[Executive Forum] A New Day

Steve Burt has always had a sense of adventure. That’s fortunate because the past six months undoubtedly would have tested the patience of even the most seasoned adventurer, including fellow countryman Robert Falcon Scott, the famed British explorer who reached the South Pole in 1912 only to perish in a blizzard a few miles from his base camp upon the return trip home.

While never a matter of life and death, who could blame Burt – the newly appointed vice-president of Bayer Environmental Science’s Pest Management Business – if he secretly identified with Scott when he found himself in uncharted territory late last year as a result of the Federal Trade Commission’s "Hold Separate Order" relating to the sale of the company’s fipronil assets to BASF Corp. Following the announcement of the sale, Burt and his staff found themselves in a "no man’s land" of uncertainty until the protracted divestment proceedings received regulatory approval in late March from both the FTC and European Commission (see "BASF Finalizes Termidor Acquisition," March PCT).

"It would be an understatement to say that the Hold Separate Order has been difficult on our people," he says, "but the transaction is now complete and we’re anxious to move forward." Which is what Steve Burt has been doing his entire life...moving forward.

A self-proclaimed "farm boy" with modest roots, Burt grew up in Glastonbury, England, an 8th century town that purportedly was the home of King Arthur and His Court. "It’s a very spiritual place," he says. "It’s still a place I like to go back to and visit to regain some perspective on my life." The eldest of four children, Burt enjoyed life on his family’s dairy farm, but true to his adventurous nature he yearned for something more. "I felt isolated in Glastonbury," he recalls. "I could hardly wait to graduate from high school. I found it a bit repressive."

Despite the inevitable family pressure to pursue a career in agriculture, Burt decided to attend nearby Warwick College, the first in his family to pursue an advanced degree. "It wasn’t an easy decision because my family wasn’t in a financial position to pay for my schooling," he says. "I had to pay for it myself, but it was something I wanted to do." It was the first of many adventures for the headstrong Burt, who has never been afraid to take on a challenge.

"Going away to college was the best decision I ever made," Burt says, but midway through his college experience he grew restless again. When an opportunity arose to work as a ranch hand in British Columbia, Canada, 5,000 miles away, Burt jumped at the chance. "My dad had done some work for a man who had purchased a farm in British Columbia as a tax shelter. I heard he was looking for some ranch hands, so I walked up to this huge mansion, knocked on the front door and introduced myself. I said, ‘You don’t know me, but I’d like to go to work for you.’ I had no idea what I was getting myself into but I never regretted it. It was fun."

After returning to England and graduating from college, Burt went to work as an agronomist for Fisons, a highly regarded British firm best known in the pest control industry as the manufacturer of Ficam Insecticide. "I liked the business side of the job, but not the science," he says. "I would spend hours walking the fields with farmers, which was very gratifying, but I didn’t feel like I was contributing very much. They were the experts. I just had a degree."

Although fieldwork kept him physically fit, it wasn’t long before Burt once again grew bored and began looking for the next challenge. When Schering purchased Fisons in 1986, Burt accepted a position as National Account Manager, working closely with distributors and key customers. "What I learned from that experience is that if you talk to people and genuinely listen to what they have to say you’ll succeed," he says.

Several years later, when AgrEvo was formed from the merger of Schering and Hoechst, Burt decided to leave agriculture and join the com-pany’s specialty chemicals business. "I came into the business not knowing the difference between pyrethrum and pyrethrin, but it’s how I got my first taste of the pest control industry," he recalls. "Within six months I was in love with the business and the people." The feeling, apparently, was mutual. Jonathen Peck, group manager of Killgerm, the largest distributor in Europe, describes Burt as a "very competent business manager who is not afraid to make tough decisions. At the time he was promoted, we were delighted for him, but very sorry to see him go because he’s the sort of person every industry needs. He gets things done."

At AgrEvo, Burt doubled the business in three years and was soon looking for a new challenge. He didn’t have to wait long. When Aventis was formed following the merger of AgrEvo and Rhone-Poulenc, the company asked Burt to move to the United States and run TechPac, a consumer products company that supplies major retailers like Lowe’s and Home Depot with over-the-counter insecticides. "You don’t have a lot of control with those kind of business partners," Burt says, "so it tests your diplomacy skills."

