Going Global

Editor’s Note: When Dick Holzschu first entered the pest control industry, Richard Nixon was president, the Vietnam War was escalating, and chlordane dominated the termiticide marketplace, attracting an astounding 80% market share. Times have changed. Today, Richard Nixon is dead and buried, the country is at peace, and the public’s love affair with highly persistent pesticides is a distant memory.

The pest control industry is very different today than it was when I started,” Dick Holzschu observed prior to his recent retirement from Dow AgroSciences. “It’s amazing the pace of change that has occurred. Four years ago, who would have thought PCOs would be using baits to control termites? Today more than ever, PCOs have an exciting array of new tools at their disposal. As a result, the industry is more professional today and provides a higher level of service than at any time in its history.”

Impressive words, but such changes wouldn’t have been possible without the product contributions of a handful of basic manufacturers serving the pest control industry. To remain competitive, companies like Dow AgroSciences have had to develop new products that are not only effective, but meet stringent environmental standards and address the public’s growing concerns about pesticides. And such pressure to innovate isn’t likely to change any time soon.

All of the major manufacturers are jockeying for position in an increasingly competitive global marketplace, fine tuning their organizations, plowing millions of dollars into research and development, and exploring new markets, all in an attempt to stay one step ahead of the competition.

In a career that spans nearly four decades, Dick Holzschu has had a ringside seat throughout this dynamic era of change, playing a key role in the growth of Dow AgroSciences and taking justifiable pride in the maturation of the industry. PCT magazine recently sat down with Holzschu and the next generation of industry leaders at Dow AgroSciences – Stan Howell, global business leader, urban pest control, and Reid Sprenkel, general manager, U.S. professional pest management – to learn more about their plans for the company in the years ahead.

During the two-hour interview at the company’s sprawling corporate headquarters in Indianapolis, Ind., the three company executives shared their observations on a wide range of subjects, from the ever-changing dynamics of the “global” pesticide market to the company’s ongoing defense of Dursban insecticide (chlor-pyrifos). We think you’ll find their comments not only interesting, but reflective of the rapid pace of change that is occurring throughout the structural pest control industry.

PCT: The chemical business at the basic manufacturer level has changed quite dramatically during the past 20 years. Increasingly, it’s becoming a global business. What impact is this “globalization” likely to have on the pest control industry?

Howell: I don’t believe U.S. PCOs are going to see a dramatic change in the marketplace as a result of the globalization of the chemical industry. The most obvious changes will be some consolidation at the basic manufacturer level in the next few years, an increase in “generic” products entering the marketplace, and greater emphasis on biotechnology. Needless to say, Dow AgroSciences plans to be a major player on a global basis in the coming century, and we continue to be committed to the structural pest control industry, so you’re not likely to see significant changes on the front lines of our business. We’ll continue to play a very visible role in the U.S. structural pest control industry, but we’ll also be more involved in growing markets in Japan, Australia and Europe.

PCT: Has this globalization of the marketplace played a role in the recent restructuring of Dow AgroSciences?

Howell: Yes. While the chemical business has become more global in nature, we’ve attempted to maintain a close relationship with our key markets by changing from an “area structure” to “local business unit” structure. We’ve created 23 local business units (LBUs) around the world, including one for the urban pest control business in the United States. Each LBU is headed by a manager who is responsible for meeting the needs and addressing the concerns of his or her particular marketplace. Reid Sprenkel is the LBU manager for the professional pest management business. Such a structure allows us to take advantage of the significant financial resources and research capabilities of a global company, while remaining in touch with our customers at the local level, resulting in a more customer-focused corporate culture.

Sprenkel: The local business unit is really the foundation of our new structure because it keeps the company decentralized and our particular business in daily contact with the marketplace, enabling us to identify the products and services needed by the marketplace.

PCT: Will your customers notice any difference as a result of this restructuring?

Howell: It should be practically invisible to our customers if the restructuring works the way it’s supposed to work because the one group throughout the company that remains unchanged is the field service organization. So the faces our customers see will be the same, it’s just that the overall organization will be more market-focused.

PCT: What impact has the Internet played in the globalization of the industry?

Howell: I think it has had a significant impact. The transfer of information from one country to another has created all kinds of new opportunities for the pest control industry. What researchers and PCOs are doing in the United States is becoming known in other parts of the world almost instantaneously and the same is true for other countries. I know that Dow AgroSciences as a company has benefited greatly from this exchange of information, both internally and externally. More than any time in the industry’s history, the work that is being done in England or Australia can have an impact on what’s being done in the United States. In fact, some of the recent improvements and enhancements to the Sentricon Colony Elimination System have actually come from research that was done outside the U.S. So, there’s no question the world is becoming smaller and smaller every day from an information transfer perspective.

PCT: Speaking of Sentricon, when Dow AgroSciences launched the product several years ago, how concerned were you that it would undermine the market position of one of your other core products, Dursban TC? Was there any opposition to the product launch internally?

