Nostoc Biotec is a company formed by agriculture and bio-technology professionals, which offers fertilizers and organic protectors based on living microorganisms that have the natural ability of fertilizing and protecting the crops.
We currently have products of a proven efficiency on the control of important diseases and plagues. We´ve created a profitable business model and gathered a team able to make it grow.
MILESTONES
- August 2014. Establishment of the company.
- October 2014. Exclusive manufacturing and wholesale license in Spain and Portugal for products of the Australian company Nano Growth Technologies (Lambano Trading Ltd).
- November 2014. Creation of a skilled team with the knowledge and expertise required achieve the business plan.
- February 2015. Development of a unique range of organic products with strong, competitive advantages to respond severe agricultural issues, such as esca (grapevine trunk disease), nematodes or red spider mite.
- March 2015. Launch of new products with positive feedback from customers. We initiated our own distribution in Madrid. A broad number of farmers became loyal customers, purchasing the products on a regular basis.
- April 2015. A profitable business model is established. Positive relationship with large suppliers, which allows commodities to be purchased at low prices, providing retail prices with generous profit margins.
- September 2015. A University-Company collaboration agreement is signed with the Universidad Complutense de Madrid, carry out a research on the manufacturing of microorganism-based products.
- October 2015. Signature of a new retailer agreement for the province of Badajoz, in addition to Nostoc’s already existing distribution operations in the region of Madrid. Contacts for new regional distribution agreements are strengthen aiming to achieve a new agreement in Alicante, Jaen and Ciudad Real.
IDENTIFIED NEED
On a healthy soil thousands of millions of helpful microorganisms cohabit. These protect plants and help them acquire the nutrients.
The use of chemical products in agriculture rose on the 70´s, and it has remained up to now. These products allowed us to increase the production of the crops, but the excessive and continued use has made our agricultural soil to be demeaned and devoid of its natural defenses. The arising of diseases and plagues is getting higher.
The agrochemical industry doesn´t offer any alternative towards the problem, but new chemical pesticides that only worsen the situation, which can be profitable to multinational companies in the sector, but also harmful to the farmers and to the consumers.
On the first semester of 2014, and after years working on the area, the founding members of NOSTOC decided to embark on a new adventure: creating a company so this situation could get reversed and offer natural solutions to the big problems of agriculture. The spotlight would be on preserving health and fertility of the soil through the use of bio-technological products.
PRODUCTOS Y SERVICIOS
The following products, specially the liquid Humus, organic fertilizers and protectors, have been developed by Nostoc and brought up to the market for the first time in 2015, mainly in the farming areas of Madrid: the meadow of Alberche (Villa del Prado) and the meadow of Tajuña (Chinchón and sourroundings).
On a first stage, we gave free trials, later on we started selling them, and finally, the farmers have kept requesting the products, with a customer loyalty up to 90%.
Most of the test and sells took place on indoor crops (greenhouse), which are a kind of tremendously technical intensive crop. On this kind of crop, plagues are very difficult to eradicate and the soils are overexploited. It´s because of these that the good results obtained are applicable to other kind of crops, much easier to manage.
The main parameters observed on this first stage were:
- Decrease on the use of chemical fertilization: depending on the kind of soil and crop. We observed that, usually, on the first stages of the crop, the use of chemical fertilizers can be decreased in up to 80%. Later on, as the plant grows and needs more nutrients, the farmer keeps raising the dose of chemical fertilizers, reaching a final decrease of over 20%.
- Plague control and health of the crop: focusing on nematodes and red spider mite, two of the most important plagues on indoor crops. The results are extraordinary; particularly the red spider mite plague disappears after 3-5 days of application.
- Longer duration of the crops: liquid humus and Greenfol allow us to extend the culture time/cultivation time/growing time of tomato and cucumber for over 15 days. In this way, farmers maximize their production.
Down below, a brief description of the products.