Burt proved to be the consummate diplomat, growing the company’s business from $10 million to $50 million in less than three years. "I loved my job, but I still missed the pest control industry. In the retail market, there was so much turnover you couldn’t develop any relationships," he says. "You were always dealing with a new group of people."

When Bayer purchased Aventis last year and Burt had an opportunity to return to the pest control industry, he jumped at the opportunity. "We have a huge job ahead of us, but I’m comfortable with the position because the people in this industry are great people," he says. "If EPA banned all pesticides for home use tomorrow in the United States, those products easily would be replaced on DIY shelves by something else. In the pest control industry, however, you have a much closer working relationship with the distributors and end users of your products. That’s why I love this industry. Pest management professionals deeply care about what they do."

PCT Publisher Dan Moreland recently sat down with Burt to discuss changes at the company, as well update the industry on Bayer’s future plans.

Moreland: With all the changes that are occurring at the basic manufacturer level, what’s the most serious challenge currently facing Bayer?

Burt: I believe there are several challenges facing Bayer Environmental Science in the months ahead. Certainly, we have to integrate two different corporate cultures that resulted from the merger of Bayer Garden & Professional Care and Aventis Environmental Science. Both organizations were successful in their own right and bring strengths to the new organization. Now we need to create our own identity and that is moving along nicely, but it will take time.

We also need to do a better job of sup-porting Premise. We’re taking some bold steps to focus on the brand, the brand extensions and the misperceptions about the product that were allowed to linger (see May PCT, page 102). We also need to improve some of our infrastructure as it relates to Accolades and customer service. Considering everything, we have reasons to be excited about our future, and it starts with our customers. A survey conducted of PMPs by our PR agency last year con-firmed that Bayer ES ranked #1 in having the broadest and most effective product portfolio of pest control products in the industry. That’s a great start and we’re going to do our best to enrich those findings.

Moreland: Originally, the merger of the two companies was supposed to be finalized late last year. What caused the delay and how did it impact Bayer heading into the 2003 pest control season?

Burt: The delay was due to the FTC and European Union approval for the deal between Bayer and BASF. In fact, as soon as the EU approved the deal (they were three to four weeks behind the FTC), it was closed within two weeks. The main impact was on people. Bayer ES was forced to run two sales forces to support the fipronil business and the rest of the Bayer ES products. This delayed the process that would have been completed much earlier. Our customers also have been confused by the changes and the delays but now we are looking forwards.

Moreland: You came out of the Aventis organization, a company with extensive merger and acquisition experience. How does this merger compare to others you’ve been involved with in the past?

Burt: This one was much tougher because of the FTC’s Hold Separate Order. The FTC likes this model, but I hope they’re aware of how the Hold Separate Order has negatively impacted peoples’ lives. It not only slowed down the merger process, but delayed personnel decisions in both organizations. As a result, it’s taken a much bigger toll on our people than on our business.

Moreland: Large-scale corporate mergers, while inevitable in an increasingly competitive global business environment, do have a human price, don’t they?

Burt: Yes they do. They can be very disruptive to peoples’ lives, and that’s sad. It’s tough when you see good people leave the organization because of a merger or acquisition. You only hope that a company involved in a merger or acquisition will treat people properly, and do what’s right for the staff and the business simultaneously. And with the constraints placed upon us by the FTC, I know we did everything we could to live up to those ideals.

Beyond that, as a manager, it’s my job to be compassionate and caring, while understanding that certain financial and performance goals must be met for the organization to remain viable. The culture I’m trying to build is a culture that balances the needs of the individual and the needs of the corporation. If I do that successfully, we’ll succeed.

Moreland: What are some of the other key elements of a healthy corporate culture?

Burt: First and foremost, we need to be honest with each other both inside and outside the organization. That’s the first step in building a healthy organization. We must be receptive to what people are saying internally and externally, and help them find solutions to their problems. If we do that we’ll earn peoples’ trust, which is critical to our company’s success. For us to grow as a company, people have to trust that we’ll do the right thing.

Moreland: Where do you currently stand in that process?

