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Red Sun Rises In Agrochemicals First-time visitors driving up to the
headquarters of Red Sun Group outside Nanjing, in Gaochun
County, can't help but wonder if their directions are wrong. They are supposed to be arriving at one of the fastest growing, more technologically proficient firms in China. But after driving for more than one-and-a-half hours from the center of Nanjing—mostly through sparsely populated farmland—they arrive at what looks like a theme park. The design of the main building is loosely inspired by a castle in Germany, and in the parking lot sits an Arc de Triomphe vaguely similar to the one in Paris.
With a bit of luck, they are greeted upon arrival by the firm's founder, Chairman and Chief Executive Officer Yang Shou Hai. Beaming as he welcomes visitors, the unpretentious Yang cheerfully explains that the design of the firm's headquarters is meant to make guests feel at ease. After the long drive from the airport, Yang says he wants Western visitors to relax when they eventually reach Red Sun and see buildings that remind them of their home countries.
And more and more international executives are visiting Red Sun, Yang says. This is not surprising. Red Sun's sales this year will reach $125 million, triple its 1998 total. The company's
Red Sun Group at a glance Headquarters: Nanjing, Gaochun County, China Formed: 1989 Sales: $70 million After-tax profits: $10 million Employees: 4,200 Main product: Flagship company Red Sun Corp. makes 26 lines of low-toxicity, off-patent pesticides Main affiliates: Red Sun Plant Gene Engineering, R&D of genetically modified seeds; Red Sun Coating, paint; Red Sun Countryside Ε-Commerce Web, domestic distribution of pesticides Website: http://www.china-redsun.com Note: Sales and profits are for 1999 and are unaudited.
product range keeps expanding. And the group, which claims it has the most extensive agrochemical distribution network in China, is further strengthening its technical support and sales channels.
Flagship company Red Sun Corp. now makes 26 lines of pesticides, Yang says. All are off-patent agrochemicals that were originally developed by multinational companies. Although highly efficient, the pesticides that Red Sun manufactures are all relatively harmless to humans and the environment, according to Yang, who worked as an agrono- Yang mist at the Agricultural Bureau of Gaochun County before founding Red Sun. He says: "I observed that there were too many harmful insecticides in China. These were leaving residues harmful to health and the environment"
The company has humble roots. Yang says he originally made use of a $600 loan in 1989 to hire a few farmers and import material. Together, they formulated high-tech pesticides manufactured by multinational firms. Although the Red Sun logo appeared on the wrappers, the active in
gredients acquired from multinational firms were clearly identified as well. By 1990, with the help of a government loan, Yang says he was collaborating with universities and technical institutes to develop products he could manufacture in China.
By 1993, Red Sun had begun producing and marketing in China its first product, the off-patent insecticide cy-permethrin, which was originally developed by FMC Corp. The same year, Red Sun also began production of fenvalerate, a broad-application insecticide initially developed by Sumitomo Chemical. Other developments and products have continued.
Red Sun's foreign sales
are growing and will reach $20 million this year, Yang says. He insists that, although low production costs allow him to sell pesticides for about 20% less than similar products offered by multinational corporations, his quality is world class. Yang says: "We have attracted the attention of multinational companies. There is intense interest. " So far, he says, five of the 10 largest multinational agrochemical producers have ex
pressed interest in collaborating with Red Sun in some form or another.
One special feature of Red Sun is the strength of its distribution channels in China, which also act as providers of technical support. The older types of highly toxic pesticides that are still typically used all over China are sprayed on crops in kilogram quantities per acre. The agrochemicals that Red Sun sells are sprayed over farmland in quantities as
small as a few grams per acre. Using the newer pesticides requires some know-how on the part of the peasants. Yang says he currently employs 2,100 sales agents, who also provide training and technical support These represent about half of Red Sun's employees.
But Yang has plans to expand his company in new areas. Within the next few years, he wants to build a much stronger distribution network, employing 120,000 people, primarily in an extensive chain of retail outlets. He envisages that 10,000 Chinese townships will be home to Red Sun stores. Further, he foresees that his empire will also include 100,000 stations providing technical support throughout the country. The entire effort will be coordinated by means of the Internet, which will link the retail outlets and technical support stations. The network, Yang says, will play a positive role in alerting authorities to cases of counterfeiting of products, a problem affecting Red Sun as much as it does multinational companies. Yang says his sales network will also distribute products manufactured by multinational corporations.
Red Sun's ambition is being supported by authorities in Beijing who are eager to see a progressive phaseout of toxic pesticides. The Red Sun subsidiary that is entrusted with developing the Internet-based national distribution net-
SEPTEMBER11,2000C&EN 15
asia-pacif ic work, Red Sun Countryside E-Com-merce Web, has already benefited from investment by the National Information Center of the Ministry of Agriculture. The latter believes farmers can greatly benefit from the online market information that Ε-Commerce Web will also provide.
Development of the network will require a $30 million investment, Yang says. The government will provide 40% of the funding, 30% will come from 10-year bank loans, and the rest will be raised in the Shenzhen stock market Yang hopes to list Red Sun Countryside E-Commerce Web on NASDAQ in 2003. This summer, Red Sun welcomed the first visit by a foreign journalist, this correspondent. Should the corporation continue to grow healthily, many more visitors will no doubt make the trip to its "theme park" headquarters in Gaochun County.
The rapid expansion of Red Sun over the past 10 years adds up to an encouraging track record, providing Yang with the confidence to build his national sales network. But there is a risk that the company may be growing too fast for its own
Red Sun's headquarters.
good and that its management team may be unable to cope with the increasing complexity of its operations. Within the past few years, the number of Red Sun subsidiaries has grown. Two ventures in Nanjing manufacture paint and coatings. A listed subsidiary invests in the stock markets of Shanghai and Shenzhen. Another subsidiary, Red Sun International, manages an expanding number of sales offices in foreign countries. Red Sun also acquired a Nanjing-based biopharmaceutical company from a local university in 1998. Furthermore, Red Sun still has to invent pesticides. All of the pesticides the firm currently sells were invented by the billion-dollar companies with which Red Sun hopes to compete.
Local authorities seem to have little doubt about the future growth of Red
Sun. The industrial park where Red Sun is now the only resident is being linked to the center of Nanjing by a four-lane highway that is almost complete. Ying Xin Fu, a high-placed official in Gaochun County, says: "Red Sun is famous not only in this county but all over China. We hope it gets famous worldwide as well."
Jean-François Tremblay
Supercritical Fluids are not arriving.
1 6 SEPTEMBER 11,2000 C&EN