Sprenkel: As with any organization, there was much debate over what, when and how we should bring Sentricon to market, if at all. Ultimately, we decided to proceed for two main reasons. First, we didn’t feel we should sit on an innovative new technology simply because we already had the leading termiticide in our product portfolio. We’d rather displace ourselves through innovation than wait for our competitor to do so. Second, when evaluating the extensive lab and field data, it was obvious Sentricon represented a better way of protecting structures than traditional means.

Holzschu: We didn’t want to do what some large companies have done in the past and that is to suppress a new technology to protect an existing technology. There was a lot of debate internally, but it had more to do with timing and changing the mindset of PCOs rather than any risk Sentricon posed to Dursban TC. We eventually made converts of everyone in the group, and in retrospect I think it has been the right decision.

PCT: Obviously, chlorpyrifos (trade name Dursban) is one of Dow AgroSciences’ most important products from a global perspective. However, it’s a chemistry that has come under increasing scrutiny by the regulatory community and various special interest groups in the United States and throughout the world.

As a corporation, do you plan to continue to defend this chemistry in the months and years ahead, and will your strategy for defending the product be different in the United States than the rest of the world?

Howell: I don’t think the level of support and interest in this chemical is any different in the U.S. than it is in the rest of the world. It continues to be a very important molecule for Dow AgroSciences and urban pest markets. We have every intention of supporting those formulations that we believe are important to the markets we serve. We feel very strongly about the science behind chlorpyrifos and confident it will remain an important tool for our industry.

Sprenkel: I think there’s been some concern relative to the entry of Sentricon into the marketplace and what that says about our support of chlorpyrifos, but the two are totally unrelated. What we’re seeing with hexaflumuron (the active ingredient used in Sentricon) and the whole termite baiting concept is a significant improvement in the way to protect structures. We struggled internally about how to bring Sentricon to market, realizing it was going to displace our most prized jewel, chlorpyrifos, eventually. It was still apparent to us that it was the right thing to do because Sentricon gives better protection to the property owner, resulting in a higher quality pest management service. So we really spent more time talking about how to best protect structures and not the regulatory and environmental issues surrounding chlorpyrifos. In fact, we’re still very supportive of barrier treatments and related applications with Dursban and Equity for protecting structures from a variety of pests, including termites.

Holzschu: Obviously, we’ve spent a lot of money supporting chlorpyrifos from attacks by the environmental community and we’re not going to quit. We’ll continue to defend chlorpyrifos until hell freezes over. It’s still a very important resource for the pest control industry and we know there is still substantial demand for the product, so we intend to keep it in our portfolio.

PCT: Is chlorpyrifos encountering the same kind of opposition worldwide from environmental organizations or is this a U.S. phenomenon?

Howell: Well, it’s very difficult to generalize because every country is different. Some have more stringent environmental standards than the U.S. and some have less stringent standards. But I think the United States is the country everybody watches, so if action is taken against chlorpyrifos in the U.S., then other countries might consider taking similar action.

PCT: Returning to Sentricon, how do you feel about the over-the-counter termite bait (Terminate) that was recently introduced to the marketplace?

Holzschu: Imitation is the sincerest form of flattery. I think people are always going to try to capitalize on a good idea, so it didn’t surprise me that an over-the-counter bait was developed. When we entered the market we knew we were creating a new product category, so it was going to be our job to differentiate our product from all those that followed if we wanted to remain competitive and protect our market share. Ultimately, I think the retail product is going to stimulate demand for Sentricon because I think it’s unrealistic to expect the homeowner to be dedicated to protecting their property from termites to the extent that a pest management professional is going to be dedicated to that process.

PCT: What sort of short- and long-term impact do you see over-the-counter baits having on the pest control industry?

Sprenkel: I think the greatest short-term impact is the distraction that it creates and the rumors that result concerning product performance. From the beginning, however, it has been our contention that performance ultimately wins out. While there will always be look-a-like products or other compounds that come along that make the same or similar claims, ultimately it’s the performance factor that a PCO or a homeowner is going to base his or her decision on. So our positioning for Sentricon hasn’t changed and it’s not going to change.

Holzschu: It should be obvious from the financial resources and effort we put into Sentricon and the Prolinx Information Management System that we are serious about ensuring that Sentricon is used properly and used properly every time. As you’ll recall, when we first introduced the product it was in a very limited, managed rollout. Our focus was not on the number of structures we were going to treat that first year, but in establishing performance success. I believe we’ve succeeded in that goal.

LEADERSHIP CHANGES AT DOW AGROSCIENCES

With Dick Holzschu’s recent retirement, Dow AgroSciences announced several key management changes. Stan Howell, a former district sales manager for the pest control industry from 1986-1988, has been named global business leader for the urban pest control market. In his new role, Howell will be responsible for managing the company’s urban pest control product portfolio throughout the United States and the world.

