7.4 Distribution

Bayer markets its products worldwide through a market- and customer-specific distribution network. The marketing and distribution units play a key role in communicating to customers the benefits and advantages of our high-quality products and services. Our distribution activities are geared toward the long-term retention of existing customers and the acquisition of new clients. In this connection, we offer smooth business processing from ordering to delivery in adequate time. Responsible conduct is also a top priority for Bayer in marketing and distribution. The necessary rules of conduct, which do not permit legal violations in marketing, are established in our Group Responsible Marketing & Sales Policy. This Group regulation and the respective training programs are implemented decentrally in the subgroups. A high level of customer satisfaction is essential for the long-term success of our business. We therefore systematically analyze both the needs and satisfaction of, as well as complaints voiced by, our customers, and thus foster partnership-based cooperation and dialogue with them.

HealthCare

Our pharmaceutical products are primarily distributed through wholesalers, pharmacies and hospitals. Co-promotion and co-marketing agreements serve to optimize our distribution network.

Consumer Care’s products are generally sold in pharmacies, with supermarket chains and other large retailers also playing a significant role in certain important markets such as the United States. The contrast agents and medical equipment of our Medical Care Division 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. Depending on local regulatory frameworks, we market our animal health products through veterinarians and other distribution channels such as pharmacies or retail stores.

Responsible business practices in marketing and distribution

In the development, sale and marketing of its products, HealthCare does not tolerate bribery or any other form of improper exertion of influence on our business partners. Furthermore, Bayer is committed to ethical advertising and communication for all its products and services. Our minimum standards are derived from three basic sources: laws and other statutory regulations, industry codes and internal rules.

The marketing and distribution of pharmaceuticals and medical devices are strictly regulated and subject to relevant laws that we are committed to observing. Also applicable at the global or regional levels are industry codes adopted by associations of the pharmaceuticals, medical devices and animal health industries. In many countries, furthermore, these standards are further concretized by local codes – all of which apply to prescription pharmaceuticals and many of which additionally apply to nonprescription medicines.

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All codes of the International Federation of Pharmaceutical Manufacturers & Associations (IFPMA) serve as a binding global minimum global standard for all products marketed by HealthCare. In addition, Bayer observes the codes of the European Federation of Pharmaceutical Industries and Associations (EFPIA) for dealings with health care professionals and patient organizations. The WHO’s Ethical Criteria for Medicinal Drug Promotion, together with national ethical standards that are usually enshrined in industry codes at the local level, represent the minimum global standard for the advertising of pharmaceutical products at HealthCare. All the aforementioned codes contain provisions governing, among other issues, advertising material standards, the distribution of samples, cooperation with members of medical and pharmaceutical specialist groups in connection with speaker and consultancy contracts, and scientific studies. Adherence to these codes is designed to ensure the independence of both health care professionals and patient organizations. Based on the new EFPIA transparency code and beginning in June 2016 at the latest, furthermore, Bayer will disclose any grants to health care professionals and organizations annually for the preceding calendar year.

The most important Bayer Group regulation in this connection is our Anti-Corruption Procedure, which establishes minimum global standards on this topic for the entire company. HealthCare has summarized the key requirements and the minimum global standard for compliant and ethical conduct in the Anti-Corruption Compliance Manual, which applies worldwide in all divisions. The main principles for ethically and legally acceptable advertising for pharmaceuticals and medical devices are also set out in an internal HealthCare directive. The goal of these directives is to help HealthCare employees to always act in compliance with all applicable regulations. Should several regulations be relevant, HealthCare principally applies the more stringent standards.

Training measures on product-related communication and anti-corruption are fundamental elements of the system at Bayer. They are directed toward certain employee groups and are tailored to account for the special risks these employees are exposed to. The principles presented in these training courses provide an overview of globally applicable minimum requirements for cooperation with key stakeholders of HealthCare, such as physicians, hospitals or patient organizations. The courses not only explain general compliance principles but also give specific instructions in relation to nonreciprocal benefits and the exchange of services with health care professionals.

As part of our compliance management system, we register and investigate any suspected violation of our responsible marketing principles. This applies to complaints both from within the company and as notified to us from outside.

Customer dialogue

A keen understanding of manifold customer needs is especially important if HealthCare’s products are to be successful in the market. Our customers include patients, physicians, caretakers, health policy decision-makers and opinion leaders, partners from research and development, and health care payers. Due to the stark distinctions between these groups, the individual HealthCare divisions take specific steps to enter into dialogue with customers and measure their satisfaction.

Different legal requirements apply for prescription medicines than for nonprescription or medical devices. This makes the conditions under which customer satisfaction data are gathered in the health sector correspondingly complex. For example, it is not permitted to directly survey patients about the effects and side effects of prescription medicines. HealthCare therefore conducts primary market and data research in this area.

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We use market research projects to identify the needs of the various customer groups and thus further strengthen customer orientation at Pharmaceuticals. We also carry out systematic internet analyses that give us a better understanding of our stakeholders’ opinions, interests and networks. To measure customer satisfaction, Pharmaceuticals conducts international surveys of its customer groups according to therapeutic areas. The results of the studies are regularly integrated into brand planning. To continuously optimize customer service, moreover, we support our medical sales force through product- and country-specific training courses.

Following the success of pilot projects in key markets, Consumer Care in 2015 began introducing its excellence program to improve customer orientation worldwide. The program is designed to identify examples of best practices in the areas of market launch strategies, distribution and trading. It has already been successfully implemented in 13 countries, and others will follow in 2016.