Fertilizers
Solid and liquid worm humus. Worm humus is considered the best existing fertilizer in nature, and it comes from worm processed manure. Nostoc has developed a liquid formula of this manure, which allows a simpler application, more economic, and keeps (even improves) the natural properties of the soil.
Fertilizers
- ORGANIC:
- BIO-N, BIO-P y BIO-K: these are microbiological products which help to absorb nitrogen, phosphorus and potassium, respectively
- GREENFOL: it’s a powder resulting from micronization of calcite, which, thanks to the small size of the particle, provides calcium and other nutrients through the stomata on the leaves.
- CONVENTIONAL:
- PROFERT R y PROFERT B: Conventional fertilizers that do not leave chemical waste. They contain all the macro and micro nutrients needed for a complete vegetal nutrition.
Stimulants
- ALGA ENERGY, PRO ENERGY and MIC ENERGY are natural, organic products that induce the plant to segregate growth hormones. These help the rooting, setting and ripening of the fruit.
Protectors
HTpro products, includes different microbiological products able to prevent and eliminate plagues and diseases.
- HTpro NEMATOD attacks nematodes from the root.
- HTpro INSECT fights red spider mite and other insects.
- HTpro YESC heals esca and other illnesses
- HTpro C it’s effective against multiple leaf diseases.
- HTpro HONGOS eliminates numerous fungal diseases.
BUSINESS MODEL
The source of income is originated on the sales of the manufactured products to Nostoc´s distributors. Its value comes from the supply of a range of organic products, able to solve serious illnesses in a sustainable way.
Organic fertilizers allow farmers to manage their production through the “Nostoc system” and recover the crop’s natural fertility and immunity.
Suppliers
We have a direct relation with the suppliers of raw materials, avoiding intermediaries. We buy in large volumes, obtaining competitive prices. We´ve got exclusivity agreements with manufacturers, like Nano Growth Technologies, which gives us stability on the purchase prices, certainty on the supplies and payment facility.
Clients
The main clients are the distribution companies which with we sign exclusivity agreements. Nostoc is in charge of the manufacturing, supply and consulting to these companies, who are in charge of the final marketing and after-sales service.
Each supplier is given an area of action on a provincial level, and its head office must be as close as possible to the organic/ecological growing areas
Nostoc currently has its own supply in the region of Madrid and in Badajoz, although there are negotiations taking place with oth1er companies interested on establishing new provincial distributions.
The suppliers are companies that only sell Nostoc products and are allocated in predominant farming areas were ecological growing is relevant.
We give a personalized attention. Nostoc is in charge of answering the technical matters of each distribution and helps on the first steps: initial offers, specific marketing campaigns, treatment of the diseases in the area, how to apply the products with the machinery available in the area, etc.
Out of the experience of Nostoc´s team on supplying bio-pesticides and bio-fertilizers, we´ve created a business model specifically for them. Nostoc advises not only on technical aspects but also in the commercialization: which marketing campaigns should be done, how often, to which kind of client, discount policy etc.
A distribution starts being profitable around the 300.000 € of billing, amount that should be easily reached after two years. The optimal level of billing of a distribution after 5-6 years should be close to 1.000.000 €.
Cost structure
We´ve limited Nostoc´s job to the development and manufacturing of products, so for the cost structure, we avoid creating an excessively big marketing structure. The distribution companies are mainly the ones who assume the commercial cost. Nostoc´s job focuses on finding new distributors, educate/prepare them and giving them the adequate support.
As far as human resources are concerned, particular emphasis has been placed on the variable component of the salaries, which must be relevant, getting adjusted to the company’s development..
Price policy
Usually ecological products are seen by farmers as expensive and not very effective. For that reason, and given the wide trade margin of our products, we´ve decided to place our prices slightly under our chemical counterparts, especially in protectors.
Regarding fertilizers, products as Liquid Humus or HUmic Tea, are tremendously much more economic than similar options as solid humus.