Burt: Because of the FTC’s Hold Separate Order we weren’t able to finalize our team until recently, although we still have a few positions to fill. But in a short period of time we have put together a great team and committed tremendous resources to this industry. For instance, we have nearly doubled our sales, technical and marketing staffs to demonstrate to our customers a commitment to our brands and to them. The end result of these moves is a trust and attitude from this team that is wonderfully contagious. They have seen the steps we’re taking, and they’re responding with great enthusiasm.

Moreland: What are your short- and long-term goals now that the transaction is complete?

Burt: Our short-term goal is to show our customers that we’re a new Bayer ES, and to provide our customers with a seamless transition as we continue to move forward with the integration of the two companies. In the long-term we want to build a "profit/value" relationship with our customers. We want to bring them new product technology and innovative application methods designed to help them enhance their productivity and profitability. And there’s ample evidence that this is underway.

Moreland: Just prior to the acquisition of Aventis by Bayer, Aventis purchased the Maxforce business from Clorox. What are your plans for the Maxforce line?

Burt: We plan to introduce several new products as part of our "passive treatment line," which includes Maxforce. We recently introduced a new granular fly bait containing imidacloprid, the active ingredient in Premise. We think it will help pest management professionals break into several new markets including health-care facilities and food plants. There have been very few products introduced in these markets, so we think there’s a huge opportunity to grow our market share with Maxforce Granular Fly Bait.

The Maxforce Tick Management System, introduced on a very limited basis in 2002, was met with universal approval as a unique method of reducing the threat of Lyme disease. We are waiting for EPA registration to roll it out nationally in 2004. We also plan to introduce Chipco® TopChoice,™ a granular fire ant product giving 12 months fire ant control from a single treatment.

Moreland: Can you offer any additional insights about Bayer’s "passive treatment" initiative? Why did the company select that terminology?

Burt: All of the products in our "passive treatment" line will fall under the Maxforce brand umbrella or will be products that control insects in non-traditional ways. The products are designed to offer reduced pesticide exposure to humans and non-target organisms, as well as discreet placement. This whole "passive treatment" area is a market we’re going to invest more dollars in the future. We believe if we can control insects without contact with insecticides, that’s good for both Bayer and the industry. Towards that end, we’ll be rolling our Pre-Empt line into the Maxforce product line in the near future.

Moreland: Earlier you mentioned that Bayer is developing a fire ant product for the pest control industry. What’s the thinking behind that decision? Isn’t fire ant control a fairly small niche market?

Burt: It’s not a huge market, but it is growing. We’ve done some market research and what we’ve learned is more and more pest control companies are getting involved in lawn care, and fire ant control is an important part of that business. Our research indicates that Top-Choice will control fire ants for 12 months with a single application, so it’s the type of service pest management professionals should be able to incorporate into their existing business as an add-on service without too much difficulty. We’re in the process of trying to build a business model for the product that pest management professionals will find attractive.

So, you’re right that it’s a niche market. But isn’t that what industry leaders do? Create new and better products that offer our customers more ways to solve problems, regardless of the size of the opportunity. This market is destined to be much, much larger as we – with pest management professionals – develop the category.

Moreland: I understand Bayer also will be introducing a new Maxforce gel bait in the near future. What prompted the company to consider changing the product’s formulation?

Burt: The new formula will address the bait aversion situation that has developed in recent years with gel baits (see the January PCT cover story). It’s still a relatively small problem, but we wanted to address it sooner rather than later. You wouldn’t believe how much time and effort we’ve put into creating a new formulation to address the bait aversion issue. We’ve spent a great deal of money, but we think we’ve got it right. In fact, we’ve got research on a dozen different new formulations that will serve us well in the future.

Here again, one of the important illustrations of leadership is stepping up to the plate and doing something when a problem or potential problem develops, and I think we’ve done that in this case. We’ll see if the pest control industry agrees when the product is introduced.

Moreland: With the merger of two such large product lines, there’s been some concern expressed by PCOs about the future of various niche products in the combined Bayer/Aventis portfolio. In particular, pest management professionals are wondering about the company’s plans for its dust products. Will you be divesting any of them?

