Four industry leaders provided their insight into the recent wave of mergers and acquisitions and shared their advice for ag retailers during the 2019 CAAR Conference.
From left to right:
Bayer CropScience Inc.
Driver has held the role of President & CEO of Bayer CropScience Inc. since January 2015. Driver is responsible for the leadership and management of Bayer’s Canadian Crop Science division.
Newton is the head of global research at Nutrien. Newton leads the team that is responsible for analyzing and communicating all agriculture fundamentals and long-term fertilizer price forecasts.
Orr is the leader of Corteva’s Canadian marketing division, leading all short- and long-term strategic developments for the Canadian region and is tasked with delivering the annual business plan.
Sweat is the vice president of business management with BASF Canada. Sweat has been with BASF for 25 years and is responsible for overseeing operations of BASF’s business divisions.
Mitch Rezansoff (Moderator)
Executive Director of CAAR
Mitch Rezansoff: What does the new company look like, and can you share some of the lessons you learned?
Al Driver: We announced on January 18 the structure for the commercial team that we have now for retailers in Canada from coast to coast. You should know who your new Bayer representative is. Those individuals will be providing full product line support as it relates to our entire portfolio. So you will have a key contact and they will bring in expertise from other areas of our business. We felt it was a huge priority to have some clarity for people to know and be accountable for the business heading into spring.
What did I learn from it? Both organizations had tremendous skill sets and one of the most difficult things was that we didn’t have enough positions to keep everybody. We had to make some really difficult choices in terms of people and families. That’s the really lousy part of the entire integration.
Jason Newton: 2018 was a year of a lot of integration activity; a lot of change happening through the company. We made really good progress but there are still some changes to come. The biggest of which is Canadian focused – the conversion of red water MAP production and producing more ammonium sulfate to our U.S. operations and shipping to Canada.
One thing I’ve learned, and maybe it’s obvious in hindsight, is that communication is key – and we take it for granted. I’ve been doing what I do for a long time and you take for granted the process. There can be misunderstandings and mistakes made along the way because communication didn’t occur.
Brad Orr: During the merger, I think one of the critical things I learned is that we’ve always got to focus on the customer. Don’t take your eye off the customer – get your commercial team out and ready to go to make sure that we’re meeting the needs of our strategic partners and the farmers through all of that.
Dow DuPont is the overarching company and then there are three operating divisions that started. Dow is a new material science company and that’s actually going to spin out April 1. So, it’s going to be the first time you can buy Dow stock instead of a Dow DuPont stock. And then on June 1, the new DuPont specialty chemical company and Corteva are going to spin out as well. It has been a long journey since the merger was approved in September 2017 to where we’re at right now. And within that you have these three big companies that are spinning out.
Lessons learned? Jason mentioned communication – if there’s voids in communication people start making stuff up about, “What’s going to happen?” “What’s going to happen to me?” “What’s going to happen to the market?”
Jonathan Sweat: It’s all about people, right? First, making sure the customer is taken care of, and that you maintain business continuity as smoothly as possible in front of the customers. Secondly, it’s about your own employees internally who are counting on you every day.
When we brought the seed assets into the organization, we knew we needed to make sure that we protected that intellectual property and the people associated with that. So, we formed a business unit around that. The global seed unit for canola runs here out of Canada, which is a really nice asset. Their job is to make sure that those Invigor hybrids get ready for market and brought to us and then my team takes those to market to sell.
So, where we are in the process: I would say we’re probably 80-plus per cent of the way there. We’re largely set in many areas but there are still some key decisions to be made. A big one that I’m sure is on a lot of people’s minds is around the distribution model, which we’ll be making a decision on later this year.
MR: Has your business model changed already, or is it going to start evolving over the next one to two years? And is that going to change your relationships with agri-retailers?
