The path to breakthrough for a nitrogen industry company

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The Path to Breakthrough for a Nitrogen Industry Company Author/Source: Date: 2016-06-03 Clicks: 12 – Jia Xinchao, General Manager of the Marketing Department at Henan Xinlianxin Company, talks about transformation. At present, the challenges faced by the fertilizer industry are growing increasingly severe, and companies are striving to find ways to overcome them. Especially for nitrogen fertilizer companies, how to overcome difficulties through transformation and upgrading in the face of continuously declining profits is a focus of concern for the entire industry. In recent years, Henan Xinlianxin Fertilizer Co., Ltd. has been committed to transformation and upgrading, focusing on efforts across the entire value chain – including costs, products, marketing, and promotion – and has achieved impressive results, serving as a model for the transformation of traditional nitrogen fertilizer manufacturers. \"Low cost + differentiation\" for products: In recent years, amid shrinking demand, some companies in the traditional coal chemical industry have begun to shift from conventional coal chemical production to modern approaches. Henan Xinlianxin, the largest nitrogen fertilizer manufacturer in Henan Province, is one of them. It is understood that in 2015, while achieving a 8.48% reduction in comparable costs for the whole year, the company recorded sales revenue of 5.8 billion yuan and a net profit of over 400 million yuan, representing year-on-year increases of 14% and 66% respectively, both of which reached new historical highs. Jia Xinchao, general manager of the company’s marketing department, told reporters that the company adheres to a cost leadership strategy, seeks efficiency through differentiated products, and has blazed a path for nitrogen fertilizer manufacturers to stand out by relying on such differentiated products. How does this company achieve a lower cost structure? Jia Xinchao gave an example: \"As we all know, the average amount of coal required to produce urea is currently over 800 kilograms per ton of urea produced. However, Xinlianxin Company only uses 672 kilograms, and that constitutes an advantage.\" 672 kilograms, which means a significant reduction in coal consumption; this translates into a decrease in total costs of over ten percentage points. ” This figure may seem very simple, but it embodies the hard work and wisdom of all the employees at the company. “In urea production systems, the raw materials are primarily coal (high-quality anthracite and bituminous coal) and natural gas. Currently, among domestic nitrogen fertilizer manufacturers, 30% use natural gas while 70% use coal. Of these 70% of companies, less than 20% use low-cost bituminous coal as raw material, and our company is part of that 20% – which is where our cost advantage lies. ”Jia Xinchao told the reporters. He also said, “When produced using bituminous coal, about 800 kilowatt-hours are required per ton of urea; whereas when produced using anthracite coal, just over 400 kilowatt-hours are sufficient per ton of urea.” It is evident that using bituminous coal to produce ammonia for urea synthesis offers significant cost advantages, as well as notable energy-saving benefits. At present, the two urea production bases in Xinxiang and Xinjiang, built using modern gasification technology, not only boast leading technical capabilities within the national industry but also enjoy significant cost advantages, which enables these enterprises to hold a strong position in the market. ” On the one hand, costs are reduced through advanced technology; on the other hand, efforts are made to develop differentiated products. Xinlianxin Company improves its overall operational efficiency by combining two aspects. Jia Xinchao explained, “Building on our advantage in production costs, we are also focused on increasing the added value of traditional urea products by developing differentiated products such as loss-control urea.” As early as 2012, Chairman Liu Xingxu led his team to clearly adopt a development strategy centered on ‘total cost leadership and differentiation’, focusing the company’s efforts on adjusting the raw material structure, developing differentiated and efficient fertilizers, and reorganizing its production bases. By making full use of the resource and market advantages of Xinxiang and Xinjiang, and while continuing to focus on expanding and strengthening the fertilizer business, it is possible to extend the coal chemical industry chain and achieve leapfrog development. ” The company has established collaborations with research institutions such as the Chinese Academy of Sciences, the Chinese Academy of Agricultural Sciences, and Henan Agricultural University. It has developed a range of high-efficiency fertilizers, including long-acting, labor-saving, and environmentally friendly urea products, polyenergy network urea, Heiliwang humic acid urea, and controlled-release compound fertilizers. These products with their distinctive features have laid a solid foundation for the company’s goal of becoming a leader in the production of high-efficiency fertilizers in China. By modifying and enhancing traditional urea, its utilization efficiency has been significantly improved, enabling farmers to increase yields and incomes without having to increase their investments or reduce the amount of fertilizer used. Like the water-contact film controlled-release fertilizer, after more than two years of extensive demonstration and comparative testing on field crops such as wheat and corn in Shandong, Henan, Hebei, and the three northeastern provinces, this product enables an average yield increase of over 8% for such crops. Compared with traditional urea, even with a 10% reduction in application rate per mu, crop yields still increase; if the same amount of fertilizer is used, an additional income of over 100 yuan can be obtained per mu. Moreover, in response to the market’s demand for product diversity, the company has developed a range of new high-efficiency fertilizers, including urea and compound fertilizers enriched with trace elements, as well as urea designed for use in vehicles. The successful development of these differentiated products has further enhanced the competitiveness of these enterprises, and it also provides valuable insights that can help traditional nitrogen fertilizer companies overcome their difficulties. “Everyone is talking about overcapacity. If new production capacity can be controlled scientifically, while the phasing out of outdated production capacity is accelerated and differentiated products that are marketable are developed, the market as a whole will remain balanced, and the issue of supply exceeding demand will be resolved easily. ”Jia Xinchao said. Marketing transformation to win the market: Currently, the end markets for agricultural inputs are changing. Relying solely on limited