A Conversation With Bill Baxter

Editor’s Note: No segment of the pest management industry has undergone more dramatic changes in recent years than basic manufacturing, where market consolidation, static sales, increased regulatory pressure and the high cost of research and development have prompted a growing number of companies to take a critical look at the long-term viability of serving niche markets like structural pest control. Despite these concerns, however, BASF Corporation has embarked on an aggressive growth strategy designed to extend its market reach into the pest management industry. The man selected to lead BASF’s pest control market initiative is Bill Baxter, a graduate of the University of Nebraska who serves as business manager for Turf, Ornamental & Pest Control for the company’s Specialty Products Department based in Research Triangle Park, N.C. Baxter recently sat down with PCT Publisher Dan Moreland to discuss the company’s plans for the future.

PCT: Why did BASF decide to invest in the pest management industry when chemical sales in this market haven’t been particularly robust in recent years, prompting some companies to consider reducing their market presence?

Baxter: Despite the current challenges being faced by the pest management industry we believe there’s significant opportunity for growth in this market. There’s a real need and a real desire on the part of the public to protect their home because for most people it’s their number one investment. And in light of recent developments throughout the world, I believe people are even more willing to invest in their homes because they have a greater appreciation for the role home and family play in enhancing the quality of their life. Just look at the growth of Home Depot and Lowe’s where business is thriving. That’s not a coincidence. I’m convinced that home and family are increasingly important to the public, so there’s an opportunity for our industry to provide consumers with the services they need to protect their number one investment, while enhancing the quality of their lives. Don’t forget, we also play a critical role in protecting the public’s health. If we tell that story effectively, we believe there’s ample opportunity for growth in this industry.

PCT: BASF is a global chemical supplier based in Germany with annual sales of $29 billion. What sort of direction have you gotten from the parent company as it relates to its plans for the U.S. pest control market?

Baxter: Management has said, “Profits are important, but do what you have to do to make inroads into the market. Learn as much as you can about the pest control industry. Find out what the PCO wants and needs in a product provider and aggressively address those needs. And, perhaps most important of all, embrace change because that’s the only way we’re going to have long-term, sustainable growth in this market, just like any market we serve.”

PCT: In reading BASF’s Annual Report, the word “verbund” is frequently mentioned as a core value of the company. What does it mean?

Baxter: It’s a phrase BASF has adopted that means to maximize one’s market strength through integration. Verbund allows us to take advantage of the synergies that exist within the various business units of our company. It allows us to take the waste out of the system. It allows us to develop and manufacture products more efficiently. Ultimately, verbund benefits the consumer by creating synergies within our organization that enable BASF to bring products to market faster. We operate in 139 different countries, so it’s important that we are able to communicate effectively throughout the company. There may be something we’re doing in Europe today, for example, that would have an excellent application for the pest control industry in the United States. That won’t happen unless we communicate effectively and take advantage of the inherent synergies that exist within our company, but in the past haven’t always been fully realized. 

PCT: In addition to verbund, what else do you think is unique about BASF’s corporate culture?

Baxter: I’m convinced and our company is convinced that the people working for BASF ultimately will determine our success or failure. It’s not just about the chemistry. The chemistry that is currently available in the pest control marketplace is very good. And the chemistry that’s coming through the pipeline is even better, but the gap isn’t so significant that people no longer make a difference. In order to be successful, we’ve got to bring more than just quality chemistry to the marketplace. There are a lot of companies providing this market with quality insecticides. We need to offer our customers more effective business processes, value-added services, product stewardship programs and – perhaps most important of all – improved profitability. Those are the things that are going to make or break the business. In today’s business climate, you’ve got to bring more than simply chemistry to the table.

PCT: How are you identifying those business opportunities and value-added services?

Baxter: We’re asking our people to think outside the box. We want them to interact with their customers and bring any product ideas or value-added services to management. In order to be a market leader you need to involve your people in the product development process, even if they make mistakes or every idea isn’t appropriate for the market. Most pest management professionals are true entrepreneurs. They are people who have started their own businesses and grown their own businesses. It’s the same kind of culture we’re trying to create at BASF. In order for businesses to grow, you need to have an entrepreneurial spirit. Otherwise, you become stale.