JS: In terms of our model in the market, we still have the business reps and the I.S. team calling on the retailers and growers and we expect that to continue in the future. Obviously, the purpose of setting up the model that way was to bring innovation to market quickly. That’s a key focus for us, and it’s going to be even more important moving forward. Probably the biggest change for us is that traditionally BASF would have been considered a pulse company. Pulses are still very important to us, but now we’re obviously a very significant canola company as well, so, we have a broader portion of the portfolio to discuss. Now being a bigger part of your business, we want to earn that respect, earn that relationship over time and be able to talk about more complete solutions for your growers.
BO: Within Corteva there were a few things that changed. There were different models from DuPont Pioneer to Dow AgroSciences internally and then our road to market. So, one of the major changes we made in Eastern Canada is the district sales leader in Eastern Canada now has the Pioneer territory manager and Brevant crop protection territory managers reporting to him. That’s different in Western Canada, where we still have separate district sales leaders for the Pioneer territory sales managers and district sales leaders for the crop protection and Brevant Seeds.
Brevant Seeds is a big change from our market evolution. There used to be farmer dealers within Dow Seeds as well, but that has changed. Brevant is 100 per cent distribution retail focused. The Pioneer brand is through the Pioneer rep model, and that’s how we’ve evolved that piece. The other key principle is, as far down in the organization as we can go, responsibility for individuals is both for seed and crop protection. So, we’ve taken it a step further in Eastern Canada right now and I think that’s going to be a model that we’re looking at from a global standpoint.
JN: In terms of changes that have happened, it started from the corporate level and worked its way down. We have a lot more production capacity and a lot more reliability in terms of supply and complementary assets throughout North America. Regardless of which side you came from in the merger, that’s consistent. If you look at the business units, I think our relationship with customers hasn’t changed as a result of the merger. From a wholesale standpoint, we still go to market in a similar fashion – just with a bigger footprint and more production throughout North America and around the world. From a retail standpoint, we have a similar strategy to what we have had historically. We’re working to add value to the grower whether that is through the products or the services that we’re offering.
AD: For Bayer, we closed the deal in the middle of August. One of the first things we did, was make a commitment to retailers that there would be no changes in distribution, or promises, or commitments for the 2019 season. We felt that it was critical to our business not to make short term decisions to change the way we go to the market for the 2019 season.
That said, how both legacy organizations have gone to the market and how they’ve partnered and built relationships and long-term loyalties with retailers has historically been different. We have some significant decisions to make as an organization. What we did commit to our customers is that we would try to make those decisions in the first quarter so that people can understand how we will move forward as an organization. It’s an exercise that takes real thoughtfulness, real communications and interactions with customers.
MR: What broad changes do you expect to see in agriculture production over the next three to five years? I would also like to give you an opportunity if you would like to disclose some future actives or systems that are very near to coming to market.
BO: We’re hearing a lot about Block Chain right now; this traceability right from beginning to end. Big food is demanding it – Walmart, Simplot and others. Farmers can’t even have production contracts unless they can clearly demonstrate that they can have the same or better production with fewer inputs. To me, that is probably the biggest opportunity that we have.
JN: Bill Gates said that we tend to overestimate the level of change that will happen in the next two years and underestimate the change that will happen in the next 10. If you look at agriculture today, across North America in particular but also around the world, we’ve gone through a prolonged period of production economics that aren’t great. That’s been the driving factor of consolidation. Farmers are looking for increased efficiency through the supply chain. We’ll continue to see increasing efficiencies that will be facilitated by technology. Automation will be a big driver of change and potentially further consolidation at the farm level. We’ve seen a lot of consolidation at the manufacturer level, and that increases the scale, which should lead to more innovation. That innovation will lead to a lot of change.
AD: If we discover a new active ingredient today, it’s 10 years, plus or minus, to get it to you to provide to your growers. If we discover a genetic trait we want to deregulate, it’s probably 15 years from the date of discovery. These things are moving slowly, and they take a tremendous amount of resources with MRL issues, export issues and now obviously tariffs and other barriers. There are no surprises coming in terms of technology in three to five years. What we don’t know, and what I think you need to be aware of, is the environment for keeping the tools that we have today with the re-registration processes and public perception and pressure on our industry. I can speak to personal experience with neonics and now with glyphosate. We don’t need to worry about what’s coming – we need to protect what we have today.
