Red Sun Matures

Like the proverbial banker, Yang Shou Hai's office hours are from 9 to 3. Nothing unusual, it would seem, but for the founder and chief executive officer of China's leading agrochemical maker, Red Sun, it's from 9 in the evening until 3 in the morning. It's the only way to get anything done, he says. He typically shows up at work around noon.

Thankful one evening that he has only one dinner appointment, Yang explains that he spends most of his time before 9 PM attending meetings and meals with government officials or business partners. Yang says he normally must attend banquet-style dinners three or four nights in a row, performing numerous toasts with beer, wine, and strong alcohol. Relieved of these obligations, he barely drinks.

Yang is a maverick who surprises both by how he differs from other CEOs and how very much like them he is. In person, he seems more like an average denizen of Gaochun County, the rural area on the outskirts of Nanjing that he hails from. He is unpretentious and wears ordinary clothing, unexpected attributes for a person who has been repeatedly recognized as one of China's most successful entrepreneurs. He gives every indication that he is much happier in Gaochun County than in Shanghai, Paris, or any fancy place.

And yet, Yang speaks like other CEOs. He believes in the critical importance of management's creativity in ensuring a company's long-term viability. Sony lost its creativity, and now they're suffering financially, he says. Although still very much in control of Red Sun, he spends considerable energy recruiting capable staff with whom to surround himself. And sounding much like Bill Gates or CNN's Ted Turner, he insists he wants to make a positive contribution to society.

Yang says his main contribution to China is to have successfully convinced farmers to switch from environmentally harmful pesticides such as DDT to more technologically advanced and benign ones. Because peasants are the weak group, I need to help them, he explains. They were using a lot of chemicals to kill insects; but now, only a little. Red Sun produces off-patent pesticides such as the herbicides paraquat, trichlopyr, and fluoxypyr, as well as the insecticide chlorpyrifos. It operates plants at several sites in Nanjing and in Ma'anshan in neighboring Anhui province.

The company that started out 15 years ago as a reseller of imported agrochemicals now has a presence in 65,000 Chinese villages and 86 countries, Yang says. He expects that his firm's sales will exceed $550 million this year, up from $375 million in 2004, and will reach $1.2 billion in 2006 as new facilities come on-line. That total is almost as much as the agrochemical sales of Sumitomo Chemical, one of the world's largest players in the field.

China, where most of the population is still rural and where pressure is high to raise agricultural productivity, is one of Red Sun's greatest market opportunities, Yang acknowledges. Still, he adds that he has no choice but to expand internationally.

If I am working in a single market and the multinational companies work in many markets, they can defeat me anytime, he says. We must globalize the corporation, or it's the end of the story. The company's exports will reach $180 million next year, he predicts.

Red Sun will not be able to compete seriously against established multinational corporations by simply remaining a supplier of lower priced generic agrochemicals; it will have to invent new products.

Today, Red Sun performs R&D with a research workforce of 180 employees and through alliances with universities and research institutes. Red Sun collaborates with 300 academics at 25 universities, seven of which are abroad, Yang says. Within a few years, he expects that Red Sun will have boosted the number of staff working in R&D by several hundred.

Yang, who speaks no English and wears his rural origins on his sleeves, is aware of what he can and cannot do.

His international sales team features graduates from top Chinese and foreign universities. One of them, present at an interview with C&EN, is Adrienne Chang, a chemical engineer fluent in English and German despite never having lived overseas. Yang also has convinced Chinese professionals established abroad to join Red Sun. His own son is completing his university schooling in Australia and will probably join the group when he returns.

Yang claims he has turned down several proposals from foreign multinational firms eager to team up with Red Sun for their expansion in the Chinese market. One rare proposal that the group accepted came from Hong Kong's largest business group, Cheung Kong, led by legendary entrepreneur Li Ka-shing, to manufacture and sell biofertilizers in China.

Cheung Kong, through its subsidiary CK Life Sciences, owns NutriSmart, a yeast-based nutrient said to help the soil better absorb chemical fertilizers. CK Life Sciences has tested the product in several countries. But China is where its most extensive marketing efforts are taking place, partly because of geographical proximity and partly because Red Sun offered to help with the marketing.

Lu Shen, senior development manager of CK Life Sciences, is the general manager of Jiangsu Technology Union Eco-Fertilizer (TU), the venture between Red Sun and CK in which Red Sun owns a 53% stake. He recalls that CK's own efforts to market NutriSmart had not been very successful. He agreed to form the venture after meeting Yang and finding out that we got along.

Sales growth for NutriSmart has been remarkable since the two combined, the officials say. For the Chinese market, TU opted to formulate a dry product that consists mostly of locally made chemical fertilizers mixed with some NutriSmart produced by CK in Hong Kong.

The venture opened a 200,000-metric-ton-per-year plant in Ma'anshan earlier in 2005, and Lu expects it will be expanded to 1 million metric tons within a few years. Before it started production, TU contracted out production to 10 other companies to help it meet demand, he adds.

Demand will expand year after year as more and more farmers notice the benefits, Lu foresees. He claims that farmers are progressively discovering that they can get high yields while cutting down on fertilizer application by using TU's product. The Chinese Academy of Sciences estimates that NutriSmart helps to reduce pollution resulting from chemical fertilizer leaching by up to 40%, he says.

Red Sun's Yang drives home the point at every opportunity that his group is not just a manufacturer or distributor. It is both, and, he notes, it is also a provider of technical support and a unique source of information about the Chinese farming market. He sees the success of the TU venture as providing an illustration of these capabilities in action.

Humble as an individual, Yang is anything but when he describes Red Sun's achievements since he founded it 15 years ago. His dream is to have Red Sun become a global Fortune 500 company. We have grown from being completely unknown to being an emerging force, Yang says. We're in the game now; we're a player.