Sales channels
We´ve considerer all possible distribution channels: direct selling, on line, multi-brand distributors, agricultural cooperatives etc., in the end we´ve come to the conclusion that the best alternative is creating exclusive distributions on a provincial level, in predominant farming areas.
These are innovative products, not frequent in agriculture, so the best way to reach the farmers is through distributing companies, carefully selected, which Nostoc educates on the use of ecological products and how to make them compatible with the usual treatment plans.
Even though, the implementation of this system is laborious, it offers the following advantages:
- Nostoc creates its own distributors and clients network, not depending on general distributors.
- The good use of products is controlled and supervised.
- A high quality service is guaranteed, which distinguishes from other companies. All distributions count with agricultural engineers who perform individualized treatment plans, and a later follow-up to the clients. Greater customer loyalty.
- Nostoc´s value increases. All distributions use the brand at their stores and at their own vehicles.
- The distributors are local entrepreneurs, who have the initial trust of the farmers of the area, essential to start selling as soon as possible.
- Distributors are focused on marketing, while Nostoc can focus its resources on developing new products and improve the existing ones.
GROWTH AND GOALS
2016
- Opening at least two new provincial distributors in Spain (two operational distributors already)
- Billing no less than 228.000€.
2017
- Expand and relocate the production to a new warehouse, much more sophisticated, preferably in the area of Navalcarnero.
- Billing at least 471.000€
- Opening at least three new distributors in Spain, keeping the current ones.
2018
- Consider the development of new products to answer the demand of the sector, such as the contribution of nitrogen in ecological crops.
- Billing at least 1.350.000€.
- Explore new ideas of business, such as gardening products.
2019
- Have at least ten permanent provincial suppliers distributions in Spain.
- Billing at least 3.000.000€.
2020
- Positioning Nostoc´s brand as a benchmark company in organic bio-pesticides and bio-fertilizers in Spain.
- Nostoc must be a synonym of quality products that respect environment and beneficial to consumers.
- Internationalization: export the Nostoc model out of Spain, mainly in the European market.
MARKET
The market´s size is extraordinarily big, being agriculture one of the activities of the primary sector. It’s characterized for its stability on time.
The cultivable extension in Europe is described on the next graph.
Fertilizers
The use of fertilizers per hectare in Europe is as it follows:
In Spain, the sales on fertilizers sector, according to ANFFE (National Fertilizers Manufacturers Association), is up to 2.350 million euros, although these are only the figures of their associates. Other sources state the total amount of sales on up to 3.000 million euros.
Plant protection products
As for plant protection products, the billing level in Europe is up to 9.160 million euros, 1.774 million euros corresponding to Spanish market:
Depending on the kind of product, plant protection market in Europe is distributed as follows:
Organic farming
This subsector is highly developing in Spain and Europe, which can be seen in the graphic:
Evolution of the organic farming surface in Europe.
Evolution of the organic farming surfaces in Spain.
This is the evolution of organic production in the European Union:
A particular case: nematodes
To understand in detail the magnitude of the market size, lets analyze the economic impact of a particular plague, the nematodes, against which Nostoc´s Ht-pro NEMATOD has proved to be very effective.
As a study from Miguel Talavera and collaborators, published on the journal Nematology, 2012, Vol. 14(5), 519-527, 17% of the 37.000 cultivable hectares in Almería are infected with nematodes, which mean a reduction of production of 30.8%.
Furthermore, Maria Elena Flor Peregrín, on his PhD thesis in 2013, titled Use of control and protection biological agents against Meloidogyne nematodes in indoor crops protected by plastic, estimates that the value of the commercialized production in Almería is up to 2.500 million euros.
Therefore, if we cross-check the data of both of the researches we can conclude that farmers of that are losing more than 1.000 million euros because of nematodes. The value of a product that can be effective against this plague is evident.