JS: In the next five years, farmers will still have the same basic challenges. They’re pushing yields, trying to manage risk and manage efficiency. That hasn’t changed and that won’t change – but the stakes associated with it are going to get higher.
Everybody up here is involved in digital platforms and there’s a whole lot more data than there is insight. Retailers are in a very unique position to help your customers sort through that heap of information and do exactly what they’re trying to do – which is be prosperous and continue to pass the farm down to future generations.
We talked about consolidation, but we’re just looking at a single point in time. It’s still going to change a lot more. People sitting in this room are going to change and the growers are going to change. The rate of change is just simply going to increase going forward, and we’re nowhere near the end of this thing. We’re probably closer to the front side of it.
MR: I’ll give you an opportunity for closing remarks to summarize what you’ve heard here, and also, from your perspective where do ag retailers need to focus direction?
JN: I think the bottom line is we need to continue to add value for the grower. Whether that’s through adopting technology that allows them to work with the downstream users of the product, or comply with regulations, maximize productivity – all of those things. The more you can add value, the better. The other way to add value is by being more efficient so; reducing the cost to serve and looking for ways to increase efficiency through the supply chain.
JS: Growers have a good idea of what they’re doing, but they still need a tremendous amount of help sorting through the vast amounts of information that come from us and from other sources. That’s where retailers have always created value and it’ll be the ongoing challenge. You need to ask yourself, what differentiates you? We do this every day and I encourage you to do the same.
AD: The agriculture industry is a privileged one and people generally spend their entire career in it. I’m an example of that. So, remember to invest in your people, train your people and hire good people. Be open to change and new dynamics. People are important, relationships are important and providing value is always key.
People are important, relationships are important and providing value is always key.
BO: We’re going to compete in the marketplace, but there’s a broader good that we’ve always got to keep at the forefront of our thought process. From an ag retailer standpoint, there’s all kinds of challenges. There’s the online people trying to erode away the value that you bring every day. And we have to all make a living off the same acre. I keep reminding my team all the time, “We all make a living off the same acre and the farmer has got to be successful or none of us are going to be successful.” I think that if we keep that in mind, we’ll all be successful, because we’re all adaptable to change.
MR: Any questions from the floor?
Ray Redfern: We all have opinions about internet-based marketing in ag retail. For most of us who aren’t there yet, we’re interested to hear the thought process from the four of you on the value of this compared to what we’d call “traditional ways?”
JN: Lots of people talk about “Amazon equivalents” in agriculture. One of the big drivers behind Amazon’s success has been the supply chain. They’re not filling physical stores, not paying leases and not paying people to be in those locations. I think it’s inaccurate to say that’s how ag retail has to go. To some extent, “retail” is a misnomer – it’s really a distribution system. There are necessary investments in the distribution infrastructure and the ability to provide value and service to the grower that improves their productivity. There’s no doubt that the current generation and certainly future generations will have a big appetite for e-commerce. Growers are going to want to have the ability to purchase inputs online and that will lead to changes. But the current network is efficient in moving product to growers, and health and safety is an important aspect as well. I think the way to protect your business is to be as efficient as possible, adopt technology and have an efficient supply chain. That’s all part of adapting to the new world.
AD: Quite frankly, digital is coming. There are a number of retailers in Canada today looking at how they provide products through digital means, so this technology will come to our industry. But, at the same time, it also has to come from an AWSA warehouse. You have an opportunity to look at and evaluate how you make things easy for your customer – digital is one way, if they can order a product on a smart phone. It’s going to be up to the people in this room to figure out the digital arena in the next few years, because it’s coming.
JS: There’s a great opportunity to adopt e-commerce and get in front of it. Don’t wait to be a victim. Drive your own destiny in this area – don’t be driven.
Editor’s Note: This discussion has been edited for length and clarity.
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