Bayer’s Big Bet On China

Drug giant Bayer has rarely seen risk-taking as a cure for its ills. But next month’s relocation of its general medicine headquarters from Germany to Beijing will make Bayer AG the first multinational pharmaceutical company to open a global corporate cent

Bayer’s Big Bet On China
Shen Jianyuan


BEIJING - Chris H. Lee, Managing Director of Bayer HealthCare China, recalls the not-very-serious reaction in the company's German headquarters when he first suggested this "whimsical" idea of moving one of Bayer's divisions to China. At that time, in 2008, the China branch of Bayer HealthCare (BHC) was still under the administration of the Asia Pacific regional headquarters, although sales in China, third largest globally after the U.S. and Japan, already qualified it to be a "Direct Territory."

Nonetheless, Lee kept on pushing his idea whenever possible, even after he was promoted to Asia Pacific Director. In 2008, sales of BHC China contributed 500 million euros to Bayer group's global total, and it was becoming clear that China was destined to eventually be the biggest market for Bayer. While Bayer was laying off employees elsewhere across the globe, China hired more than 1,000 new staff. In the past 5 years, BHC China's turnover has grown to €660 millions, an eleven-fold increase.

Still, the rapid consumer growth is not Bayer's main reason for the "exceptional" strategic decision to move the general medicine headquarters to Beijing, which was finally approved in late 2010. "They finally realized that this is probably going to affect the development of Bayer in the next several decades, and if they don't act promptly, other companies might take the first step," Lee says.

Reaching to be the first

Bayer is not the only competitor putting core investments in China, a market ripe with opportunities, but also teeming with competition. Novo Nordish has announced its intention to invest $100 million in the next five years to expand its R&D center in Beijing. The three outsourced R&D centers of Eli Lilly and Company in China account for 20% of its chemical analysis and early clinical studies work. GlaxoSmithKline has co-founded a joint venture with Shenzen Neptunus Interlong Bio-technique, investing 21 million euros in China's first vaccine production base.

In March, BHC China announced it had decided to structure China's market into three regions, the Northern zone, Southern Zone and Middle zone, with their regional operations centers based in Beijing, Shanghai and Chengdu respectively, so as to cater to the needs of each zone and operate at different development stages, thus enabling Bayer to respond quickly and appropriately.

Chris Lee invited He Qian, the then General Manager of Bayer Animal Health, to join him in BHC China's new strategy. Having already worked for Bayer Animal Health for 15 years, He Qian understood what business and market development are all about in its strategic sense.

Ms. Gu Xinxin who was originally responsible for Bayer's North ASEAN countries also joined Lee's team and is responsible for the "Strategic market zone (Southern China region)". "The next ten years should probably be the 10 golden years of Bayer in China. I do not want to miss this opportunity", Ms. Gu says.

But to be informed directly of regional market information is not BHC China's only goal in restructuring China's operations. Ms. Gu says that after Bayer set up the Southern zone operations center, numerous backbone sales staff of the competitors have come to join Bayer, increasing personnel to 1500 this year.

Lineup and tactics

For Bayer AG Germany, the Chinese market is defined as one of "high growth and high complexity." Chris Lee says all multinationals have broader development objectives and direction which do not necessarily reflect the regional objective. "The first requirement is to satisfy the regional need and then try to reach the global objectives based on that," Lee says.

Nonetheless, the sales managers of BHC China get a different message. "Don't feel pressure on your sales, your first goal is not in how to increase your sales but in providing the best service to doctors," Lee says he always tells new recruits. "Don't act with undue haste, this is what I tell them all the time."

Currently, Bayer's brand reputation in the southern region is still not as well regarded as that of its competitors. But Ms. Gu believes that economic maturity doesn't equate with market maturity; it takes time for the concept to be fostered. Faced with training medical representatives, understanding the characteristics of the market needs, and designing the educational methods, "all these steps require elaboration, it will take at least 2-3 years. We are patient." In comparison with the GDP over $10,000 in Guangzou and Shanghai, the Western region's GDP is only around $2,000-3,000, so it is almost a pure investment strategy for Bayer. "Even if Bayer put people here, it's going to take at least five years for them to start making profits', a hospital director in the Western region estimates.

