PERSPECTIVE Many of you likely remember a piece of news that broke in January on CropLife.com regarding Farmer Business Network’s new crop input procurement service, FBN Procurement. In case that doesn’t ring a bell, here’s a link: www.croplife.com/crop-inputs/farmers-business-network-launching-farm-input-procurement-service-for-growers/
As the email swept open across my desktop that chilly January morning and I began to process the implications, it immediately set off loud, clanging alarm bells in my ag editor mind. At first glance it seemed both monumental for the independent large-scale growers, while at the same time deeply troubling for the three-tiered crop input distribution industry.
So, as any worthy media outlet would do after such a proclamation, we put out the call among our many retail connections for any and all comments on just what exactly the FBN news meant to the industry. Knowing how things work in this close-knit, oftentimes media-attention averse business, I figured there would be some folks reluctant to talk about the FBN news on the record.
And boy, was I right. Some of the curt replies I received included an always-friendly Nebraska-based retailer flatly telling us “No, I would not like to comment on creating another competitor,” and an Ohio-based plant nutrition company offering no explanation other than “we are not interested in commenting on this.”
We did, however, receive additional comment from one of FBN’s co-founders, now VP of Product Charles Baron, who basically said in a statement via PR outfit Charleston Orwig that FBN is just advocating for price transparency and competitive pricing for its members.
Then, a few days later, came the call I had been patiently waiting for.
A gravely-voiced gentleman (not Deep Throat – but close), let’s just call him Andy for the purpose of remaining anonymous (Anonymous Andy), had left me a late-night voicemail on my office line, saying he would be willing to discuss his feelings on FBN Procurement on the record, we just couldn’t publish his identity. Myself being a longtime fan of non-traditional media outlets that dabble in gossip and speculation like Gawker, Deadspin and Pro Football Talk – where these type of anonymous sources are cited frequently, I decided to take “Andy” up on his offer.
Now, before we get into what Andy had to say, a little background. Andy has over 15 years of experience on both the retail and distribution side of crop input selling throughout the Pacific Northwest and Rocky Mountain regions.
He had a number of issues with what FBN has done and is likely planning to do with FBN Procurement. Chief among those concerns is that FBN was not at all transparent with how they were going to use farmer’s data when the Des Moines, IA-based startup first began signing farmers up for its service. He says that other data management companies like FarmLink are “in it for the good of farming and the public” and that FBN is not.
“I don’t trust them at all; they’ve basically hoodwinked a lot of farmers to get their backend data and then use it to market cheaper crop inputs to them, and nobody’s going to call them on it,” he said via phone. “When they began signing up growers they stated very clearly they would not be selling data or aggregating the data to sell things to farmers, and they sold themselves as an independent and trusted partner to maintain the data and give unbiased agronomic recommendations.
“But now, how can they be independent when they are trying to sell inputs to farmers? To me, this was a classic bait-and-switch on growers so FBN could get enough data to do data mining so they can sell product, not to help the farmer. And their data use agreements, they were written very ambiguously, so there’s really not much these farmers can do (in response).”
Now, to be fair to FBN, these type of direct-to-farmer services have been tried before. Some have failed (AgraCity) and some have flourished (Helena reportedly does some direct to grower marketing in certain trade areas).
But what keeps many folks in retail (like Andy) awake at night is FBN’s deep pockets. The company closed on $15 million in Series B funding back in May 2015, with that round of investment headed up by Google Ventures. Generally speaking, Google doesn’t swing and miss that often when it comes to funding tech ventures.
Another way that FBN has positioned itself to incite some uneasiness in the market is in personnel. The addition of former AgraCity Procurement Manager Michael Snyder, who serves as VP of Procurement at FBN, is, according to Andy, a play by FBN to leverage Snyder’s existing industry relationships with generic manufacturers to get bargain basement pricing on inputs like generic Chinese glyphosate. Before it shuttered in October of 2015, Snyder and the folks at AgraCity were reportedly the first supplier of generic glyphosate in Kansas.
“The goal with AgraCity was always to take stuff direct to growers with their own labels, and FBN is mimicking the AgraCity model, just with more capital behind it,” Andy explained. “By hiring Snyder they are trying to have direct sales relationships with generic providers, at which time they can get their own labels and start offering large volume discounts on their own labeled products. The key to their whole business model is to get generic manufacturers on board, get their own labels and then follow a scorched earth pricing policy in the Midwest.”
Although Andy cautions he has no official knowledge of any existing relationship between FBN and the generics, he says he has heard rumors that Rotam North America is a key target and possible partner for the company. Additionally, he says issues that ADAMA North America has experienced in its U.S. distribution channel makes an alliance with FBN Procurement possible for them as well. He also cited Willowood USA as a prospective future partner.
“And I heard they’ve already knocked on Drexel’s door, and Drexel told them to take a hike,” he adds.
So, what would it mean to the U.S. ag retail industry if FBN succeeds?
“If FBN is successful with this – and they’ve got the funding to probably make this work where AgraCity did not – it could eliminate a lot of the independent retailers in some areas, similar to the ‘Walmart effect’ when Walmart enters a small market,” he says. “And the large-scale cooperatives could see a massive decrease in crop protection product revenues.
“Then, you think about what happens when someone like Helena, who already goes direct to growers in certain areas, sees all of this. If FBN goes direct to growers what’s stopping the big regional players like Southern States or Helena from doing the same thing? I’ll admit that the market does need a little bit of disruption, but what FBN did with that data was dishonest.”
The end goal in all of this for FBN, according to Andy, is to get big enough to go public with an IPO in the not-so-distant future.
“If FBN wants to have a price war (with me), I’ll have a price war. Their goal is to be a part of Big Ag, but they are not going to defeat the DuPonts and the Dows and the Monsantos of the world. FBN’s clock is going to get cleaned.”