The profitability of pest control

Malaysian Business, Apr 16, 2004 by Seelen Sakran

HOW MANY would have thought that the pest control business could mean big

bucks for entrepreneurs in the country? Well, how's this for starters? The

estimated total business turnover of the pest control industry in Malaysia

is about RM80 million. As Dr Lee Chow Yang, Associate Professor (Urban

Entomology) at Universiti Sains Malaysia's School of Biological Sciences

puts it, `The industry is believed to have chalked up RM100 million in

2003.'

In fact, termite control is the most important component of the pest

control business. More than 50% of the total turnover of the pest control

industry in Malaysia is related to termite control. Interestingly, Dr

Tsuyoshi Yoshimura of Japan's Kyoto University has estimated the total

market for termite control to be at US$ 1 billion per annum in Japan

alone.

Lee explains, `The cost of damage due to this group of pests is believed

to be three to four times higher than the control cost. As Malaysia is

located in the tropics with warm weather, high rainfall and high termite

species diversity, termite infestation is truly prevalent in this country.

The situation is further aggravated by the fact that many of the

residential housing projects, buildings and structures are constructed on

former rubber or oil palm plantation sites, where termites are also

serious pests. When the trees were felled, the termites continue to

survive by feeding on the roots of these trees, and subsequently move to

feed on the completed houses.

`It is not uncommon to then find termites moving into the new building

or structure, even before the rightful owner obtains the keys. In

addition, pre-construction treatment of soil with termiticides, although

encouraged, is not mandatory by Malaysian law,' he adds. `Even when

treatment is carried out, there are numerous instances when it is not

performed by pest control professionals, but instead by migrant workers

who do not even understand basic termiticide dilution, let alone the right

spray rate. All these factors are some of the contributing factors to the

serious termite problem in this country.'

To a homeowner, termites are often viewed as a major threat to property

value. However, to a pest control operator, the high termite prevalence in

Malaysia can be viewed as a good business opportunity.'

To date, there are about 350 pest control companies in Malaysia. In

fact, there has been a steady increase of pest control companies in

Malaysia over the last 10 years.

It is widely believed that the top-11 foreign and local companies in

terms of sales turnover, good service and reliability - in no particular

order - are Rentokil Initial (United Kingdom), NLC General Pest Control

Sdn Bhd, Ridpest Sdn Bhd, Okin Pest Management Sdn Bhd, Flick Pest Control

Sdn Bhd (Australia), Antipest Services Sdn Bhd, United Fumigation Sdn Bhd,

Envirocon Pest Management Sdn Bhd, CWS Hygiene Sdn Bhd (Switzerland), Pest

Dynamics Sdn Bhd and Ikari Sdn Bhd (Japan).

These 11 companies may be leading the pack but so far what are the

challenges keeping entrepreneurs from entering this industry?

Explains Lee, `Pest control is a service-driven industry and a fairly

lucrative business to venture into, judging from the low capital needed to

set up a company. Essentially, it is driven by the ability to provide good

service and solve pest problems. To enter the industry is easy. However,

to survive and profit from this industry, it is crucial to have the

technical know-how and experience in the trade. Unless that person has

been working in a pest control company for several years or has a degree

in entomology (particularly urban pest management), it may be difficult to

acquire such knowledge without hands-on training.

`In addition, the upcoming Pesticide Rules 2004 will require all pest

control operators to be licensed. In order to get a practising licence,

they will have to pass the examination administered by the Pesticide

Control Division, Department of Agriculture.'

As to the ways to survive in this industry and make a profit, says Lee,

`The best solution is to have several years of working experience in a

pest control company or related environment. It is also possible to set up

a pest control company and hire qualified and experienced personnel to

work for them, particularly those who have been working in the field at

least two or three years, or get a business partner who has had experience

in the field.

`Another popular trend lately is to hire experienced entomology

graduates, particularly those with a background in urban pest management

to work for them.'

With such excitement surrounding this sector, Malaysian Business decided

to get views from the two top players, Rentokil and NLC, on what it has

taken for them to remain profitable, as well as their future plans.

Showcase Company NLC

Richard Ng, the managing director of NLC, has taken this Malaysian

company to new heights. `In the last 30 years of operation, NLC has

managed to create a niche for itself,' Ng says.

In fact, from a one-man operation, Ng has proudly taken NLC to become

the authorised operator of the Sentricon Termite Colony Elimination system