Burt: As you know, we have Tempo, Drione and DeltaDust in our product line as a result of the sale of Aventis to Bayer ES, and although there’s some overlap, we think it makes sense to keep all three products. We view Tempo 1% Dust as a valuable flying and stinging insect control product, a replacement for Ficam, which had incredible product loyalty among PMPs. In addition, we hope to have DeltaDust labeled for food handling use by the time this article is published, so we’re continuing to invest in our dust line.

There are rumors we’re getting rid of this or that product, but they’re not true. Ultimately, we may divest some products, but we’re going to take our time. We’re going to start off by listening to our customers to learn what they value most about our product line. Then we’ll make some decisions about the breadth of the line.

Moreland: What about Suspend?

Burt: Suspend is one of our key products, as is Tempo. Both products feature synthetic pyrethroids as their active ingredient, so it represents a bit of a challenge for us from a marketing perspective. You’ll see us continuing to support both products. What’s interesting about the two products is Suspend has a very strong following in certain parts of the country like New York and New Jersey, while Tempo is popular in other parts of the country like Georgia and South Carolina. We believe it’s good business to continue to offer both products, serving the needs of our customer base in various parts of the country.

Moreland: Obviously, one of the most important market segments for any basic manufacturer is the termite market. How does Bayer plan to approach this market moving forward, particularly in the wake of the loss of Termidor from its portfolio?

Burt: Five months ago our team took an honest and critical look at our position in the termite market, and some of the decisions we made in recent years. Based on this critique, we have launched a bevy of new initiatives aimed at eliminating misperceptions about Premise, building our technical story and creating a framework for our reps to be aggressive and proactive rather than defensive. For instance, our field research team is uncovering evidence of an impressive retreat story. This more pro-active approach is the best decision we ever made. Our sales force is excited about selling Premise again.

Moreland: What can you tell our readers about the planned brand extensions for Premise?

Burt: The brand extensions that we’re creating for Premise are absolutely important for the long-range success of Bayer and our customers. These unique innovations offer PMPs an opportunity to expand their product offerings to meet the specific needs of customers. More and more PMPs are using the technology to attract and retain business. For instance, if a customer has an isolated termite problem in a home and they want the PMP to do something immediately, he or she can offer to treat the area with Premise Gel and then come back a few days later to conduct a thorough inspection or apply a comprehensive termite treatment. With an anticipated launch of Premise granules and Premise foam in the next year, our customers will have two more arrows in their quiver of solutions for customer problems.

Moreland: How do you feel about the application of non-repellent termiticides like Premise around the perimeter of structures to control termites? By all accounts, it’s a controversial subject.

Burt: The pest control industry is going to have to be very careful when it comes to perimeter termiticide applications because it could have a devastating impact on pricing. The industry is going to have to figure out a way to retain the value of its service in the face of dramatic downward economic pressure. And how do we do that? It’s important for pest control companies to think about ways they can add value to their termite jobs, so they don’t go back to selling them for $300 a treatment. PMPs are going to be competing with guys who are selling their service at that price, so they have to figure out a way to add value to the service. One way to do that, we believe, is through products like Premise Gel and other termite control tools that illustrate you’re doing more for the money than simply trenching a home and applying a liquid termiticide. We’ve seen how gels have transformed the ant and roach control markets in the past decade. We believe the same thing is going to happen in the termite market. In fact, we already have seen examples of Premise gel solidifying customers that otherwise might opt out of a full treatment, and getting 100 percent control.

Perimeter treatments are going to put incredible pressure on the current termite control business model, so it’s in the industry’s best interest to figure out how to offer a range of termite control options (i.e., baits, liquids, targeted applications, etc.), while protecting the pricing structure of each of those services.

Moreland: One final question. Do you think the "merger mania" that has struck the pest management industry is over or are there more on the horizon?

Burt: I think there are probably one or two mergers left in the pest control industry. Ultimately, I think you’re going to end up with four major players serving the pest control industry, each with approximately a 20% market share and everyone else with the remaining 20%. While some may be concerned about that, I think it’s good for the business long-term. If you’ve got four players that can invest serious amounts of cash in both the specialty and agricultural markets, the pest control industry will be fine.