According to the latest market research data announced by the Ministry of Industry in late April, Bayer HealthCare is the world's leading multinational drug manufacturer in terms of sales, yet it is still not the champion of the Chinese market among the multinational drugs manufacturers.

Read the original article in Chinese

photo - Conanil

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7 Ways The Pandemic May Change The Airline Industry For Good

Will flying be greener? More comfortable? Less frequent? As the world eyes a post-COVID reality, we look at ways the airline industry has been changing through a pandemic that has devastated air travel.

Ready for (a different kind of) takeoff?

Carl-Johan Karlsson

It's hard to overstate the damage the pandemic has had on the airline industry, with global revenues dropping by 40% in 2020 and dozens of airlines around the world filing for bankruptcy. One moment last year when the gravity became particularly apparent was when Asian carriers (in countries with low COVID-19 rates) began offering "flights to nowhere" — starting and ending at the same airport as a way to earn some cash from would-be travelers who missed the in-flight experience.

More than a year later today, experts believe that air traffic won't return to normal levels until 2024.

But beyond the financial woes, the unprecedented slowdown in air travel may bring some silver linings as key aspects of the industry are bound to change once back in full spin, with some longer-term effects on aviation already emerging. Here are some major transformations to expect in the coming years:

Cleaner aviation fuel

The U.S. administration of President Joe Biden and the airline industry recently agreed to the ambitious goal of replacing all jet fuel with sustainable alternatives by 2050. Already in a decade, the U.S. aims to produce three billion gallons of sustainable fuel — about one-tenth of current total use — from waste, plants and other organic matter.

While greening the world's road transport has long been at the top of the climate agenda, aviation is not even included under the Paris Agreement. But with air travel responsible for roughly 12% of all CO2 emissions from transport, and stricter international regulation on the horizon, the industry is increasingly seeking sustainable alternatives to petroleum-based fuel.

Fees imposed on the airline industry should be funneled into a climate fund.

In Germany, state broadcaster Deutsche Welle reports that the world's first factory producing CO2-neutral kerosene recently started operations in the town of Wertle, in Lower Saxony. The plant, for which Lufthansa is set to become the pilot customer, will produce CO2-neutral kerosene through a circular production cycle incorporating sustainable and green energy sources and raw materials. Energy is supplied through wind turbines from the surrounding area, while the fuel's main ingredients are water and waste-generated CO2 coming from a nearby biogas plant.

Farther north, Norwegian Air Shuttle has recently submitted a recommendation to the government that fees imposed on the airline industry should be funneled into a climate fund aimed at developing cleaner aviation fuel, according to Norwegian news site E24. The airline also suggested that the government significantly reduce the tax burden on the industry over a longer period to allow airlines to recover from the pandemic.

Black-and-white photo of an ariplane shot from below flying across the sky and leaving condensation trails

High-flying ambitions for the sector

Joel & Jasmin Førestbird

Hydrogen and electrification

Some airline manufacturers are betting on hydrogen, with research suggesting that the abundant resource has the potential to match the flight distances and payload of a current fossil-fuel aircraft. If derived from renewable resources like sun and wind power, hydrogen — with an energy-density almost three times that of gasoline or diesel — could work as a fully sustainable aviation fuel that emits only water.

One example comes out of California, where fuel-cell specialist HyPoint has entered a partnership with Pennsylvania-based Piasecki Aircraft Corporation to manufacture 650-kilowatt hydrogen fuel cell systems for aircrafts. According to HyPoint, the system — scheduled for commercial availability product by 2025 — will have four times the energy density of existing lithium-ion batteries and double the specific power of existing hydrogen fuel-cell systems.

Meanwhile, Rolls-Royce is looking to smash the speed record of electrical flights with a newly designed 23-foot-long model. Christened the Spirit of Innovation, the small plane took off for the first time earlier this month and successfully managed a 15-minute long test flight. However, the company has announced plans to fly the machine faster than 300 mph (480 km/h) before the year is out, and also to sell similar propulsion systems to companies developing electrical air taxis or small commuter planes.

