Management Report & Annexes | Fundamental Information About the Group
9. Products, Distribution and Markets
Bayer markets its products globally through a market- and customer-specific distribution network. Responsible marketing and distribution is a top priority for Bayer, which is why we do not tolerate legal violations in the marketing of our products. The necessary code of conduct is established in our Group directive on “Responsible Marketing & Sales.” This Group directive and the respective training programs are implemented decentrally in the subgroups. Our distribution activities are primarily aimed at ensuring that our products are available on the market. A high level of customer satisfaction is essential for the long-term success of our business. This necessitates the systematic analysis of customer satisfaction and complaints, but especially partnership-based cooperation and the willingness to engage in dialogue.
Our Pharmaceuticals segment supplies prescription products. Our range of cardiovascular products includes the anticoagulant XareltoTM, AdalatTM to treat hypertension and coronary heart disease, and AspirinTM Cardio for secondary prevention of heart attacks. The product portfolio in women’s healthcare comprises contraceptives such as yazTM/YasminTM/YasminelleTM, MirenaTM and the EssureTM procedure. We also offer specialty pharmaceuticals that are mainly prescribed by specialist physicians, including KogenateTM for people with hemophilia a, BetaferonTM/BetaseronTM to treat multiple sclerosis, the cancer drugs NexavarTM, StivargaTM and XofigoTM, the eye medicine EyleaTM, and AdempasTM to treat two forms of pulmonary hypertension. Our pharmaceutical products are primarily distributed through wholesalers, pharmacies and hospitals. Co-promotion and co-marketing agreements serve to optimize our distribution network.
The portfolio of our Consumer Health segment mainly comprises non-prescription products. The Consumer Care Division specializes in over-the-counter (otc) medicines – those available without a prescription – and is the second-leading supplier in the global otc market with a portfolio covering all the major therapeutic areas. Our offering includes the pain relievers AspirinTM and AleveTM and the otc medical skincare products BepanthenTM / BepantholTM and CanestenTM. The product range also includes cough-and-cold and allergy products such as Alka-Seltzer PlusTM and ClaritinTM, nutritionals such as One A DayTM, BeroccaTM and SupradynTM, and products to treat gastrointestinal complaints, such as MiralaxTM and RennieTM. Other otc products include CoppertoneTM sunscreen products and Dr. Scholl’sTM foot care products. We also offer prescription dermatology products. The division’s sales and distribution channels are generally pharmacies, with supermarket chains and other large retailers also playing a significant role in certain important markets such as the United States.
In the Medical Care Division we offer blood glucose monitoring devices such as ContourTM. We also market the ContourTM usb meter, which features integrated diabetes management software and direct plug-in to computers. Outside Europe, these products are generally sold to consumers through pharmacies, drugstores, mass merchants, hospitals or wholesalers. In Europe, they are sold mainly through pharmacies. We are among the principal players in the area of blood glucose meters and are also one of the leading suppliers of contrast agent injection systems for diagnostic and therapeutic medical procedures in X-ray, computed tomography and magnetic resonance imaging. Examples from our portfolio of contrast agents for diagnostic imaging are UltravistTM, GadovistTM / GadavistTM and MagnevistTM. Our products are marketed to radiologists, cardiologists and other specialists in medical imaging in hospitals and out-patient clinical sites through a global direct sales organization, supplemented in some cases by local distributors.
The Animal Health Division offers an extensive portfolio of animal health products for farm and companion animals. Depending on local regulatory frameworks, we market our products through veterinarians and other distribution channels such as pharmacies or retail stores. Our AdvantageTM family of products protects dogs and cats from parasite infestation and supports our number two position in the parasiticides market. The innovative SerestoTM collar provides dogs and cats with lasting protection against parasites through a modern system for controlled release of the active ingredients and reinforces our leading market position. Other important products include BaytrilTM and VerafloxTM for the control of infectious diseases, the DrontalTM line of wormers, and BaycoxTM to treat coccidiosis in livestock.
Responsible business practices in marketing and distribution
In marketing its medicines, HealthCare applies strict standards and observes the relevant international industry codes. This includes all codes of the International Federation of Pharmaceutical Manufacturers & Associations (ifpma) and of regional associations such as the European Federation of Pharmaceutical Industries and Associations (efpia) concerning relations with health care professionals and patient organizations. These codes include rules governing the distribution of advertising materials and product samples, cooperation with health care and pharmacy professionals under speaker and consultancy agreements, and scientific studies. HealthCare has also undertaken to implement the efpia transparency code. The codes apply to prescription medicines. There are also local laws and codes applicable to all medicines.
The ifpma code applies not only to prescription medicines but also to over-the-counter products that are directly advertised to health care professionals. The ifpma code, as a binding global minimum standard for HealthCare, also includes basic principles for cooperation with patient groups. The efpia Code of Conduct for cooperation with patient organizations mandates universal transparency and requires that these organizations’ independence not be compromised by the provision of support to patient organizations. Under the code, donations to health care professionals or organizations must be disclosed annually on a publicly accessible website. This information must be published for the first time by June 30, 2016, and must include the relevant donations made in the 2015 calendar year.
