GROWMARK: A Mirror Image

Growmark team

In agriculture, change is a way of life. On an almost daily basis, grower-customers deal with changing weather patterns, changing crop and soil conditions and an ever-increasing list of technological changes. It’s all part of doing business in today’s ag world.

The same could be said for GROWMARK, a Bloomington, IL-based cooperative that ranks No. 2 on the annual CropLife 100 list of the nation’s premier retailers. In recent years, the company has significantly expanded its presence in the ag retail marketplace, exited the feed business and decided to re-enter the grain market for the first time in more than 20 years. Perhaps more significantly, GROWMARK saw two of its key executives retire at the end of 2010, Steve Barwick and Bill Davisson. This means a new generation of executives has now been charged with maintaining and growing this $6.1 billion cooperative.

A Long-Standing Vision

But despite these changes, the incoming crop of GROWMARK executives believe the one constant that has driven the company during its 80-plus-year history remains intact — anticipate market changes and adapt your business make-up accordingly. “It’s amazing when you look eight to 10 years ago at what GROWMARK was vs. what we are now,” says Mark Thornsbrough, crop protection division manager. “We have a strategic plan about what we want, what we have become and where we want to go. If you look at the market seven or eight years ago, it used to be that you could be static in your business approach and that would pass scrutiny. But today, the changes in the market are coming so rapidly, you have to change with them — and be ahead of them to really be successful. That’s the key for GROWMARK as a company — the market starts pushing us in a certain direction and we push that way and then go a little further than that.”

Lance Ruppert, seed sales & marketing manager, agronomy division, agrees with Thornsbrough. “If there was one word that best describes GROWMARK today as a company, it is proactive,” says Ruppert. “We are much more about taking control of our destiny today in terms of the businesses we are operating and buying into.”

Part of this drive to-ward a more proactive stance within the marketplace comes directly from GROWMARK’s leadership. For example, the company’s new CEO, Jeff Solberg, has spent 34 years at the cooperative, but didn’t come from a farm background. “I was a finance guy,” says Solberg. “I started out in finance and stayed there until I was named CEO in January. I understand our operations and how they can produce measurable value to what we offer our members and grower-customers. That’s helped me to understand agriculture.”

In some ways, this value proposition with its customers represents the one constant that has driven the cooperative throughout its history of changes. In the mid-2000s, then CEO Davisson described how the company never altered the way it treats its members, both direct partners and customers. “When I look at our organization, I see a complete system dedicated to cooperation,” said Davisson in a 2004 interview with CropLife® magazine.

However, according to Jim Spradlin, vice president of agronomy, Davisson did make one significant change that has helped GROWMARK get to where it is today as a major ag retailer — stressing fiscal aggressiveness. “I need to go back about 12 years, when Davisson took over,” says Spradlin. “He had a program on improving income, and it wasn’t long before this turned into a top-line program where he challenged the organization to grow. He set lofty sales goals and empowered everyone to achieve them, and that has been a key driver in where we are as a company today. So at the end of Bill’s tenure in December, we ended up having our six best years in company history during the last six years. For us, it’s not a radical change in strategy. It’s about our culture.”

By contrast, the marketplace itself has been battered with radical changes. For example, the fertilizer area has been particularly volatile the past few years, going from incredibly big demand/large volumes/high prices in 2007 to virtually no demand/too much volume/rock bottom prices in late 2008. At times, says Joe Dillier, director, plant food, agronomy division, it’s been a little hard to take, even for a company such as GROWMARK that supplies more than 2.5 million tons of plant food to its members and customers annually.

“I think everyone will agree that the plant food business has changed pretty dramatically,” says Dillier. “GROWMARK had to respond to a rapidly changing marketplace, which was extremely volatile. I think we’ve embraced that change and are not looking to go back to the way the fertilizer market operated between supplier, wholesale and dealer the way it did 15 years ago. We are trying to bring value, through all our members down to the farmgate. That’s a tremendous change.”

Adding To Storage

Part of the way GROWMARK is accomplishing this value initiative is through acquisition to increase the company’s storage ability. In quick succession since the start of 2011, GROWMARK has acquired the Little England terminal in East Liverpool, OH, the Seneca terminal in Seneca, IL, and three terminals from CF Industries in Albany, IL, Mapleton, IL, and St. Louis, MO. The company also formed a business partnership with Bunge North America called B-G Fertilizer, LLC to acquire a CF liquid and dry fertilizer storage terminal in Cincinnati, OH, and is constructing a fertilizer storage facility in Casey, IL, to help Effingham-Clay Service Co. and Illini FS supply their customers.

