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Marketing Channels: The Case of Agricultural Inputs in Brazil 1

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Marcos Fava Neves Luciano Thome Castro

University of São Paulo University of São Paulo
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 Marketing Channels: The Case of Agricultural Inputs in Brazil1

Marcos Fava Neves2

Luciano Thomé e Castro
Rodrigo Teixeira Bombig

Abstract: The usual salesperson goes to the client, makes a sale contact, identifies needs, shows his products, attributes and
gets the effective sale. In agricultural inputs, this is a very expensive activity for some companies, and one of the most used
communication tool. Once the competition increases and companies start to practice marketing concepts even more, and on a
changing environment, the sales force function has to add value and, at the same time, to be more cost effective for companies.
This article brings opportunities and threats that the fast changing environment is bringing and what could differentiate
salespersons.

Key words: Marketing channels, sales force, agricultural inputs

1. Introduction

The sales force function in agricultural inputs companies have been frequently discussed. Responsible for the contact between
the companies and clients, the sales force has seen one of its main competitive advantages, that is the information, being freely
and widely available by the emergence of the Internet and direct marketing techniques. Moreover, the trend of agricultural
input companies to merge has downsized the industry, provoking the extinction of many positions in the sales team.

2. Objectives and Methodology

The objectives of this article are: describe the distribution channels for agricultural inputs in Brazil, mainly defensives (1),
show the main agents and the important changes that have occurred in this sector (2), and finally, analyze the sales force role in
this new context (3).

Detailing, first the ag-inputs distribution system will be shown, localizing the sales force in the transactions. Afterwards, the
threats and opportunities from the external environment (swot analysis - Johnson & Scholes, 1997) will be analyzed.
Subsequently, the characteristics for a good salesperson were traced and must be undestood as strenghs of them.

The methodology used was very diversified, in which the following were applied: a literature review in sales area, added by
interviews with 132 salespersons of ag-input retail and 50 large rural producers, who are clients of ag-input companies. These
interviews were made during training for sales force in 3 different regions of Brazil (South, South-East and Middle-West) and
during an agricultural fair.

3. Description of Current Channels and Flows

Figure 01 shows where the sales force is present in the relationship between ag-input industry and rural producer, based on
distribution channels structure used frequently by input industry.

1
Due to space restrictions only a small part of the research is shown here. Full version can be obtained with authors.
2
University of São Paulo, FEARP – School of Business and Economics
PENSA - Agribusiness Program - Av dos Bandeirantes 3900, 14040-900 Ribeirão Preto - SP - Brazil
Phone 0055-16-6023892 Fax 0055 - 16 – 6331144 - Email mfaneves@usp.br
web page: www.usp.br/fearp/fava
1
Chart 1: The Distribution System of Agricultural Inputs

Internet
Retailer

Cooperative
- S

Smaller Retailers
Retail
S

Industry Store 1 F Agric.

Retail A
S R
R Store 2 Processing
RM M
Store 3 E
R
S
S S Salesperson
Direct Sales Great Clients

R Representatives
External Agents S
Retailer
RM Regional
Other Manager

Orders - Money - Information

Products – Services - Comunication

Negotiation - Risk

Source: elaborated by the authors.

2
3.1 – Changes for Rural Producers

The main changes can be described by the concentration of the rural activities, major profissionalization and specialization.
Other new trends for the farmers are pointed out.

3.2 – Changes in the Role of Retail (about 15 thousands in Brazil)

Input retailers (shops) have a fundamental task of offering services, especially because of the experience and the close contact
with the client. However, the retailers might have their profit margins reduced, which can increase concentration.

3.3 – Changes in the Agricultural Input Industry

The input industry wants to get closer to the producers and their business, searching for costs reduction and introduction of
technology for the farmers. The main challenge to the input industry is to offer technology solutions and international tax loans
for farmers. The input industry has got the role of “monetary transformer”, taking products from the producers to the ag-
industry.

3.4 – Changes in the Agricultural Processing Industry

The agricultural industry became a distributor of ag-inputs, since they finance farmers, giving products that will be used in the
crop and receiving their production as payment for products given or loans. However, this industry does not have the advantage
of knowing the specificities of these products, which are becoming more specific.