These local codes serve to bring the provisions of the global or regional codes mentioned above into line with local laws. In the event of discrepancies among the rules we have committed to respect, HealthCare always observes the more stringent requirement.
The who’s Ethical Criteria for Medicinal Drug Promotion, together with national ethical standards, represent the minimum standard for the advertising of pharmaceutical products at HealthCare. National ethical standards are usually enshrined in industry codes at the local level, an example being that of the association “Voluntary Self-Regulation for the Pharmaceutical Industry” (fsa). The main principles for ethically and legally acceptable advertising for pharmaceuticals and medical products are also set out in the internal HealthCare directive “Compliance in Product-Related Communications.” This directive in turn is based on our “Group-wide Responsible Marketing & Sales Policy” and the “Directive on Integrity & Responsibility in Communications and Marketing”.
HealthCare has summarized the key requirements for compliant and ethical conduct in the global “Anti-Corruption Compliance Manual.”
Published in 2014, this manual summarizes existing internal anti-corruption regulations at HealthCare within a standard document. It applies to all HealthCare divisions and therefore governs the marketing of prescription medicines, as well as over-the-counter, medical and animal health products. It establishes the minimum global standard for responsible marketing and ethically acceptable dealings with important stakeholders such as officials, health care professionals and patient organizations.
The specific global anti-corruption training program launched a number of years ago was continued in 2014. The comprehensive training materials are available in 11 languages. Courses are offered both in the form of web-based compliance programs and face-to-face programs. The web-based programs were honored with the Brandon Hall Excellence in Learning Award, receiving the silver medal in the “Best in Compliance Training” category. In conjunction with all training courses, employees can receive further information as part of our newly launched “Integrated Compliance Management (icm)” project (see Chapter 18.3 Compliance) and can also request additional support.
Any suspected violation of our responsible marketing policy is recorded and investigated as part of our compliance management. This applies to complaints received from inside or outside the company.
Bayer utilizes a broad range of measures and quantitative targets to increase the value of its commercial distribution activities. In addition to internal monitoring, customer satisfaction is evaluated in core markets. The results of these evaluations help Bayer to continuously improve its offering in line with the needs of its customers.
The HealthCare divisions maintain their own active dialogue with their specific customer groups. The various sales organizations carry out customer satisfaction studies – for example with physicians from different disciplines. Different legal requirements apply for prescription medicines than for non-prescription or medicinal products. This makes the conditions under which customer satisfaction data are gathered in the health sector correspondingly complex. For example, patients may not be surveyed directly about the effects and side effects of prescription medicines. HealthCare therefore conducts primary market and data research in this area.
Customer groups from four therapeutic areas in the Pharmaceuticals segment have been surveyed in 11 countries since 2012. Long-term customer relationships and the performance of the sales employees were identified as key factors in customer loyalty and positive differentiation from competitors. The results of the studies are regularly integrated into brand planning. Country coverage was further expanded in 2014, and the studies now include 14 key markets.
In order to improve customer orientation, Consumer Care launched pilot projects in key markets in 2014 for the excellence program initiated in 2013. Global rollout of the program is planned for 2015. The initiative focuses on the identification of best practice models for distribution and trading.
At Animal Health, the methods for measuring customer satisfaction are dependent on the market segment. The division also carries out market research projects on specific disease-related issues and measures satisfaction with its own products and the image of the company brand.
Information on health care topics and customer services for orders, product and delivery information, complaints or the handling of general inquiries pertaining to HealthCare are addressed by the relevant business units and country organizations, and contact information is made available online.
As the Bayer Group is headquartered in Germany, HealthCare operates a customer service center in that country that since 2008 has had a quality management system certified to iso 9001:2008.
CropScience offers its customers in the Crop Protection/Seeds operating segment an outstanding range of products including high value seeds, innovative crop protection solutions based on chemical and biological modes of action as well as an extensive customer service for modern, sustainable agriculture. In the field of non-agricultural applications (Environmental Science operating segment), CropScience has a broad portfolio of pest control products and services for areas including the home and garden sector, professional applications for golf courses and forestry.
CropScience markets its products in more than 120 countries. In the coming years we intend to continue expanding our business, particularly in the emerging markets, by deploying innovative, leading-edge technologies in order to meet the increasing global demand for high-quality food and feed.
The marketing and distribution activities of the Crop Protection/Seeds operating segment have a product-specific alignment.
The Crop Protection business is based on a broad portfolio of highly effective herbicides, fungicides, insecticides and seed treatment products with chemical or biological modes of action. Our innovation capability and long years of experience with crop protection products have placed us among the leading companies in the world.
The activities of the Seeds unit are focused on the crops cotton, oilseed rape/canola, rice, soybeans and vegetables. We market high-value seeds based on our own research and breeding expertise. In our core crops, we have achieved strong market positions and are internationally represented.
Our Crop Protection products are primarily marketed through two- or three-step distribution systems, either via wholesalers or directly to retailers. We also sell products directly to customers in selected markets where farmers and market conditions require this mode of distribution.