PCT: Do you have any examples of business processes or systems that are in the early stages of development that are specifically targeted at the pest control industry?

Baxter: We are currently offering online certification courses for Subterfuge® termite bait and Phantom® termiticide-insecticide (see story on page 103). The training is designed to provide an overview of the products, as well as educate pest management professionals about proper application techniques. Additional modules are currently in development that will enhance the pest management professional’s educational experience. We believe it’s this kind of business initiative that will add value to our relationship with PCOs because, after all, people are the pest management professional’s most valuable asset. We’re very excited about this initiative. We believe there’s a huge opportunity for online training in the industry.

PCT: Given the fact BASF is a relative newcomer to the pest control industry, what’s the biggest challenge currently facing the company in this market?

Baxter: A year ago, we had one person, a market development manager, working in the pest control industry. Today, we have more than 20 people specifically dedicated to the pest control business. One of our biggest challenges is fully understanding the business culture of the pest control industry, although we’re learning as we go. One of the ways we’ve attempted to gain a better understanding of the industry is by partnering with the National Pest Management Association on a strategic business initiative earlier this year. The NPMA invited more than 50 prominent pest management professionals, including PCOs, distributors and regulatory officials to an industry strategic planning session to discuss the future of the industry. One of the goals of that meeting was to communicate to those in attendance that we were serious about our commitment to this industry, so we wanted to do something significant that would benefit the pest control industry as a whole. And the feedback we’ve gotten from that event is the industry is excited about having a new player in the industry, a new player that is clearly committed to the long-term growth and development of the pest control market. 

PCT: What do you think is the cause of that excitement for PCOs?
Baxter: First, as a result of consolidation and recent regulatory action, pest management professionals have fewer product choices today than they did in the past and they don’t like that. Second, it’s been a while since a new player has come into the pest control marketplace. If you look at the barriers of entry to the industry today, it’s very substantial and there aren’t a lot of companies that can afford the investment. BASF, as a worldwide chemical supplier, is one of those companies. Third, I think PCOs are excited about the prospect of having a new manufacturer that is interested in investing in their industry. Now it’s up to us to walk the walk and not just talk the talk.

PCT: How does BASF as a company plan to walk the walk?

Baxter: As mentioned previously, we’re going to invest in business systems and processes that will benefit the pest management professional, but we’re also going to invest in research and development. As a company, BASF has a goal of introducing 15 new active ingredients in the next five years, and six of those have been specifically designated for specialty uses. We also have a promising general use insecticide in the pipeline, so we’re in this business for the long haul. As a result of the acquisition of American Cyanamid in 2000, we’ve been able to keep our specialty chemical pipeline very full, but the challenge is not just to keep the R&D pipeline full, but the business tool pipeline full as well. We must constantly ask ourselves, “What are we bringing to customers beyond chemistry that will add value to their business?” That’s the real challenge you see all the major manufacturers struggling with because they know it’s ultimately the customer and business relationships that are important, not necessarily the chemistry.

PCT: Given the rapidly changing business landscape being experienced by basic manufacturers, what’s the biggest challenge currently facing BASF?

Baxter: As a brand new player, our biggest challenge is bringing two new products – Subterfuge termite bait and Phantom termiticide-insecticide – to market at once. In order to be successful, you have to have the appropriate focus on both, which can be a challenge, particularly with so many new people on board, but I believe we’re up to the task. Our second challenge is further developing our business relationships with distribution and the PCO community.

PCT: How would you characterize BASF’s current relationship with distributors?

Baxter: Our business model is very dependent on distribution and we want to work hand-in-hand with them. We weren’t even in the pest control business a year ago, so it’s very important we develop a strong relationship with distribution. They already have an infrastructure in place to interact with our customers and they bring real value to the marketplace. Ultimately, the distributor offers peace of mind to BASF, offering the ability to make products available to PCOs at the right time and in the right place without significantly adding to the cost of our products.

