especially in the Midwest, where growers are more “brand-oriented” and less familiar with generics, companies will need to make a niche for themselves. “Companies must provide some unique offering that allows retailers to make money and solve problems and that is easier to use,” he says.

More product differentiation and value building can be expected, whether the product is a direct brand or a private label, confirms Dunlop. “Branded products still offer ability for differentiation and value through selling the various features and benefits of the brand, company, quality product and other factors,” he says. “Beyond branding, companies differentiate by supplying products in different sizes, product formulation types, combination active ingredient recommendations and other tactics.”

“People are pretty smart,” says Addy. “If you choose to market a generic product, you have to do something a little different, because farmers are going to ask what the difference is between the generic and branded product.”

To share such product information, Griffin appeals to the traditional distribution chain through target publications and direct mail. “Our sales force makes us appear just as the manufacturers do with customers,” he says. “While we may not offer a re-spray guarantee, for example, we do have a customer service department that offers technical support and service. We want satisfied customers just like any other company.”

Addy's advice to retailers considering generic sales is to offer one generic product and one branded product with the same chemistry. “You don't need eight different products. Some people want brands, and others don't care,” he says. “We believe retailers are the critical link to the marketplace, and offering generic and branded products is one way retailers can succeed. Farmers are always going to rely on dealers for products, service and advice, whether they are buying generic products or not.”

“The best situation is for a small mix—10 to 30 percent — of generics in the market, which allows both types of manufacturers to survive, make a profit and keep the pricing structure intact. Everyone, from manufacturer to distributor to retailer to grower, will benefit,” says Mol.

Rounup versus glyphosate

Retailer and farmer interest in generics has been fueled by the fact that glyphosate, the active ingredient in Monsanto's Roundup herbicide, is now off patent. “Glyphosate generics will be interesting to watch because volume is increasing every year,” says Duane Mol, chemical manager, Crop Production Services Inc., Galesburg, IL. “There is a lot of competition, and some will have a hard time without something unique to sell.”

While some observers note that Roundup's introduction to the market several years ago contributed to slimmer profit margins for dealers, others say Roundup's presence has heated up the competition and resulted in better deals from other companies. Either way, many sources agree price will be the driving factor when product use decisions are made.

“Price will have a large influence on which glyphosate formulation farmers ask for,” says Aaron Hager, University of Illinois extension weed specialist. “If there is a big price difference, farmers may switch to a generic product.”

Hager encourages dealers to pay close attention to the formulations of generic glyphosate products marketed because the products can vary with respect to salt, how much active ingredient is in the formulation and the acid equivalent of the formulation. Different salts have different weights, which can influence the amount of active ingredient or acid equivalent in each product, which in turn can affect rate recommendations. Formulations may also differ with respect to spray additives, such as whether a nonionic surfactant should be added.

“Farmers may not know what the differences are and will need that information from dealers,” he says. “If the generic has the same active ingredient and acid equivalent formulation as Roundup, there may not be much difference in weed control. But if additives and rate recommendations differ, weed control may also, especially for any marginal species not controlled well with glyphosate.”

Likewise, Hager suggests farmers may want to consider whether the company they purchase glyphosate from offers a service policy or other guarantee. “Companies may or may not offer a cost difference, and they may or may not have a respray program,” he says. “For example, if a company does not offer a respray policy, the savings in product cost may have to be large enough to cover a second trip if needed, or it is doubtful farmers will switch products.”

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