This traditional global pharmaceuticals giant has unprecedented growth in Brazil. Reuben Ford analyzes the market catalysts of an emerging economy.
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Founded 150 years ago in Germany, Bayer is one of the oldest and strongest brands in health care, science and agricultural chemicals.
Operations in Brazil began 117 years ago. Today, the country represents the fifth largest and one of the fastest growing markets for the company.
Last year alone over $63 million was invested in projects and infrastructure in Brazil, where Bayer’s annual growth rate is currently 15 percent compared to 5 percent worldwide.
“The Brazilian market is heating up – more people have more disposable income to buy our pharmaceuticals and goods that contain our products,” says Paulo Pereira, Director of Corporate Communications.
More than Medicine
The Bayer logo and brand are instantly recognizable to most from household medicines such as pain-killers, anti-inflammatories and cold and flu remedies. However, Bayer operates in three divisions: Bayer HealthCare, Bayer Crop-Science and Bayer MaterialScience.
Prescription medicine is manufactured under the Bayer Health Care line. “Health-Care is responsible for standard prescription pharmaceuticals, diabetes medicine, radiology, consumer care (vitamins, supplements and non-prescription medicines) and animal care lines,” Pereira explains.
Bayer produces medicines for pets (cats and dogs) and agricultural lines for cattle (milk and meat farming), pigs and chickens.
In Brazil, Bayer’s biggest business is CropScience. “Agriculture in Brazil is extremely important and in contrast to world figures, the majority of our revenue is generated by agrobusiness in the areas of seeds, crop protection and non-agricultural pest control,” Pereira says.
In 2012, 56 percent of revenue in Brazil came from Bayer CropScience, 29 percent from HealthCare and 14 percent from MaterialScience.
People also buy Bayer without immediate recognition of the brand. The Bayer MaterialScience division concentrates on high-performance material sales of products such as polycarbonates and polyurethanes, present in foams, plastics and adhesives.
“Household appliances, manufactured by brands such as Whirlpool and Brastemp use our products. Thermal insulation mechanisms in refrigerators, and filters in other appliances are made by Bayer,” Pereira explains. The company also produces foam for furniture and car seats (Volkswagen, GM and Ford) and mattresses.
“The polycarbonate roof of the new soccer stadium in Brasília, built for the upcoming World Cup Competition in Brazil, was provided by Bayer – the qualities of polycarbonate mean that the pitch is protected from the sun without getting too hot,” he adds.
In Brazil, the Bayer Group has important facilities for each of the three divisions. In São Paulo’s Socorro neighborhood is home to the company’s headquarters and CAFIASPIRANA® factory.
Also in São Paulo, in Santo Amaro, Bayer manufactures hormone replacement therapy drugs, and oral contraceptives. “The factory is Bayer’s second largest, after Germany, for this kind of hormone treatment,” Pereira says. Bayer produces the leading contraceptive pills in the market and the factory exports to 27 countries in Latin America and Asia.
In Belford Roxo, in Rio de Janeiro, Bayer manufactures products for the CropScience and MaterialScience sectors as well as animal medicines. “Research for new medicines follows three steps. Starting with molecular studies and patent research for efficiency, the next stage is sample testing. Provided phases one and two are successes, the product can be submitted for regulation,” Pereira explains.
An important focus of investment for Bayer in Brazil has been the refurbishment and expansion of laboratories specialized in possible side effects. Pereira explains: “When patients experience any form of irritation in reaction to medicines, international regulations require this to be monitored and registered in a global database. Products are not just launched and sold without post-sales studies.”
A new vigilance laboratory has been constructed at Bayer’s Socorro location, one of four such testing plants worldwide (Bayer has one in the United States and two in Germany).
“50 percent of all issues are handled in Brazil – that doesn’t mean that 50 percent of all customer reactions are originate in Brazil – it shows that the laboratory is an important support structure for the Bayer Group worldwide,” Pereira says.
Investment in Brazilian infrastructure reached $63 million in 2012 and in addition to the laboratories involved expanding Bayer’s industrial complex, which includes a hairdresser, drycleaners, chocolate store, car wash and restaurant for employees.
Bayer has 111,000 employees worldwide, 4,500 in Brazil. “We prioritize employee comfort and aim to provide staff with time-saving services on-site,” Pereira adds.
Bayer also invested $2.5 million in the construction of a footbridge connecting the Socorro facility to the nearest train station in São Paulo’s Santo Amaro district. The bridge, which is a gift to São Paulo, is expected to reduce carbon gas emissions by 300 tons as well as dramatically reduce traffic congestion in the region.
Research and Reinvestment
New products are decided and planned centrally by Bayer in Germany. “Research for new medicines follows three steps, starting with molecular studies and patent research for efficiency,” Pereira explains.
Last year the Bayer Group reported annual revenue of $51.7 billion and Bayer Brazil $2.8 billion. The company invested $3.9 billion in research and development, $2.6 billion of this was for HealthCare. The figures correspond to 14 percent of revenue reinvestment in the division.
The Bayer Group employs 12,000 research staff, 7,500 in the pharmaceutical sector.
Bayer is among the top ten global pharmaceutical companies in the world. Pereira explains, however, that the raking varies according to division: “In material science and agrobusiness we are first and second in the market respectively – the medicine manufacture industry is extremely competitive.”
There are also national hurdles for Bayer to jump in Brazil. “Bayer has a demanding code of conduct, which not all Brazilian producers observe. Our quality and ethics cannot be compromised,” Pereira says.
Despite strong customer loyalty from Brazil’s growing middle class, pharmacists offer cheaper imitations when prescriptions are submitted.
Even with these limitations, Bayer’s growth in Brazil is more than three times the group’s global rate – a fact that Pereira attributes to increased public spending resulting from the recent government policies: “The middle class have more money to spend on brand quality medicines and household appliances.”
Bayer has positioned itself as a brand that cares. “Our 91-year-old slogan ‘If it’s Bayer, it’s good’ (in Portuguese) is one of the oldest in the market, representing our longevity and consumer care. We pride ourselves on traditional values, modern technology and environmental policy,” Pereira says.
The Rio de Janeiro plant recycles water, returning it to the natural source in a cleaner state than when acquired and Bayer participates in projects and programs in Brazil and all over the world. Among them, Escola Verde (Green School) environmental education institute, and eco-construction projects for ecologically friendly buildings.
“We are always looking for more efficiency in internal operations and planning our next strategic steps,” Pereira concludes.
Already among the market leaders in agro-business, material science and pharmaceuticals, Bayer promises an even bigger future in Brazil.