Other plagues such as red mite spider and diseases as esca or verticillium have similar economic impact.
COMPETITION
The number of companies who chose to create new fertilizers and plant-protection products is increasing due to the growing demand of farmers. However, in Spain there isn´t a similar value proposition as Nostoc´s, based on beneficial communities of microorganisms.
Some of the relevant actors of the sector who offer organic bio-pesticides and bio-fertilizers are Idai Nature, Daymsa, and Seipasa. These companies have created good lines of fertilizers and natural protectors, but based only on botanical extracts and organic materials, which have more of a preventive than healing effect, and do not restore the natural immunity of the crops. They are less disruptive proposals.
On the other hand, the big manufacturers of bio-pesticides and bio-fertilizers are: Bayer, Syngenta, Fertiberia, Fertinagro, Timac Agro, UBE Chemical Europe, among others. They manufacture only conventional chemical fertilizers and plant protection products, and are very rooted in this market. They are favored by governmental institutions.
For further information on this subject, contact directly with Nostoc.
COMPETITIVE ADVANTAGES
- Exclusive manufacturing and distribution license in Spain and Portugal of the products GREENFOL and PROFERT, whose patent is property of Lambano Trading Ltd.
- Creation of a range of unique organic products, based on microorganisms, very effective against plagues and diseases of enormous economic impact, such as esca, red spider mite, nematodes, etc…
- In-house technology and manufacturing license of bio-fertilizers and bio-protectors.
- Research agreements with universities and technology centers.
- Profound knowledge of the sector on a national and international level, as well as the different trade channels.
- Purchase agreements with suppliers. Purchase of raw material at a low cost. Very attractive profit margins.
DESTINATION OF THE FUNDS
The investment acquired through Bolsa Social will be destined to the following:
- Business development, especially to strengthen and expand the team with qualified personnel (44%).
- Advertising and marketing (23%)
- Equipment and other facilities (21%).
- Research and Development (12%).
EXIT STRATEGY
The most obvious exit strategy for Nostoc Investors is a second capital increase at the end of the year 2020.
There are certain industrial process that can (and should) be internalized when reaching a high billing volume. This will require external investment and will allow Nostoc not to depend from suppliers, minimize costs, and in the end, increase profit margins.
Another possible exit strategy would be for our company to be bought by a bigger business group. This scenario can´t be easily predicted nowadays, although it could happen if Nostoc gets positioned as a benchmark company on the bio-pesticides and bio-fertilizers sector, given the increasing demand that these products are experiencing among farmers.
For a big company it would be more profitable to acquire Nostoc, than to launch a new line of ecological products and attract customers.
LEGAL FRAMEWORK
European regulation (CE) nº 2003/2003 covers the manufacturing and commercialization of fertilizers in the member states. It establishes a series of categories for the most common chemical fertilizers and delegates the regulation of other kind of fertilizers to the member states.
In Spain, the Royal Decree 506/2013 (which can be found in the section “Documents”) establishes:
- Seven additional categories of fertilizers (organic and inorganic).
- Regulates the commercialization of fertilizers: only products from categories 2, 3 and 6, must be registered on a national fertilizers register (Article 21). Bio-fertilizers from Nostoc are in group 4.1 and 5, which doesn’t require this register.
- The minimum level of nutrients must be respected for each product, as well as the traceability and the labeling regulations.
- As for the company, it has to be registered as a fertilizer manufacturer at the Ministry of Agriculture. To make the registration there are two possible ways: doing it directly with the Public Administration, or to carry out an audit by an authorized private entity. The latter is the option chosen by Nostoc, which will be audited by Bureau Veritas at the end of 2015. This entity will verify if the company complies with the legal regulation.
On the other hand, town councils regulate the license of activity and opening, checking if the activity is performed in an industrial building, and each region is involved in terms of environmental impact. (Nostoc is exempted of this inspection because the manufactured products are ecological and there is not a big manufacturing volume).