New aircraft designs

Airlines are also upgrading aircraft design to become more eco-friendly. Air France just received its first upgrade of a single-aisle, medium-haul aircraft in 33 years. Fleet director Nicolas Bertrand told French daily Les Echos that the new A220 — that will replace the old A320 model — will reduce operating costs by 10%, fuel consumption and CO2 emissions by 20% and noise footprint by 34%.

International first class will be very nearly a thing of the past.

The pandemic has also ushered in a new era of consumer demand where privacy and personal space is put above luxury. The retirement of older aircraft caused by COVID-19 means that international first class — already in steady decline over the last decades — will be very nearly a thing of the past. Instead, airplane manufacturers around the world (including Delta, China Eastern, JetBlue, British Airways and Shanghai Airlines) are betting on a new generation of super-business minisuites where passengers have a privacy door. The idea, which was introduced by Qatar Airways in 2017, is to offer more personal space than in regular business class but without the lavishness of first class.

Aerial view of Rome's Fiumicino airport

Aerial view of Rome's Fiumicino airport

Hygiene rankings  

Rome's Fiumicino Airport has become the first in the world to earn "the COVID-19 5-Star Airport Rating" from Skytrax, an international airline and airport review and ranking site, Italian daily La Repubblica reports. Skytrax, which publishes a yearly annual ranking of the world's best airports and issues the World Airport Awards, this year created a second list to specifically call out airports with the best health and hygiene standards.

Smoother check-in

​The pandemic has also accelerated the shift towards contactless traveling, with more airports harnessing the power of biometrics — such as facial recognition or fever screening — to reduce touchpoints and human contact. Similar technology can also be used to more efficiently scan physical objects, such as explosive detection. Ultimately, passengers will be able to "check-in" and go through a security screening anywhere at the airports, removing queues and bottlenecks.

Data privacy issues

​However, as pointed out in Canadian publication The Lawyer's Daily, increased use of AI and biometrics also means increased privacy concerns. For example, health and hygiene measures like digital vaccine passports also mean that airports can collect data on who has been vaccinated and the type of vaccine used.

Photo of planes at Auckland airport, New Zealand

Auckland Airport, New Zealand

Douglas Bagg

The billion-dollar question: Will we fly less?

At the end of the day, even with all these (mostly positive) changes that we've seen take shape over the past 18 months, the industry faces major uncertainty about whether air travel will ever return to the pre-COVID levels. Not only are people wary about being in crowded and closed airplanes, but the worth of long-distance business travel in particular is being questioned as many have seen that meetings can function remotely, via Zoom and other online apps.

Trying to forecast the future, experts point to the years following the 9/11 terrorist attacks as at least a partial blueprint for what a recovery might look like in the years ahead. Twenty years ago, as passenger enthusiasm for flying waned amid security fears following the attacks, airlines were forced to cancel flights and put planes into storage.

40% of Swedes intend to travel less

According to McKinsey, leisure trips and visits to family and friends rebounded faster than business flights, which took four years to return to pre-crisis levels in the UK. This time too, business travel is expected to lag, with the consulting firm estimating only 80% recovery of pre-pandemic levels by 2024.

But the COVID-19 crisis also came at a time when passengers were already rethinking their travel habits due to climate concerns, while worldwide lockdowns have ushered in a new era of remote working. In Sweden, a survey by the country's largest research company shows that 40% of the population intend to travel less even after the pandemic ends. Similarly in the UK, nearly 60% of adults said during the spring they intended to fly less after being vaccinated against COVID-19 — with climate change cited as a top reason for people wanting to reduce their number of flights, according to research by the University of Bristol.

At the same time, major companies are increasingly forced to face the music of the environmental movement, with several corporations rolling out climate targets over the last few years. Today, five of the 10 biggest buyers of corporate air travel in the US are technology companies: Amazon, IBM, Google, Apple and Microsoft, according to Taipei Times, all of which have set individual targets for environmental stewardship. As such, the era of flying across the Atlantic for a two-hour executive meeting is likely in its dying days.

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