Overcoming Agricultural Retail Crisis in Brazil: The Exemplary Journey of Campofert

In recent years, Brazil has witnessed a unique phase in its agricultural crop input distribution, marked by industry consolidation, the entry of new players, mergers and acquisitions, store openings, growth of purchasing pools, emergence of marketplaces, and new business models. 

The agricultural retail sector now faces a challenging period, reminiscent of the difficulties currently experienced by traditional retail in Brazil. The crisis in traditional retail serves as a significant example of what could potentially happen in agricultural retail.

Rising interest rates, leverage, intense competition, consumer default, and a myriad of problems have inflicted substantial losses on companies and their investors in both traditional and agricultural retail. A common characteristic among these retailers, be they traditional or agricultural, is their reliance on product suppliers to finance working capital, leading to a high dependency on these suppliers. This practice increases leverage and significantly reduces profit margins.

As competition intensifies, retailers strive to dominate territories, resulting in a drastic increase in operational costs. Reduced margins, escalating costs, and higher capital expenses become key ingredients for downfall. Traditional retailers' stocks in the Brazilian market have plummeted, foreshadowing a similar fate for agricultural retail if immediate actions are not taken.

Drawing inspiration from a famous Brazilian whisky brand slogan, "Eu sou você, amanhã" (I am you, tomorrow), the comparison between agricultural and traditional retail reveals striking similarities. Campofert stands out as the most emblematic example, having experienced a similar crisis a decade ago. 

In traditional retail, there have been several examples like Mappin, Mesbla, Arapuã, Jumbo Eletro, and others that could have provided valuable lessons.

Founded in 1979, Campofert initially demonstrated exponential growth. However, around 2014, it embarked on a phase of aggressive expansion, like the current trend among various distributors. 

Unfortunately, the consequences faced by Campofert, resulting from this audacious growth, have raised concerns about the future of distributors repeating the same mistakes.

Campofert, in its bold expansion, overlooked the importance of prudent financial management. The aggressive growth led to investments beyond its financial capacity, with expenditures in management and assets, neglecting credit risks and climate uncertainties inherent in agribusiness. During these "golden years," Campofert initiated a management improvement process, implementing an expensive ERP system unsuitable for current needs.

The company also opened numerous stores in unfamiliar territories, including a disorganized expansion into Mato Grosso. The original owners were replaced by renowned executives from other industries, resulting in an inflated organization that worked on non-essential business aspects. This expansion led to a loss of agility, knowledge of genuine customer needs, and a focus shift from the customer to mere growth, devoid of sustainability and business perpetuity.

The catastrophic outcome compelled Campofert to file for judicial recovery in 2018, a painful process affecting all stakeholders in the chain, including the company, employees, suppliers, and, most notably, the customers. 

Many distributors today are fighting with lessons learned through Campofert's judicial recovery plan, emphasizing professionalized partnerships with producers, continuous credit risk monitoring, and seizures of grains in case of producer partnership failure.

Abandoning major management projects with renowned consultants and executives, Campofert faced imbalanced operational costs, depersonalized sales due to the absence of commercial teams at producers' locations, overconfidence in the field and financial markets, and a lack of credit for working capital. 

The peak of its operation spanned three states, with over 2,000 clients, 17 units including stores and silos, producing 520,000 tons of soy and corn, generating a revenue of R$ 240 million.

However, judicial recovery led to the loss of credibility with suppliers, increased competition, demotivation among employees, and customer abandonment, resulting in a 50% drop in revenue the following year. 

The pivotal point for Campofert's recovery was a united effort—from producers continuing to supply and collaborators facing the challenge of rebuilding credibility to the broader community where Campofert operated.

Serasa Experian's study revealed that only one in four companies survives in Brazil after filing for judicial recovery. Among 3,522 companies with approved recovery requests, only 946 completed the process, and 218 of them resumed activities. The remaining 728 companies declared bankruptcy.

Addressing the agricultural retail crisis in Brazil is a complex challenge involving various economic, social, and political factors. In this context, judicial recovery should be the last resort due to the reasons mentioned. However, in Campofert's case, it was deemed extremely necessary.

Post-judicial recovery, the return of original owners, closure of unprofitable units, and the reduction of personnel by selecting the most resilient employees were the initial steps. The formation of a council and assistance from specialized companies marked the first actions. Over the next five years, Campofert underwent a management overhaul, leading to the closure of the recovery process in 2023 and the restoration of customer confidence.