According to Rod Wells, plant food division manager, these acquisitions are part of GROWMARK’s commitment to the plant food industry. “In 2006, GROWMARK had 23 facilities that we owned or leased,” says Wells. “To achieve our growth goal, we needed to be more aggressive on acquisitions, so we worked to identify areas where we wanted facilities and areas where we had too many facilities. We then developed a plan to address these, and today, we have 47 facilities in our system.”

Besides adding places to store fertilizer for its customers, GROWMARK also has changed the way it brings crop nutrients to market. According to Dillier, this again ties back to the word “proactive.” “We are more proactive in fertilizer in the forward market than other companies are,” he says. “We are trying to provide the grower with some stability. I think that the average grower doesn’t like what’s happened to them when it comes to fertilizer swings during the past few years. So we’ve tried to get more forward-pricing from our vendors, to be able to offer more forward-pricing to the growers. That’s an option for dealing with the market’s extreme volatility right now.”

Of course, just having storage capacity for its plant food offerings is only half the battle. GROWMARK also needs to get this product to its members and customers using an elaborate system of trucks, railcars and river barges. The numbers when it comes to logistics at GROWMARK are mind-blowing: To supply the cooperative’s more than 100,000 customers in 22 states and Canada, GROWMARK coordinates and delivers more than 100,000 truckloads, 6,500 railcars and 400 barges of product each year. On average, the cooperative delivers approximately 350 loads per day, with more than 1,300 loads per day delivered during the peak season periods.

To handle all this traffic, Bill Taft, logistics division manager, and his team have to perform a lot of supply chain planning with its members and customers. “The biggest challenges for GROW­MARK’s logistics are getting accurate forecasts from our supply partners and figuring out how to best handle supply disruptions,” says Taft. “When it comes as planned, we have established an excellent truck, rail and barge system to deliver it. However, when there is a problem with one of our transport modes, such as a lock on the river system being out of service, that’s something we can’t control. Then, we have to find the best alternative way to move product to our customers so their needs are met.”

Changing Threats

While GROWMARK has made every effort to strengthen and stabilize its market position, the general agricultural economy still has its questions. Whereas most industry observers predict that the 2011 season will be a strong one for commodity prices and input/services demand, there is still a note of caution hanging in the air. “In a seasonal business such as fertilizer, people are normally cautious because they don’t want both sides of the market — supply and demand vs. grain prices, for instance — suddenly changing and they get caught in the middle,” says Dillier. “Following 2008 and 2009, everyone in the industry is very concerned about risk and that makes it very difficult to plan ahead. We have to make sure we have enough product on hand for our customers, but also make sure we don’t get caught in a situation like the one we saw in 2008 and 2009.”

CEO Solberg also sees market volatility as the major challenge facing GROWMARK and the rest of the ag retail marketplace going forward. “The No. 1 issue we are facing right now is risk management, trying to match up grower opportunity and our product inventories to try to help them lock in profits,” he says. “Looking at it right now, I think the opportunity for agriculture to have good years in 2011 and 2012 is there, but if grain prices should collapse, they inevitably would bring down input prices with them. Since the prospects for big crop carryover numbers aren’t the same as they used to be a few years ago, I don’t think this will happen and grain prices should stay up.”

But Solberg is wary that one major, unexpected event could derail this positive growth curve for the market. “A few years after I started in this business, no one thought then President Jimmy Carter would embargo U.S. grain exports, but he did and that really sent the market down in a hurry,” he says. “I wonder the same thing about something like that happening to the ethanol market, for example. Ethanol represents 4.5 billion to 5 billion bushels of corn use per year. If that suddenly changed, how would the commodity market respond?”

Closer to home, Solberg is thinking about how GROW­MARK will continue to grow and expand as a key member of the ag retail community, during his tenure and beyond. “We need to leave the next generation of management for this company in a very, very strong financial position and with well-positioned assets to have a chance to build on and improve the company base,” he says. “But we also need a good pipeline of talented people that are capable of running the company in the future.”

To this end, GROWMARK has active college recruitment and internship programs, spreading the good word about the cooperative and the industry it serves — mirroring recent efforts by ag to spread its positive message to the average American. “There are fewer and fewer farm kids coming back to the farm these days and many of them are not looking at agriculture as a career,” says Solberg. “We have to show them that we are a successful organization in a successful industry with a great story to tell.”

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One comment on “GROWMARK: A Mirror Image

  1. Thanks for a very detailed, insightful article which I feel was well researched and put together, and weaves in many realistic yet positive messages relating to Growmark and agriculture in America today.

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