products such as urea and compound fertilizers to operate in these markets and increase profit margins makes it difficult to overcome traditional sales barriers. To this end, the company proposes to leverage the advantages of its existing marketing channels and establish diversified marketing platforms, in order to bring other valuable resources and products into its sales network. This will enable it to provide its clients with more comprehensive, systematic, and high-quality services, breaking away from the cycle of price competition over homogeneous products and fostering healthy development in both production and sales. Jia Xinchao said that since 2013, the company’s marketing strategy has undergone a comprehensive transformation, shifting from a pure low-cost approach to one that combines low costs with differentiation; it has also evolved from a model of producing based on production capacity to one of producing based on market demand. In the overall operation of a company, the focus shifts from production to the market, with marketing playing a leading role. As part of its comprehensive marketing upgrade, the company first merged its existing urea marketing system with its compound fertilizer marketing system. Through the integration of these two systems, the company’s marketing system operates more effectively. On the one hand, there is a concentration of personnel, unified management, and coordinated actions. On the other hand, marketing can direct valuable resources toward the promotion of differentiated products and high-efficiency fertilizers, thereby increasing efforts to promote such products. Secondly, the company is also trying a \"nanny-style\" implementation strategy to promote high-efficiency fertilizers. The so-called “nanny-style” approach means providing support to dealership in every single detail. The company has developed a range of marketing plans tailored for its distributors, even custom solutions, and has established the Xinlianxin Company Marketing Academy to provide targeted training for them, supported by a professional marketing team to assist with promotion efforts. Once again, the company began to embrace e-commerce and entered into close cooperation with \"Rural Taobao\". On last year’s Double 11, the company’s daily sales volume on Rural Taobao amounted to 4.43 million yuan, with a total sales volume of nearly 3,000 tons. From last August to this March, the sales volume of products was approximately 17,000 tons, with sales revenue amounting to around 27.5 million yuan. “Of course, e-commerce also includes the direct online store for Xinlianxin Fertilizer that our company has established on its own; however, it is not yet our main sales channel, and we are still in the exploratory stage of testing different approaches. However, e-commerce for agricultural supplies is an inevitable trend; it indeed achieves good sales results at certain times, and it can also enhance the visibility of our brand. ”Jia Xinchao said. Fertilizer is delivered directly to farmers at the point of use. Product promotion and agricultural services are not merely about holding training sessions, distributing bags of fertilizer, or organizing events; true promotional services involve a seamless integration of the company’s products, culture, and business philosophy. The standard for success is to meet the diverse needs of consumers to the greatest extent possible, and this requires companies to invest considerable time, effort, manpower, and financial resources to achieve it. “As an enterprise dedicated to supporting agriculture, we also strive for differentiation in our service offerings, upholding the service philosophy of \"Farmers satisfied, we are satisfied.\" We use high-quality products, the most reliable items, and the most attentive services to help farmers increase their production and incomes. ” Jia Xinchao said. The reporter learned that the company is one of the earliest in the country to actively explore new models of cooperation between agricultural enterprises. In line with its **strongly promoted policy of soil testing and fertilization, the company introduced a customized fertilization service model that provides a specific formula for each field and processes fertilizer separately for each bag; this approach has yielded excellent results after being implemented in various regions across the country. In particular, pilot projects for smart fertilizer distribution were launched in 2013, and to date more than 20 terminal fertilizer distribution stations have been established. This year, in partnership with Bifude Company, another 50 terminal fertilizer distribution stations will be established. “Our approach involves gradually establishing a database of soil information in the areas where fertilizer distribution stations are located, and at the same time setting up scientific fertilization service centers in those areas. This helps to create a smart agriculture service network platform that fosters cooperation between agricultural enterprises and farmers, brings benefits to farmers, and achieves win-win outcomes for all parties involved. By integrating the ‘fertilizer distribution at the end point’ and ‘e-commerce’ approaches, we can provide tailored services to farmers and customized solutions for large-scale professional growers. ”Jia Xinchao said, “I believe that as the process of land transfer accelerates and the goal of zero growth in fertilizer use by 2020 is achieved, there will be a major transformation in both fertilizer production and application techniques.” This type of formulated fertilizer, which is efficient, environmentally friendly, cost-saving, and convenient, and is produced using intelligent fertilizer dispensers, will come to the forefront of fertilizer development. ” Moreover, in recent years, the company has focused on the promotion of differentiated products and high-efficiency fertilizers. It has organized a series of activities in major grain-producing regions such as Heilongjiang, Shandong, Hebei, Henan, and Anhui, including lectures on scientific fertilization, demonstrations of seed-fertilizer simultaneous sowing techniques, on-site observation sessions, actual yield measurements, and free distribution of fertilizers as a gesture of kindness. These efforts have helped to make the promotion of its products and agricultural services a regular part of its operations, thereby establishing a bridge of connection with consumers. “In the future, we will continue to focus on enhancing the value of traditional nitrogen fertilizer products through modification. We will make full use of the capabilities of the **Nitrogen Fertilizer R&D Center and various research institutions, accelerate the commissioning of ongoing projects, so that high-efficiency fertilizers can better meet the needs of modern agricultural development, thereby providing comprehensive technical support for the advancement of efficient agriculture in China. ”Jia Xinchao told the reporters.