TRENDS IN THE BRAZILIAN DISTRIBUTION SYSTEM

FOR AGRO-INPUTS

Wanderson Rodrigues2013, March, 15

Visao fundação Marcelo prado

... our way of seeing

500d e a l e r s

300c i t i e s

25s t a t e s

A r g e n t i n aB o l i v i aB r a z i l

P a r a g u a yP o r t u g a l

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70c o n s u l t a n t s

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15y e a r s

CORPORATE  GOVERNANCE

100l a r g e

f a r m e r s

60c o o p s

TECHNOLOGY

TRADE

BUSINESS

MANAGEM

ENT

CORPO

RATE

GOVERN

ANCE

1970  -­‐  89

1990  -­‐  99

2000  -­‐  

09

2010  -­‐  19

Brazilian

   Ag

ribusiness

Source:  Mprado  2011

Buying Groups1%

Coops21%

Industry32%

Dealer46%

Source: KFF Group 2012

WHERE THE BRAZILIAN FARMERS PURCHASE THEIR INPUTS?

INPUTS SOLD BY THE DISTRIBUTION CHANNEL(Dealers and Coops)

66%Agro-inputs

45%Fertilizers

60%Crop Protection

82%Seeds

↑2012

Source: ANDAV 2012 and MPrado survey with industries

(Dealers and Coops)

$1,7  bi

FARMERS PURCHASEOF CHEMICAL PRODUCTS

(agribusiness Size X Channel)

Small Farmers Medium Farmers Large Farmers AG Companies

Direct SalesDealersRedistributors

Redistributors Direct SalesDealers

Direct SalesChannel

17%

50%

17% 16%

Sour

ce: K

leffm

an 2

012

and

MPr

ado

Surv

ey

The  actors  in  this  market  need  to  deal  with  it  is  the  weakest  link  in  the  chain  that  defines  their  level  of  compeBBveness

INTEGRATEDVALUE CHAIN

GOOD EXAMPLEMAY 2012

Syngenta supported some dealers to capture 86Mi R$ in a transaction using CRA at Bovespa Securities Market.

The goal was to capitalize some of the dealers, help them to become more competitive and enable them to sell a

range of products (chemicals, seeds and fertilizers).

Source: Syngenta Press Release 2012

Who can best understand the

Brazilian market needs?

PANORAMA OF BRAZILIAN AG DISTRIBUITION

↑ 4,02% in 10 years

↑ 6% average profitability

↑ 1,5% default rate2002 2011

8.0008.322

Source: ANDAV 2012 and MPrado

THE RUIN OF AG DEALERS IN BRAZIL

(main causes)Lack of corporate governance

§ High levels of farmers’ default

§ Indebtedness with suppliers and banks

§ Low quality Management

§ Disharmony between partners

§ Misalignment in partnership with industries

§ Small product portfolio

§ Expansion and diversification poorly planned

§ Difficulties in complying with the local, state and federal laws

Source: ANDAV 2011 and Mprado

MAIN CHANGES IN FARMING BUSINESS

• Prioritizing main crops • Outsourcing services• Strengthening partnerships with dealers and industries• Adopting Hedging• Using of state of the art ag technology (seeds mainly)• Valuing better trained and prepared workers • Implementing management information systems (ERP)• Professionalizing marketing and management

Source: 500 company study MPrado 2012

MAIN CHANGES IN CROP PROTECTION BUSINESS• Crop industries merge and takeovers• Growth of generics• Molecules Exchange between industries to maximize portfolios• Customer segmentation• Business Clusters (geographical - customers - crop)• Formal Business Agreements with dealers• Solidification of partnerships à industries / dealers• Plant Protection moving from chemicals to seed resistance

through biotechnology

Source: 500 company study MPrado 2012

SCENARIO AND TENDENCIES IN THE DISTRIBUTION OF AGRO-INPUTS• Expansion of Dealers (concentration)• Improvement in professional management• Investment in education to develop talents• More compliance with the Law: tax, social, environmental• Sales Force Automation and CRM• New services and integrated solutions• Strengthening of relationships with main suppliers• Rigidity in credit management for farmers• Importance of dealer capitalization to offer fertilizers• New Business Models (partnerships among dealers and between

dealers and other players like food industries)

Source: 500 company study MPrado 2012

MANAGEMENT:

Key Performance IndicatorsManagement reportsInventory turnoverSharing decisionsInternal and external communicationRisk management / Credit ManagementEnvironmental regulation

COMMERCIAL:

Customer ManagementSales Force ManagementMarket Intelligence

Distributors managementRoom for improvement

Source: 500 company study MPrado 2012

FINANCES:

Annual budgetCash flow managementInvestments Valuation

HUMAN RESOURCES:

Payment by results (wage and benefits)Performance EvaluationHR Policies Management

Distributors managementRoom for improvement

Source: 500 company study MPrado 2012

What does the future hold for Agro-inputs distribution in Brazil?

In the future, the local distribution of agrochemicals will follow the American or

European model?

Farmers will keep buying products or convenience services?

”… 40% of the increase in global agricultural

production will come from Brazil

in the next years. “Marco Antonio Nasser, Chairman of the Board ANDAV

What are going to do?

TRENDS IN THE BRAZILIAN DISTRIBUTION SYSTEM

FOR AGRO-INPUTS

Wanderson Rodrigues Silva, CCIDirectorwrs@mprado.com.br+55  (34)  3228-­‐3300+55  (34)  9192-­‐3366