Despite a challenging year for Brazilian agriculture in 2023, Campofert achieved its highest volume ever, indicating that agricultural retail solutions lie in fundamental aspects such as supplier management, risk management, SG&A management, targeted product offerings, operational excellence, and, above all, customer focus.

Tons of Soya, Corn and Sorghum commercialized by Campofert during the last years ( R$1,2 Billions in 2023)

Sales of Crop Inputs (R$ Millions) by Campofert during the last years

Campofert's example should inspire distributors to proactively adopt measures rather than resorting to judicial recovery. Here are some key actions taken by Campofert that could serve as immediate strategies:

Development of a Recovery Plan According to Government Policies:

Created a solid plan with clear goals, cost reduction strategies, revenue increase, and efficient resource management.

Advocated for public policies facilitating business environments, engaging executive managers in discussions with authorities across Campofert's municipalities.

Creditor Negotiation and Inter-Company Collaboration:

Conducted transparent negotiations with creditors to restructure debts, seeking favorable conditions and realistic payment timelines.

Engaged owners and leaders in discussions with suppliers to optimize the supply chain, gaining trust from many, crucial for the success of the operation.

Financial Review and Restructuring:

Analyzed and restructured the company's financial structure, identifying and eliminating unnecessary costs, renegotiating contracts, and adjusting operations.

Finalize with some  operational units, stores, and a Diesel Distribution Terminal, maintaining only the most profitable unit.

Enhancement of Operational Efficiency:

Implemented more efficient and productive processes to maximize operational efficiency and reduce waste.

Restructured the credit committee, decreased crop inputs stocks in stores, and achieved logistic efficiency.

Investment in Marketing and Sales:

Strengthened marketing and sales activities to boost revenue and rebuilt the customer base from the pre-judicial recovery (RJ) era of 2000 clients to a focus on 840 clients, with 600 of them exclusively associated with the grain’s origination area, providing an opportunity for growth without the need for expansion. 

 Developed a new marketing approach, customer segmentation, increased investments in field days and lectures with farmers, and tailored campaigns based on customer loyalty.

Invested in awareness and transparency campaigns with farmers, explaining every step of the RJ process. 

Implemented a business intelligence area through a commercial desk and data analysis to better understand farmer behavior and optimize the supply chain.

Innovation and Diversification:

Explored new business opportunities, products, or services to diversify revenue sources and adapt to market changes, such as the creation of a brokerage focused on minimizing risks for producer clients through agricultural insurance. Additionally, they ventured into a new business offering products for feedlot operations, increased Barter operations, and emphasized higher-margin products like seeds and specialties. 

Invested in technologies to enhance the customer experience, including mobile applications, efficient e-commerce, and innovative payment systems such as Grão Direto and Izagro. They also implemented territory management programs for demand generation and recommendations (6th Grain).

Adherence to Commitments and Legal Compliance:

Strictly adhered to commitments outlined in the recovery plan, demonstrating financial discipline and commitment.

Maintained transparent and constructive communication with all stakeholders, including customers, suppliers, employees, and investors.

Stakeholder Relationship:

Maintained transparent and constructive communication with all stakeholders, including customers, suppliers, employees, and investors.

The role was primarily played by owners and organization leaders.

Continuous Monitoring, Evaluation, and Adjustment:

Established a robust system for financial and operational monitoring, focusing on cash flow and regular assessments of progress.

Adjusted strategies regularly based on the company's performance against recovery plan objectives.

People Management and Customer Experience Focus:

Engaged and motivated the team, ensuring that everyone was aligned with the company's recovery objectives. 

Empowered employees to provide more personalized and efficient service to farmers. Sales and farmer interaction training (Weekly monitoring of visit routines and offers to farmers). 

Developed digital skills to adapt to technological changes in the industry.

Prioritized customer satisfaction through strategies such as loyalty programs, preferred customer service, and customization, including anticipating offers such as high-value insurance, optimal negotiation times, and business fairs.

Although 2023 has been a very challenging year for Brazilian agriculture, Campofert has grown significantly, demonstrating that solutions for agricultural retail involve simple things such as supplier management, risk management, SG&A management, seeking products where consultative sales are more necessary, operational excellence in all processes, but above all, a focus on the customer.

Customers no longer tolerate mistreatment, and if you are not relevant and helpful to them, they will replace you with a click or by asking someone else to manage their purchases and avoid dealing with input providers.

I hope that Campofert's example inspires us not to resort to judicial recovery, and that with simple and effective measures, we can use their example to inspire us and avoid falling into the mistakes we are witnessing in traditional retail.

"I am you tomorrow" cannot be our future...