The Ag Inputs Love Triangle
The Ag Inputs Love Triangle
Every company on the planet is working towards getting someone else’s dollars. Some provide products, some provide services. Some are value added. Some are wholesale. There’s an unlimited set of ways that this can be done but some are more popular than others.
In mature agriculture markets like North America the most popular is what I call “the love triangle”.
The Farmer. The Retailer.
And the guy in the white Ford truck.
A bundling of product and service that seems to serve the values of this market given the level of product market fit it seems to have.
The “guy in a white ford truck” comes with many names.
In the animal world this is a “nutritionist”.
In the crops world this is a “agronomist”.
In the retail world this is a “salesperson”.
These prolific pounders of the pavement work the majority of their adult lives building relationships with farmers in an area as small as a town or as big as a continent.
They do a mix of technical sales, advisory, and farm strategy for customers depending on the products margin and the size of the farm. The higher the LTV ( Lifetime Value ) of the customer the higher the amount of service.
There are a huge number of people both inside and outside the triangle that benefit from this setup and such secure its place in commerce.
The brand that leverages a dealer network or other forms of non direct distribution get to count on these “boots on the ground” to create the necessary branding warm fuzzies and provide customer support without managing them or hiring them.
The retailer that hires these people use them to build a competitive wedge in the local market. Through a wide range of incentive structures the salesperson becomes adept in a near artistic fashion at bundling loss leaders with high margin products into an attractive package for both the farmer and retailer given the purposely obfuscated environment in which they compete.
The lender that is often also the retailer utilizes these direct to farm denizens to help asses the farmers credit worthiness. Does this farmer leave junk in the yard? Did I hear a rumor of unpaid debts? Did we drink beer at the same college? Since farm bankruptcies are a given and having the 5th claim on a sinking ships bank account leaves you basically rekt this is important. They also act as collectors when 30 day terms become 90 day terms etc.
And on a good year they get to be the person that hands out free trips to Cancun for the farmers adult(ish) kids to keep everyone happy to be in the triangle. 🌴
This is the way of the love triangle.
Until one day the salesperson shows up in a truck with a different sticker on the side.
In many cases the farmer opts to follow the salesperson to the new retailer.
The market is pretty undifferentiated and the seller knows how the farmer likes to be sold and the farmer doesn’t mind this particular individual. They maybe even enjoy each other.
Because of a general lack of *real* differentiation in the market the farmer rarely feels too hurt about it.
As long as the credit terms with this retailer are just a friendly and the brand is one the farmers neighbor wont look at him funny in town for having on a post in the ditch.
And commerce continues. Happily ever after… to the end of days.
Thoughts on the future.
Getting sold to and selling should be more transparent. Farmers know the guy gets paid but at-least anecdotally from a hundred stories in the midwest there just is a very small appetite to transparently know what that number is. Especially cutting a separate check for it. Everyone wants it to both feel expensive and cost $0.
As farms get bigger and the total number of farms gets smaller this actually empowers the love triangle since there is a natural gravitational pull for a salesperson to target the largest operators since they can “feed more cows” or “plant more acres” for each visit. If the small operators are naturally going out of business this is in line with the gravitational forces of this existing incentive structure.
One saving grace of large farms is at a certain scale it makes sense to hire “in house counsel” per se and start buying things closer to the wholesale level. This increases margin capture at the farm level and is a cleaner more appropriate incentive structure in my opinion inside of a commodity market.
Should we proliferate this model elsewhere?
I don’t know much about emerging markets from on any boots on the ground experience ( yet ) but direct in person sales doesn't scale when each farm has 3 cows and 3 hectares. This leads me to believe that this model won’t work there pre-scale and its probably better off that we skip this specific iteration of commerce in those markets and leapfrog to whats next.
To me, at its core, the ag inputs salesperson job is to be an influencer and cowboy credit officer.
The current wild west nature of unsecured ag credit is going to be eaten up by an incoming wave of fintech providers. Credit, insurance, hedging products will systemically change the reality of these problems. These products will be very hard to build but the trend and incentives are clear. Fintech is eating the world and the mountains of coin to be won will make sure this happens.
With credit taken out of the equation the inputs salesperson becomes pure influencer.
Influencer is a bit of a dirty word but scaling value through media is not.
It makes sense to me that the new model is some mashup of transparent buying bundled with influence/education/teaching scaled by media + credit via tech.
This is pretty broad and allows for many models to proliferate from bespoke opt in managed supply chains to decentralized marketplace platforms.
A lot of companies will need to be made to build this reality and each reality will fit differently at a different rate in each market.
What do you think should happen?