Howell previously served as general manager of the company’s Midwest agricultural operations from 1995-1998. “After being involved in some other markets in recent years, I’m pleased to be back in the pest control industry,” Howell said. “It’s clear things have changed since I was involved in the late ‘80s. The market for general pest control products is much more fragmented now than in the past and the termiticide market has undergone dramatic changes.”

Reid Sprenkel, a 17-year veteran with Dow AgroSciences, is general manager for the U.S. professional pest management business. In his new position, Sprenkel will oversee the U.S. business operations, interact with distributors and PCOs to meet the market needs of the structural pest control industry in the United States, as well as provide leadership for the company’s marketing and sales force. “I’ll also serve as liaison between the U.S. industry and global management and the board at Dow AgroSciences,” he said. “It’s an exciting opportunity.”

How do you explain the industry’s paranoia about over-the-counter products destroying the industry’s customer base, particularly as it relates to the lucrative termite market?

Sprenkel: I wouldn’t describe it as paranoia, but they’re clearly concerned.

Obviously, the do-it-yourself population has grown considerably over the last 10 to 20 years with the advent of the Home Depots and other stores that promote do-it-yourself products. I don’t think we as an industry have a clear handle on how many people attempt to do it themselves first before ultimately calling a pest control professional. But I’m sure it’s a considerable number, which means there’s still a significant customer base to be serviced.

I also think people are more likely to use do-it-yourself products for general pest control rather than termite control. After all, their home is their most important investment. And homeowners don’t have the expertise to adequately protect that investment from termites. I believe there’s still great opportunity for growth in the termite and general pest control market if the service is marketed properly. We are very supportive and have contributed significantly to the Industry Awareness Council and NPCA’s efforts to promote the industry.

PCT: Could you see the day where Dow AgroSciences entered the market with an over-the-counter termite bait, perhaps selling Sentricon directly to the consumer?

Sprenkel: That’s one of a number of different options that could take place over the years, depending on how market conditions change. Currently, however, we don’t have any plans to enter the over-the-counter market. We don’t want to do anything that would be disruptive to the professional side of our business because it’s still our contention that it’s the professional who offers the best protection for homeowners. It’s the professional who is going to ensure the product is used properly and applied according to our recommendations. That’s the best means of maintaining the performance and integrity of Sentricon. The homeowner simply isn’t capable of providing the same service.

PCT: What about future product developments? What are your plans?

Howell: We’re constantly striving to develop new products and we anticipate making several new product introductions in the years ahead, as well as enhancing our current formulations, although I can’t get into specifics at this time. Obviously, the golden ring is biotech, but most of that work is being done on the ag side right now. Once those products are introduced in the ag market, however, you can expect to see them in the structural pest control industry and other specialty markets. Nonetheless, I think it’s going to be a minimum of five years before you see sophisticated biotech products in the pest control industry.

PCT: In addition to the movement toward biotechnology, what other trends do you see impacting the pest control industry in the years ahead?

Howell: I think there are three primary trends that will impact PCOs in the future – biotechnology, the introduction of more and more “generic” products into the marketplace, and industry consolidation. And not just consolidation at the basic manufacturer level, but at the distributor and PCO level as well. We believe there’s going to be fewer pest control operators, fewer distributors, and fewer manufacturers serving the pest control industry in the next century. Even with this trend toward consolidation, however, the future looks very bright for the professional pest control industry. It’s an exciting time to be involved in the professional pest management business and Dow AgroSciences is committed to the marketplace for the long run. We’re confident we’ll continue to be a major contributor to the industry well into the next century.

SUCCEEDING IN THE 21st CENTURY

With Dick Holzschu’s retirement earlier this year, the pest control industry lost one of its most outspoken and influential figures.

However, before devoting his days to such diverse interests as golf, painting and fishing, we asked the 36-year industry veteran to share his insights about the skills required to be a successful PCO in the next century. Here’s what he said:

“To be successful in the future, PCOs will have to be very comfortable with change, because the pace of change is accelerating every day. If you don’t embrace change, you won’t have a chance in the 21st century.

“Successful PCOs will also need to be well-versed and active in the political process,” Holzschu added.

“The pest control industry will continue to come under attack, so regardless if you’re a pest control operator, a distributor, or a basic manufacturer, you’re going to need to build relationships at all levels of government.

“You’re also going to have to understand how the media works. Those PCOs who are skilled at using the media to promote their companies and positively impact public perceptions about the industry will be more successful than those who are not.

“In short, PCOs are going to have to embrace change, get involved in the political process, understand how the media works, and work with various coalitions to try to influence regulators. In addition, they’re going to need to be receptive to the new technology that is going to be introduced to the marketplace.

“It’s going to be a lot of hard work, but if you do those things, you’ll be successful.”