4. Sales of Agricultural Inputs – main opportunities and threats for the salespeople

The analysis of opportunities and threats, as well as the analysis of strenghs and weakness, is great help for planning and
managing sales force. Being a part of the marketing program, the sales program needs to be adapted to the external and internal
companies ambient. (Churchill et al, 1990). First, the external analysis will be described, which was obtained from an interview
with 132 salesperson and 50 rural producers. So, the both parts are represented, the seller and the buyer of ag-inputs. The
results are exposed below on table 01:

3
Table 01 – Threats and Opportunities for the salespeople of agricultural inputs
THREATS
Biotechnology: responsible for estimulating the
concentration in this sector and to reduce the number of
companies and consequently jobs
Substitute Function Groups: great clients buying
directly from ag-input companies, skipping over retail
and salespeople. The so-called large accounts, they are
serious threats.
Others Types of Distribution: the role of the
internet, linking selling companies and producers
directly. It is worth to list the e-commerce sites as
threats.
Buying Pools: producers organized in buying
groups which increase their bargaining power and
reducing transaction costs.
Bundling: the new delivery strategy of added
products and services might reduce positions in sales
force team.
The Price War: reducing margins and salespeople
are forced to reduce highly their commissions.
Adapting to the Environmental Legislation: the
expected law reinforcement, related, for example, to the
recycled packages, might bring negative impacts.
Agricultural Income (Policy): the drop in
agricultural income brought lower consumption of
inputs.
Product Concentration: the expected concentration
due to the necessary scale reduces the number of rural
producers, consequently buyers.
Organic Products: once it increases its market
share, the use of ag-inputs will decrease.
Concentration of agricultural input companies:
leads to consequently less jobs in this sector.
Source: Elaborated by the authors.
OPPORTUNITIES
The Increase of Direct Planting: stimulating
the use of ag-inputs
The Increase of Irrigation Systems: might
bring more techniques and improvement of the
ways for ag-inputs applications.
Systematic Sales: a role in the follow up of
the production process.
Profissionalization of agriculture: leads to
more rational use of inputs.
Agricultural Frontier: the expansion of this
and of the Brazilian grain production represents
major potential to sell ag-inputs.
Creation of New Products: new products,
more specific each time, have increased the
diversity of offers.
Information Technology: the role of using
terminals as tools to improve sales.
Mobile Phone: in the same way, the mobile
phone increases highly the productivity of the
sales force.
Finance: loans, by the ag-industry, leads to an
increase on sales
Certification of Products and Process: major
identification for the sector
Bundling: might bring client’s loyalty, since
the producers are linked to a technology bundling
Changing on work force rights (laws):
contracts improvement.
4
5. Characteristics of Winners in Sales Force for Agricultural Inputs

Table 02 – Strengths of the ag-input sales force

Strengths of the Sales Force

• Offer quality products

• Knows the products’ attributes
• Knows agrindustrial chains in which the producers (clients) are involved, being a consultant to the
client.
• Obtains adequate supplies for the needs of rural producers (clients)
• Manages to develop close contact with the rural producer (clients)
• Provides quick response to the client and to the company he represents.
• Has acess to relevant information, always well informed, and up-to-dated
• Honest and ethical
• Aplies technology in their assistance (notebooks, mobile phones)
• Develops empathy with producers and regional leaders
• Is organized and motivated
• Has flexible schedules and availability to attempt
• Give continous support with a good after sales
• Has a support team that allows him more time in thouch with clients
Source: survey with rural producers

6. Conclusions

Many changes are expected and have been ocurring, specially related to three main factors: Internet, genetically modified
organisms and companies concentration. These changes threaten the traditional salesperson, as long as the companies’ actions
or other agents, as telemarketing companies, logistic operators, among others, replace his traditional functions.

An important message is that the salesperson, which do not have the characteristics pointed out as strenghts, may be punished
by the market. Keep on trying to get the maximum number of orders with minimum number of visits and short support to the
clients is a wrong way to the salesperson who wants to stay in the market.

7. References

CHURCHILL, et al. Sales Force Management: planning, implementation, and control, Irwin, 1990, Boston, 3a Ed., 845p.
COBRA, M.. Administração de Vendas. