Driving Impact in Brazilian Crop Input Distribution: The A+ Distributor Strategy

Date:04-14-2025

I wrote this article with the firm conviction that the crop input distribution system in Brazil, the essential engine of the sector's dynamism, urgently requires a profound review and strengthening. The difficulties permeating the chain, impacting efficiency, profitability, and, crucially, the satisfaction of our farmers, cannot be ignored.

We have witnessed cases of once-promising companies, which boasted exuberant returns and impeccable service to farmers, succumbing to a system that imposed the weight of their own inefficiencies upon them. We have seen margins erode, default rates escalate due to poorly planned expansions, operational costs inflate due to inadequate management models, and even a diversion of focus towards agendas far removed from the core of the distribution business.

Let me be direct: the heart of a distributor beats in sync with its customers, its suppliers, and its employees. It is within this triad that the key to generating genuine value for entrepreneurs, shareholders, and society as a whole lies. Any deviation from this primary focus results in empty promises, in discussions disconnected from the reality of the field.

    Although the spotlight often shines on the results of publicly traded companies, a deeper analysis reveals that these challenges resonate across numerous other distributors in our country.

In this article, I share not only a critical analysis of the obstacles we face but, above all, a call to action. I firmly believe that by working in synergy – suppliers, distributors, and all links in the chain – we can revitalize the distribution system in Brazil and lead this vital sector back to its most prosperous days.

The Current Challenges of the Distribution System: A Detailed Analysis

We can condense the main obstacles of our distribution system into six crucial points:

1. Logistical Inefficiency and High Costs: The lack of logistical optimization and the slow adoption of technologies hinder the agility and effectiveness of input delivery. This translates into higher costs and longer waiting periods for farmers. Added to this is the inadequate management of suppliers, resulting in an excess of SKUs that invariably culminate in returns, disposals, or donations, generating significant losses for suppliers and, especially, for distributors. 

   Brazil's continental dimensions exacerbate this issue, with a lack of integration between transport modes, excessive dependence on road freight, and flawed inventory management. Expansion through acquisitions, while strategically sound at times, has often neglected the integration of logistical operations, perpetuating high costs and a lack of synergy.

2. Pressure on Margins and Aggressive Competition: The entry of new players into the market has intensified competition. The lack of preparedness for more technical and consultative sales has commoditized offerings and squeezed margins. The proliferation of purchasing pools and digital marketplaces, with leaner service structures, offer greater competitiveness, further eroding the margins of traditional distributors. These often struggle to compete in scale and efficiency, making the fierce commercial war advantageous to only one link in the chain. The direct sales strategy with aggressive discounts, adopted by many companies, has proven unsustainable in terms of profitability. Data from Crossara consultancy indicates that 36% of crop input sales in Brazil occur directly from suppliers to farmers, limiting the competitive capacity of distributors.

3. Deficiency in Innovation and Digitalization: A considerable portion of distributors still operate with outdated systems. The timid incorporation of technologies such as IOT, Big Data, and Artificial Intelligence for demand forecasting and inventory management represents a significant deficiency. The slow pace of adaptation to the ongoing technological revolution in the sector has created space for agtechs that have understood the needs of producers, occupying a previously central role of the distributor.

4. Crisis of Confidence and Fragility in the Relationship with Producers: Customer service, often flawed, with little personalization and inadequate support, undermines producer satisfaction, trust, and loyalty. This fragility in the relationship also impacts margins, as negotiating power has shifted to the producer who, using digital tools, has transformed input purchasing into an auction, devaluing the relationship and differentiated service.

5. Consolidation with Below-Expected Results: The attempt to consolidate the sector has not generated the desired profitability, with margins pressured by competition and aggressive pricing strategies.

6. Financial Crisis and Loss of Local Identity: Large distributors face serious financial crises and judicial reorganization processes, destabilizing the market and hindering access to credit for farmers, who are already penalized by the drop in profitability due to low agricultural product prices and high input costs, in addition to the disincentive for new investments caused by high interest rates. The loss of experienced managers has resulted in the erosion of knowledge about the particularities of each region, compromising personalized service and significantly increasing default rates. Recent surveys by Andav reveal a billion-dollar decrease in revenue from grain commercialization and an alarming increase in default levels.

Building the A+ Distributor: A New Paradigm for the Future

Faced with this challenging scenario, the need to break the vicious cycle and build a more robust and efficient distribution system emerges. I therefore present the concept of Distributor 10.0, an innovative approach that integrates operational efficiency, technology, and sustainability as pillars to overcome existing barriers.

Steps towards an A+ Distribution System:

To materialize an excellent crop input distribution system, we propose an approach that converges the physical and digital worlds, optimizes processes, and elevates the value delivered to the customer:

• Hybrid Model: Seamlessly integrate physical and digital channels, providing a consistent Omni channel experience and simpler, more efficient business models.

• Operational Efficiency: Leverage innovation and technology, such as AI, IOT, and Big Data, to optimize the distribution flow, reduce costs, and accelerate delivery.

• Added Value: Offer specialized agronomic consulting and customized technological packages, valuing local knowledge and proximity to farmers to re-establish trust and strengthen relationships.

• Sustainability: Prioritize ESG (Environmental, Social, and Governance) practices to minimize environmental impact and meet the growing demand for sustainably produced food.

• Strategic Alliances: Foster solid partnerships between distributors, suppliers, and producers, strengthening the sector as a whole and ensuring access to resources and knowledge.

The 10 Fundamental Pillars of an A+ Distributor:

Based on this strategic vision, we have identified 10 essential pillars for building a high-performance distributor:

1. Strategic Planning: Clear goal setting, efficient resource allocation, continuous market analysis, and adaptability to change.

2. Governance and Sustainability (ESG): 

1. Environmental (E): Waste reduction, green logistics, incentives for sustainable inputs.

2. Social (S): Fair relationships with employees and communities.

3. Governance (G): Transparency and compliance to prevent crises.

3. Human Capital and Leadership: Employee appreciation, technical training, skill development, and an organizational culture focused on innovation and well-being.

4. Relationship with Producers: Consultative service, use of data for offer personalization, and demand anticipation.

5. Efficient Commercial Management: Teams specialized in crop and strategic pricing models.

6. Partnerships with Suppliers: Long-term relationships and co-development of solutions.

7. 360° Marketing: Strong digital presence and loyalty-building actions.

8. Financial Performance: Rigorous cost and cash flow control, alternative financing models.

9. Operational Excellence: Process automation and intelligent logistics.

10. Knowledge Management: Database with market insights and sharing of best practices.

Diagnosis and Journey to Excellence:

To assist in this transformation journey, we have developed a robust diagnostic tool, with systematic evaluations conducted in collaboration with leading figures in the market, such as David Telio, Tercio Tosta, Sandra Helena França, Lilia Milde, Matheus Roldan, and Nirus Agrointelligence, through its founders and my colleagues Mark Doumen, Sinesio Souza, Alejandro Donadio, and Erik Frasser. 

The expertise of these professionals, with extensive experience in multinationals, specialty companies, seeds, and distribution, allows us to accurately map the level of adherence of distributors and cooperatives to the performance pillars, giving us a vision not only of Brazil but also of all of Latin America.

Based on this mapping, we have established a Performance Scale for an A+ Distributor:

• 0 - 20: Beginner (does not meet minimum requirements)

• 21 - 40: Developing (partially meets requirements, with gaps)

• 41 - 70: Basic (meets minimum requirements, with room for improvement)

• 71 - 90: Intermediate (good performance, consolidated processes)

• 91 - 100: Excellent (benchmark, exceptional performance)

The Journey to Excellence to achieve Distributor 10.0 status comprises three distinct phases:

1. Phase 1 – Diagnosis and Mapping: Detailed evaluation of the 10 pillars and identification of operational gaps.

2. Phase 2 – Improvement Plan: Prioritization of actions (digitalization, training, etc.) and partnerships with agtechs for innovation.

3. Phase 3 – Expansion and Optimization: Scaling the model to new regions and continuous monitoring via KPIs.

The Future of Crop Input Distribution in Brazil:

We hope that this methodology and this mapping based in practical experiences will help us transform the crop input distribution system in Brazil, and this transformation is imperative to keep pace with the evolution of modern agribusiness.

The A+ Distributor model offers a clear roadmap for this journey, focusing on innovation, technology, sustainability, and, above all, customer appreciation. By embracing these steps, we can build an ″A+" distribution system that drives the growth and competitiveness of one of the most important sectors of our economy.

The key to success lies in the continuous evaluation of these 10 pillars and the ability to adapt to a constantly evolving market. With this approach, we will not only survive the challenges but lead the crop input distribution market in Brazil.

The future belongs to distributors who transcend the mere sale of products and dedicate themselves to delivering complete and valuable solutions to producers.

Come and learn more details about how we can build Distributor 10.0 and raise the performance bar of one of the main sectors of Brazilian agribusiness.