08 Dec What AAD Ownership Means to Ag Retailers Around the Country
The competitive landscape in the crop protection marketplace prioritizes the procurement power that comes with size and scale. While it’s created economy for larger retailers, it simultaneously adds pressure for others, especially regional companies with smaller service areas, customer numbers and resulting buying power. In other words, the bigger you are, the easier it is to get the most bang for your buck in today’s crop protection product market.
But for independent regional ag retailers, that’s changing; evolving business models like the one Aligned Ag Distributors (AAD) offers its owners are helping independent ag retailers collaborate and work together to firm up product supply partnerships that facilitate a competitive edge that otherwise wouldn’t exist. It’s an equation of price, but it’s built on transparency and relationships among like-minded retailers and the product distributors with whom they work to secure what their customers need, where and when they need it.
The need for alignment for independent ag retailers
Independent ag retailers today work in two different worlds: At the local level, they work with customers to create solutions that are often unique to every acre, field or farm. But doing so effectively — especially knowing the right specific products for each customer and his or her production — requires work in the global crop protection product marketplace. Combined with the increasing economy of scale for the products and services farmers need to raise bumper crops, it’s an increasingly challenging marketplace for independent, regional ag retailers.
“Aligned Ag owners work on a local level, but it’s a global marketplace influenced by variables sometimes a world away from the farm gate,” said AAD President and CEO Mary Tolke. “It’s an increasingly complex marketplace that can make it difficult for independent ag retailers to compete. Aligned Ag helps our owners better navigate that complexity to become more competitive while still doing what they do best: take care of their farmer customers.”
Aligned Ag Distributors owners work together to align individual supply chains into one, resulting in a stronger presence in the crop protection market based on how AAD can manage purchases collectively, resulting in greater buying power and resulting stronger competitiveness for owners securing products for their customers.
“When you get independent ag retail business owners together, there’s a potential risk to how are you going to be transparent with one another. But we found the more that we work together, the more closely aligned we are,” said Carl Hoff, president and CEO of Butte County Rice Growers Association and AAD owner. “So even though we are independent businessmen and we each have our own go-to-market strategies, we know that we are stronger together.”
Solving a common problem for retailers
Like many ag retailers, Hoff faced a growing challenge in staying competitive from a cost standpoint with larger retailers. He knew he had an advantage in the local service he could provide his customers. But cost is always a major priority for the growers he serves, so Hoff knew anything that could help him compete better on that front would be a boon to his business. Ian McGregor shares that customer focus; the president of the McGregor Company and fellow AAD owner said what started out as an admission of a competitive disadvantage turned into a motivating factor in organizing AAD.
“We recognized that we were not going to outgrow those national and international companies against whom we competed. But we fundamentally had to make sure that we were bridging the gap and putting our customers in a good position to be competitive from a product perspective,” McGregor said. “We recognized that we were going to have to come together and focus our operations on those things that we do well and that make us unique.”
Overcoming early challenges
What sounded great on paper at first wasn’t the easiest thing to create in practice. The group of independent, like-minded retailers that eventually started AAD had to set aside some of the competitive impulses that had made them successful. McGregor said his own “lightbulb moment” came when he realized there was a lot of efficiency to be gained by working together with other retailers like himself.
Other AAD owners faced the same challenges in their respective markets and had shared strengths in farm-level service. And they serve farmers in different geographies, meaning they’re not in direct competition with one another. Once McGregor saw his challenges were shared with others like him, AAD ownership became an easy choice.
“Each individual AAD owner had that same lightbulb moment and recognized ‘Hey, there’s a better, more efficient way to do this.’ It just happens when you work together with the right like-minded partners,” McGregor said. “We had a number of inflection points in becoming an AAD owner, and the biggest one was we saw that everyone was trying to reinvent the wheel with the same product distribution process. We decided we can serve our customers better by working together on some of these functions critical to our business.”
Added Hoff: “Since we became an AAD owner, I have developed a greater appreciation of the global nature of agriculture. We have access to market intelligence that helps us manage our supply chain logistics. As we see the supply chain logistics issues, I think we’ve just got a bigger picture of the global marketplace and how things that might happen halfway around the world can impact us and our customers at the farm gate.”
The future of Aligned Ag Distributors
Moving into the future, McGregor, Hoff and Tolke agree that the crop protection marketplace will continue to be challenging for regional, independent ag retailers. Washington state-based McGregor said while growth is likely for AAD, it will only happen with the right people and companies involved. And that’s what current AAD leaders and owners will prioritize in the coming years as they work to level the crop protection product market playing field.
“The key for us in the next one to three, or even arguably 50 years will be to make sure we grow responsibly in a way that fundamentally continues to bring like-minded retailers together,” McGregor said. “That’s where the strength of Aligned Ag Distributors lies.”