A Rebel and an Outlaw: Disruption In Agriculture

Article #9 of 9 in “Unconventional Thinking”

Is the agricultural industry ripe for dis-inter-mediation? If one truly observes what is going on all around us, then the answer is yes. 

There is something happening to supply chains everywhere. Entire industry verticals have been disrupted by digital upstarts. Yet in the agricultural industry very little has fundamentally changed. Manufacturers as well as distributors and retailers continue to take for granted that the value of their advice, support, and relationships will carry them through. 

“They think the ag value chain only exists to take advantage of farmers”

In many years of observing the industry we’ve become extremely skeptical of this viewpoint. It’s not just that farmers keep telling us the industry needs to change. It’s that we see a small but significant group of farmers who actively distrust their suppliers - and want other options. Why the level of distrust? For a small minority, there may have been a service breakdown in the past that altered the farmers perception of the relationship, but in the discussions we’ve had, we think it is something else. Some people are simply hardwired to be skeptical!

“A different approach”

We estimate that somewhere between 15 and 20% of farmers actually have an antagonistic view of the relationship. That is, they believe that retailers exist to take advantage of farmers unless the farmer turns the tables by exerting scale pressure or using mechanisms such as tender pricing. These are the customers who will start the revolution!

Why aren’t Agri-marketers doing more about this? It may be that they think their product is so technically superior that it will sell anyway. We think there is another reason - they are simply burying their heads in the sand. It’s a classic case of biased measurement. Almost every focus group or market research survey will at some point address the role of the retailer in influencing a product purchase. The prevailing wisdom is that a farmer’s relationship with their suppliers varies from neutral (recommendation has no impact) to strong (recommendation is taken at face value). That is, there is to one degree or another, a win-win component to the relationship.  This is where the biased measurement comes in. By using a scale from “neutral to strong positive” we are using a one-sided scale. We are not allowing the respondent to express their true feelings. To ensure we see a more complete picture we have been using alternative wording: “when recommending a (fungicide, feed additive, etc), my retailer has my farm’s best interest in mind” and using a scale from strongly disagree to strongly agree.

Why This Is Important:

The business model for almost every agricultural input is predicated on the assumption that the channel provides value add beyond logistics and inventory. If this assumption is invalid, then this industry is indeed ripe for disintermediation.

If you like to discuss further, challenge the thinking or help us confirm the hypothesis - let us know - we want to talk with you!