Our seeds are sold to growers, plant raisers, specialist retailers and the processing industry. Plant traits developed using modern breeding methods are either incorporated into our own seed varieties or licensed to other seed companies.
The products of our Environmental Science operating segment are based on both proprietary and inlicensed active ingredients and designed for non-agricultural uses. We market pest control and plant care products both to private customers in the home and garden sector and to professional users in the green industry (including public parks and golf courses), forestry, professional pest control and public health (vector control to combat malaria and dengue fever). CropScience ranks among the world’s leading suppliers of crop protection products for non-agricultural uses. The Environmental Science products are mainly sold through wholesalers and specialist retailers. A large part of our business in the area of vector control is transacted in response to tendering by government agencies and non-governmental organizations.
CropScience follows the International Code of Conduct on the Distribution and Use of Pesticides issued by the Food and Agriculture Organization of the United Nations (fao). This forms the basis for CropScience’s expanded Product Stewardship Policy, which satisfies the requirements of the Group’s position on responsible marketing and sales. Training materials to explain this Group position have been distributed throughout the global organization and are available on the Bayer intranet.
The issue of responsible marketing and sales is addressed at CropScience in compliance training courses and is also an integral element of marketing and sales excellence training measures. By the end of 2014, we had trained approximately 3,700 employees worldwide in three- and one-day courses, including some 1,300 employees in 2013 and 2,400 in 2014.
CropScience investigates the satisfaction of its customers using standardized surveys as part of its commercial excellence activities, among other tools. In addition, CropScience completely overhauled its internal customer relationship management (crm) processes in 2014 so as to establish a new understanding of crm. Alongside farmers, this new approach also focuses on distribution channels in all markets. A centralized, global crm platform will also standardize core processes. Furthermore, CropScience is intensifying its direct cooperation with farmers through the Bayer Forward Farming initiative. Our solutions for sustainable agriculture in practice are demonstrated at Bayer ForwardFarms.
One of the world’s largest polymer companies, MaterialScience is a manufacturer and supplier of precursors for rigid and flexible foams, plastic granules, and raw materials for coatings and adhesives. The subgroup holds leading competitive positions in these product groups. We also manufacture and market plastic sheets, functional films and selected inorganic basic chemicals. The latter serve as raw materials for the manufacture of our products. Others are generated as by-products of our production and sold to external customers.
Our products are used mainly in the automotive, construction, electrical/electronics, furniture, wood, textile, sports and leisure goods, medical equipment and chemical industries.
Rigid or flexible polyurethane foams based on our diphenylmethane diisocyanate (mdi), toluene diisocyanate (tdi) or polyether (pet) raw materials have found a broad range of applications in a variety of industries. Automotive uses include the manufacture of car seats and components. They are also used in the construction industry and the refrigeration chain as insulating materials, and in the furniture industry for cushioning and mattresses.
Our polycarbonates are marketed as granules (MakrolonTM, apecTM, MakroblendTM, BayblendTM), sheet and films. Their uses include electrical appliance housings, cds/dvds, roof structures and automotive headlamps.
The Coatings, Adhesives, Specialties business unit manufactures raw materials for car and commercial vehicle coatings and for footwear and textile adhesives, for example. Specialties include films used in id and credit cards, along with raw materials for cosmetic and medical products.
We market our products mostly through regional and local distribution channels. Here three regional Supply Chain Centers serve as the central link to the customer. We make use of e-commerce platforms and other channels for order processing.
This structure pools all information streams from order acceptance to dispatch planning, delivery and complaint acceptance in the Europe/Middle East/Africa, Latin America, nafta and Asia/Pacific regions. In particular, that gives us a high level of expertise in order management and in transaction, supply chain and logistics solutions. Our customers can check the status of their orders at any time through the online information platform BayerONE.
The top quality objective targeted by MaterialScience is completely error-free operation so as to achieve a high level of customer satisfaction. Our supply, production and delivery processes are therefore certified to din iso en 9001 and are regularly audited both internally and externally.
To systematically increase customer satisfaction and ensure optimal quality of service, we regularly evaluate the complaints registered in our global management system and by the individual business units. We also analyze in detail the evaluations performed by our customers. Through dialogue with internal stakeholders, corrective and preventive measures are undertaken to further increase quality and customer satisfaction while at the same time lowering the error rate and ultimately also the incidence of complaints. In 2014, for example, a total of 4,835 complaints by around 1,990 customers were registered. This yields a rate of 7.18 complaints per 1,000 deliveries, about the same as in 2013 (7.44 complaints per 1,000 deliveries).
We also work with trading houses and local distributors who are responsible for business with small customers. Major customers with global operations are serviced directly by our key account managers.
In the marketing of our products, we also take into account all the requirements of the Group’s position on responsible marketing and sales. The importance of observing antitrust law and preventing corruption is regularly emphasized in training programs, internal communications and discussions with management. In 2014, antitrust law was a particular focus of our training measures. Around 3,000 MaterialScience employees took part in Group-wide, web-based courses and supplementary target group-oriented, on-site training sessions.