Animal Health also conducts studies on customer satisfaction and customer retention, applying varying methods according to the respective market segment. From studies that track long-term customer behavior, performance indicators are developed that in turn are used to measure customer satisfaction.

Complaints, customer services for orders, product and delivery information, information on health care topics or the handling of general inquiries pertaining to HealthCare are processed by the relevant business units and country organizations. The respective contact information is available online.

As the Bayer Group is headquartered in Germany, HealthCare operates a customer service center in that country with a quality management system certified to ISO 9001:2008.

CropScience

Distribution

CropScience markets its products in more than 120 countries. We market our crop protection products mainly through wholesalers or directly through retailers. We also sell products directly to customers in selected markets where market conditions require this mode of distribution.

Distribution activities for seeds are focused on the crops cotton, oilseed rape / canola, rice, soybeans and vegetables from our own research laboratories and breeding facilities. In our core crops, we have achieved strong market positions and are internationally represented. Our seeds are sold to growers, seedling companies, 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 Environmental Science products are mainly sold through wholesalers and specialist retailers. We market our range of pest and weed control products to professional users in the green industry (including public parks and golf courses), forestry, industrial vegetation management and professional pest control. In the area of public health, an example being vector control to combat malaria and dengue fever, much of our business is transacted in response to tendering by government agencies and nongovernmental organizations. We also offer pest control and plant care products to private customers in the home and garden sector.

Responsible business practices in marketing and distribution

CropScience follows the guidelines of its Product Stewardship Policy with regard to the distribution and use of its crop protection products. This policy, which also satisfies the requirements of the Group Responsible Marketing & Sales Policy, is based on the International Code of Conduct issued by the Food and Agriculture Organization of the United Nations (FAO). Training materials to explain this Group policy have been distributed throughout the global organization and are available to the employees on the Bayer intranet.

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Responsible business practices in marketing and sales are addressed at CropScience in compliance training courses and are also an integral element of marketing and sales excellence training measures. In 2015 we trained a total of 600 (2014: 2,400) CropScience employees worldwide in three- and one-day training courses.

Customer dialogue

CropScience sees tremendous value in the satisfaction of its customers. Our goal is to establish long-term customer relationships that ensure the business success and meet the expectations of both parties. We strive to fulfill the high expectations of our customers through targeted communication, smooth business processing and effective complaint management. We regularly determine these expectations through our commercial excellence activities so that we can offer our customers tailored solutions. In addition to the customer surveys we conduct through our country organizations every two years according to a standardized process, we analyze all channels of interaction with our customers. We use the findings of these analyses to align our distribution and marketing processes around the world to the respective customer needs. In general, we aim to make our dialogue with customers more target group- and region-specific and to continuously improve it. We improve our customer processes in part with the help of a customer relationship management database that is now used in more than 60 of our country organizations. We assess our performance using a system of qualitative and quantitative indicators.

CropScience is also intensifying its direct cooperation with farmers through the Bayer Forward Farming initiative. Our solutions for sustainable agriculture in practice are demonstrated at Bayer ForwardFarms. The first farms have been established in Belgium, France, Germany and the Netherlands, and further collaborations are being prepared in Spain and Brazil. CropScience will successively expand this type of cooperation worldwide.

Covestro

Distribution and customer dialogue

Covestro’s products are mainly supplied to the automotive and transportation, construction, wood processing and furniture, and electrical / electronics industries. Other customer industries are the sports and leisure, cosmetics and health care sectors, as well as the chemical industry.

Covestro markets its products mostly through regional and local distribution channels. Here three regional Supply Chain Centers serve as the central link to the customer. Covestro makes use of e-commerce platforms and other channels for order processing. Customer satisfaction is systematically analyzed on a global basis, enabling the development of improvement measures.

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The Supply Chain Centers pool all information streams from order acceptance to dispatch planning, delivery and complaint acceptance in the Europe / Middle East / Africa, Latin America, North America and Asia / Pacific regions. This ensures a high level of expertise particularly in order management and in transaction, supply chain and logistics solutions. Using the “Order@Covestro” online information platform, customers can at any time place orders, call up safety data sheets and track the status of their orders.

Covestro’s highest quality objective is faultlessness so as to attain a high level of customer satisfaction. To systematically increase customer satisfaction and ensure optimal quality of service, complaints registered in the global management system and by the individual business units are regularly evaluated. Customer evaluations are also analyzed in detail. Through dialogue with internal stakeholders, preventive and corrective measures are undertaken to further increase quality and customer satisfaction while at the same time lowering the error rate and thus also the incidence of complaints. In 2015, for example, a total of 5,178 complaints by around 2,088 customers were registered worldwide. This yields a rate of 7.61 complaints per 1,000 deliveries, about the same as in 2014 (7.75 complaints per 1,000 deliveries).

Covestro also works with trading houses and local distributors who are responsible for business with small customers. Major customers with global operations are serviced directly by key account managers.

Responsible business practices in marketing and distribution

In the marketing of its products, Covestro also takes into account all the requirements of the Bayer Group’s Responsible Marketing & Sales Policy. The importance of observing antitrust law and preventing corruption is regularly emphasized in training programs, internal communications and discussions with management. In 2015, training focused on export control. Around 4,980 Covestro managerial employees took part in web-based compliance training courses and supplementary target group-oriented, on-site training sessions.