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Transformation of Brazil’s distribution system: One eye on the future
Jul. 18, 2019
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Renato Seraphim
Business Strategist / CEO
By Renato Seraphim
Today, Brazil is one of the largest agricultural input market and a top three producer of major crops, which are soybean, corn, sugarcane, cotton and coffee. Due to the country’s soil and weather, it can grow five diverse types of crops in three years, as well as host cattle farming and livestock integration businesses in some areas. Brazil has four agricultural regions with various distribution accesses. Some 44% of agriculture input sales in Brazil comes from distributors, 28% from cooperatives, 27% from direct sales and pools, and 1% through trading.
Access varies from region to region, in Cerrado there is more direct sales, while in the center of the country there is more distribution, and in the south there are more cooperatives.
Understand these dynamics and changes to the sector is key. Today, the agribusiness sector is witnessing many transformations, which are:
- Environmental pressures reducing the number of chemical producers, directly affecting cost.
- Agrochemical and seed companies are merging, as well as fertilizer companies, reducing the number of providers.
- Ag-techs began a technological revolution in farms and made industry associations migrate from technical and management streams to e-commerce.
- Logistics facilities in Brazil have affected the entire chain, impacting competitiveness.
- Brazilian farmers are more globalized and better connected, with access to more information and greater demand for professional capital human.
All these changes have affected the entire distribution system, causing:
- Lower margins
- Difficulty accessing capital
- Increased demand for specialists
- The need for verticalization to compete against Brazilian cooperatives with tax benefits
- More regulations and bureaucracy, making the cost of maintain commercial points more expensive
- New competition from China, buyer pools, international groups, and private equity funds that require changes to the current mindset
How do we react to these challenges? How can dealers face these threats? The quick answer is that companies that are better prepared will make use of new opportunities that arise.
In my opinion, distributors will need to become stronger, and 50 distributors make up a third of the total market. This trend will become more common over the coming years.
It will be necessary to:
- Increase economies of scale and improve operational efficiency
- Choose the best providers and make long-terms contracts
- Invest in proprietary products and provide direct access for new entrants
- Offer differentiated services and invest in new technologies
- Improve product mix by offering biological and other specialist products
- Increase geographical expansion and be present in all regions
- Look for new opportunities, such as insurance, technical projects, financial services and big data
And most importantly, it is necessary to know customers, their needs and their new requirements, and offer, besides products and services, a true and long-lasting relationship.
About Renato Seraphim
Renato Seraphim is an agronomist who graduated from Unesp Jaboticabal (SP). He completed a postgraduate degree in Marketing from FGV and has several specialist degrees in agribusiness from PENSA - USP, FDC, INSEAD and Purdue University.
With 25 years of experience in agribusiness, through working for leading companies in the crop protection industry and plant biotechnology where he performed various functions, such as R&D, technical support, sales and marketing, along with activities related to Brazil and Latin America.
In recent years, he helped to develop Brazil’s distribution system and introduced his company's strategy to the Brazilian market, with the aim of restructuring and achieving market leadership in the region.
In 2016, Seraphim took on a new challenge, when he became President of Albaugh Brazil, where he proposed mergers, drafted appropriate strategies and made Albaugh a leading crop protection company in Brazil.
From April 2019, Renato accepted a new offer from the private equity firm, Aqua Capital, and is leading the distribution operations of Agro inputs in the south of Brasil, through Agro100 with over 40 stores and Agroferrari with eight stores, along with over 200 agronomists providing services and technical assistance to growers.
Seraphim is part of the Board Member Council of FEARP-USP.
Source: AgroNews
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