More than 425 attendees were on hand Dec. 5-7 in St. Petersburg, Fla., for the Agricultural Retailers Association’s 2006 Conference and Exposition. They heard from a range of speakers about the changing retail landscape and the need to rethink marketing plans, and also received updates from ARA staff about pressing legislative issues and ongoing advocacy efforts in Washington, D.C.
Dr. David Downey of Purdue University kicked off the conference’s general session by highlighting changes for ag retailers, including intensified competition among fewer competitors; less loyalty from customers, who are confronted with more choices; more sophisticated and better informed farmer customers; and continued market fragmentation. Segmentation and targeting are key to a successful, long-term marketing strategy, Downey said, and that theme was echoed by numerous other speakers.
Agrium Senior Vice President Richard Gearheard, who is also president of Agrium Retail, highlighted the challenges posed by labor shortages, transportation, biotechnology, security for ammonium nitrate and anhydrous ammonia, globalization, and industry consolidation. “The GMO train is moving,” Gearheard said, adding that the value of GMO seed will continue to increase while chemical sales will decrease. He referred to the effect of the two G’s – genetics and generics – on crop protection, noting that genetics will lower volume, while generics will lower price.
Transportation will remain unreliable for the industry, Gearheard said, due to fewer carriers, limited capacity, higher rates, and longer lead times. North American nitrogen production will continue to decrease as production moves offshore, and nitrogen imports will increase along with delivery lead times. With high oil costs and expanded ethanol and bio-diesel demand, nitrogen prices will not decrease. “If anyone has hopes of seeing $200 ammonia again, I think those are idle hopes,” he said.
Gearheard said retailers will continue to see consolidation and a reduction in the number of owners and facilities, along with increasing environmental pressures at the local level. Along with further rationalization, the ag retail scene will also see more innovation, however. “Innovation, not size, is the key to success,” he said.
Opportunities lie with the profitable niche markets offered by organics and more environmentally friendly products, and with the demands of biofuels. Corn acreage will increase, fertilizer consumption will increase, and retailer revenues will be up as a result. “Everything is lining up for 2007,” Gearheard said. “Don’t blow it.”
Like Downey, Jay Akridge of the Center for Food and Agricultural Business at Purdue talked of the need for retailers to rethink customer segmentation, likening precision marketing to precision agriculture. “Customers are segments of one,” added Tim McArdle of Brandt Consolidation in Central Illinois. “Each is different and requires a different approach.” McArdle stressed the need for key account managers, more consultative sales, and maintaining long-standing customers and relationships. “You must know the needs of local customers to create local strategies,” he said. “That’s what the customer wants, and keeping the customer happy is our objective.”
Joe Spinler and Dewey Holicky of Hwy Ag Service in Le Center, Minn., talked of their company’s efforts at creating customer profiles and tailor-made sales programs through the analysis of customer behavior and buying patterns. Steve Watts, vice president and general manager of The McGregor Co. in the Pacific Northwest, discussed McGregor’s use of separate pricing models and product bundles to let customers segment themselves. While acknowledging that the program was “not painless” and took some time to implement, Watts said the result offers a per/acre price quote that is fast, accurate, fair, and equitable. “This is what the customer is interested in,” he said.
Steve Becraft of Cargill Inc. discussed methods to optimize employee, plant, and equipment performance, and stressed the need to measure customer and employee satisfaction. “If your good people are leaving, look hard in the mirror about why they left,” he advised. “Employees with low engagement scores won’t create satisfied customers.”
ARA President Jack Eberspacher recapped the organization’s fund raising and partnership efforts for the year. He said ARA had dues revenues of $954,715 in 2006, adding that the budget goal of the ARA membership committee in 2007 is $1,050,000. He also highlighted ARA’s partnering successes with Purdue University and ABG in the Excellence in Management Initiative and ABG Blended Learning Solutions programs.
ARA’s Richard Gupton and Jim Thrift talked of legislative successes and challenges for the industry. Gupton referred to the “major power shift” that occurred with the November election, noting the defeat of two-time ARA Legislator of the Year Award winner Sen. Conrad Burns (R-Mont.). Referring to Senate committee leaders Barbara Boxer (D-Calif.) and James Oberstar (D-Minn.), Gupton said, “Whether you want them or not, they are your new best friends.”
Gupton highlighted the October signing of chemical facility security legislation, which provides interim final regulations for “high-risk” facilities, noting that questions remain about which facilities are covered, what risk-based performance standards will be applied, and what vulnerability assessments will be allowed. He also talked of the Ag Business Security Tax Credit and the 2007 Farm Bill. Other legislative issues on the horizon include increased oversight of natural gas trades, emergency ag disaster assistance, reform of CDL background checks, investigations into railroad and transportation costs, and fertilizer trade issues.
Thrift also spotlighted several “hot” issues for the industry, including spray drift and the EPA Drift Reduction Technology Program; application standards and certification; pesticide harmonization with Canada and the new EPA Own Use Initiative; and EPA’s Spill Prevention, Control, and Countermeasures (SPCC) regulations, which Thrift referred to as a “big win for retailers.”
Other less pressing issues for the industry included pesticide container recycling regulations and Transportation Worker Identification Credentials (TWIC) proposals. “The buzz word in Washington, D.C., is security,” Thrift said, noting that many government agencies wish to play a role in security enforcement.
Thursday’s session included an update from Kathy Mathers of The Fertilizer Institute on the Nutrients for Life Foundation, and suggestions on how to improve margins from business author Dr. Larry Steinmetz. The conference also offered Thursday afternoon tours of a phosphate mine and the Tampa port facilities, sponsored by the Mosaic Co.