Information on global poultry, pig and animal feed markets.

Animal Nutrition Views

Ioannis Mavromichalis, Ph.D., gives his views on poultry, pig and dairy nutrition based on his experience as a nutrition consultant with clients around the world.
Business & Markets

Following versus leading in agribusiness

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Copying may be the highest form of flattery, but what do we do about it?

September 19, 2017

An old Chinese proverb says that copying is a form of the highest flattery. I will not disagree. After all, we all copy patterns, behaviors and trends in our everyday life, and this is the way children take their first lessons. I will not get into the legal or ethical side of copying products to make a profit as such notions differ among countries; I would rather focus on the practical aspect of it.

I have seen two patterns in the agribusiness industry, both successful: those who copy, and those who invent.

I have seen two patterns in the agribusiness industry, both successful: those who copy, and those who invent. The first enjoy high volumes at relatively low margins, making a living but never a fortune. The second enjoy high margins, but they fall victims to copy practices that minimize their volume aspirations. They attempt to prolong their margin privileges by offering claims on quality, innovation, etc., but eventually their products become commodities. We all know of many such examples!

The way I have perceived this “game” is that it takes an enormous amount of time, effort and resources to develop a new technology. Then, there is a window of about 2 to 3 years that the investment can be recovered by applying necessarily high margins, whereas any profit is reaped during the following 2 to 3 years, and always against competition, as it takes them so long to copy and launch a similar product. After that, even competitive copies become as good as the original (at least those sold by smart copiers) and all sell based on volume deals, other services attached or just because of their name. But the real money goes to the lowest priced product-commodity after the first 5 years. Perhaps a patent, or any other legal measure might delay the process, but in our business, it brings about the same result in terms of long-term profitability.

So, what do we do? If we take for granted that “those who can, invent; those who cannot, copy,” then it is very simple. Keep inventing but make sure your customers know that if they want to continue enjoying such inventions, they have to support the leaders. And give those supporting customers a margin break!

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