PCT: One of the other challenges you face as a company is a limited product line. As mentioned previously, BASF currently has two termite products on the market, but no general pest control products available to PCOs. How significant a liability is that for BASF?

Baxter: Ideally, we would like to have a comprehensive product line from day one, but Phantom termiticide-insecticide does have ants on the label, so we do have some general use applications for at least one of our products. And we’ll be adding a number of new products in the years ahead, so there’s not a doubt in my mind that we’ll have a comprehensive product line in fairly short order. At the moment, our core focus is on termites, but that doesn’t mean behind the scenes we’re not working on additional products and active ingredients that will broaden our product line.

PCT: How aggressive is BASF going to be in developing strategic partnerships in the pest management industry, a trend that has picked up momentum in recent years. Will BASF be involved in any strategic partnerships in the short- and long-term?

Baxter: We’re having discussions with many different strategic partners, but any agreement we enter into with another company must be a win-win. We’re not going to develop strategic alliances just to develop strategic alliances. At this stage, we’re exploring many different avenues, but I’m not ready to announce anything at the moment. They’re just in the preliminary talking stages. Let’s just say we’re always looking for and open to new opportunities.

PCT: Since you got a late start on this year’s termite season, what are your expectations for BASF’s termite control product line in 2002, particularly Phantom?

Baxter: We expended a good deal of energy and resources in setting up 491 EUPs throughout the United States for Phantom. We went to PCOs across the country and said, “Here’s the product. Use it as you would any termite control product and let us know how it performs.” We want real-world results and that’s what we got. This year, our goal is to get Phantom in the hands of as many PCOs as possible and get them to try the product, positioning us for rapid growth in 2003. I’d like to grab double-digit market share the first year, but we need to be realistic. We understand that PCOs must first feel comfortable with a new product and how it fits their business needs. With Phantom we want to build off of our EUP experience and achieve rapid adoption of the product in the next five years. The initial response to Phantom has been very good. People are willing to try it and they seem to like its attributes. The PCOs and researchers we’ve been talking to seem to think there is going to continue to be a shift to non-repellent products, so that puts us in a good market position. We’re going to be assertive and aggressive and build momentum off this year’s results.

PCT: What about Subterfuge? The product had some false starts in the early stages of its development when American Cyanamid owned the compound. In fact, it was briefly introduced and then taken off the market in 1997, much to the chagrin of many in the industry. As a result of that false start did BASF ever consider changing the name of the product when re-launching it this past year?

Baxter: Yes we did, but we felt the Subterfuge name had value. The bait matrix in the old Subterfuge product was the issue. Once the formulation issues were corrected, we didn’t have any concerns about introducing a high-performance bait with excellent recruitment and control characteristics. While I’m sure pulling the product from the market was a painful decision at the time, it was the right decision for the market. We’re confident Subterfuge will perform very well for pest management professionals.

PCT: How do you plan to differentiate this product from the other baits currently on the market?

Baxter: One of the key benefits of the product is it’s live in the ground from day one. It can be used as a stand-alone product or in conjunction with a liquid termiticide. Obviously, we believe we offer pest management professionals an effective liquid termiticide in Phantom, but they can use any liquid on the market as long as they follow the appropriate label directions. We felt it was critical to create a product that offered additional benefits from existing product technology. In our market research we learned that the PCO wanted control of that customer. They wanted to be independent of the company selling them the product and they wanted a product that would help them maximize their profits and decrease their costs. We believe our product addresses those issues. We feel it gives the PCO a differentiating alternative, which is a key part of our strategy.

PCT: Since BASF is so new to the industry, what would you like PCOs to take away most from this interview?

Baxter: We simply want the industry to give us a chance to illustrate our commitment to the marketplace. We’ve got new products. We’ve got new people. We’re going to make mistakes, but we’re hungry to learn. We’re going to be asking a lot of questions and we don’t profess to be the experts, but we’re in this business for the long run. We want to help solve the PCO’s business needs.