Jiuhe Distributes Fertilizers in Centralized Manner     

While it might be the most difficult time for domestic fertilizer operations now, Chongqing Jiuhe Co., Ltd., a fertilizer trader, is recruiting new employees and mulling expansion, hoping to grab more market share at a weak period.
    "Domestic fertilizer prices rode a crazy roller coast in 2008, having been surging before July 2008 and started to plunge after August 2008. This really shocked almost every fertilizer producer and trader," said Jiuhe Chairman Chen Xiaojun. "It's now the time for the survival of the fittest game for the fertilizer industry."
   So far, lots of fertilizer plants has shut, or closed for maintenance and many traders has canceled or delayed plans for building up stockpiles of fertilizers in the second half every year, a typical low season, because they are not sure about future price and demand trends and due to panic. In the past, traders in fertilizer industry usually stockpiled products in the second half to solve the problem of imbalance between all-year production and seasonal use.
    Jiuhe is also affected a bit, Mr. Chen said. But that could be limited as the company has fixed suppliers - Sichuan Chemical Group Co., Ltd., Sichuan Lutianhua Co., Ltd. and Sichuan Tianhua Co., Ltd., and owns production capacity itself, as well as fixed customer resources thanks to its self-created franchise and chain distribution model.
   In the current fertilizer market, dealers have an upper hand, as they usually don't fix product prices amid price volatility thus reducing risk for trading companies, Chen said.
   Jiuhe is a stock-holding corporation co-invested by several domestic fertilizer companies. The shareholders include Sichuan Lutianhua Co., Ltd., China's leading urea manufacturer, Lutianhua Group Co., Ltd. and Sichuan Tianhua Co., Ltd. Jiuhe engages in fertilizer trades and distributions, formulating fertilizer on the basis of soil composition for customization production, housing gas distribution and chemical products trade.
    So far, Jiuhe owns more than 100 distribution centers, selling more than 10 types of fertilizers from over 300 domestic producers, as well as some imported products, with annual distribution volume of nearly 3 million tons.
   Jiuhe's self-created chain and franchise distribution network ensures products could be directly delivered to local markets, towns and countryside, and even to farm lands. This substitutes the traditional multi-layer distribution channels, avoiding irregular practices such as selling beyond agreed regions and unauthorized price hikes, among other problems that could emerge during delivery.
   Chen summarized the model to one word: shortcut. Under the system, they collect good clients together to form a franchise distribution chain, which will deliver products directly to farmers, allowing them to commute directly with users and learn their demand.
   The distribution mode also substantially cuts the cost in developing sales channel for Jiuhe, as it tends to absorb existing agricultural product dealers as Jiuhe's distribution member. That means Jiuhe does not have to pay while acquiring its member distributors' sales networks and their costumers. This allows Jiuhe to expand extremely fast, giving it an across-the-nation distribution network in only several years and annual sales of surged sharply to RMB7.23 billion in 2007 from 2002's RMB1.56 billion, rising for six consecutive years.
   Jiuhe has set up 32 agricultural products distribution branches or subsidiaries in 15 provinces, autonomous regions or municipalities including Sichuan, Chongqing, Guizhou, Guangxi, Guangdong, Jiangxi, Hunan, Hubei, Shaanxi, Gansu, Hebei, Henan, Anhui, Jiangsu and Shandong. These units, considering the convenience for logistics, distribution and coverage, then set more than 80 sub-distribution outlets across towns and countries, signing over 10 000 member distributors and enjoying direct customers of over 100 000 households.
   The "shortcut" model allows Jiuhe to standardize and centralize the distribution network, management network and operations, leading to a "centralized service" which enables Jiuhe to deliver agricultural services to farmers.
   Jiuhe also set up stations for technology services, issued a guide book on formulating fertilizer on the basis of soil composition, to provide professional agricultural technology services to farmers. Such programs allow Jiuhe to reach farmers better and enable it to provide tailor-made products on different requirements in different regions. Thus Jiuhe's capability of making customized products is also enhanced.
   Today, formulating fertilizer on the basis of soil composition has been a characterized service by Jiuhe, which produces tailor-made mixture of fertilizers to provide customized products according to different plant and soil condition in different regions. Jiuhe is capable of annually producing 100 000 tons of urea and 250 000 tons of compound fertilizers, and is constructing an additional 500 000 t/a production line for compound fertilizers now.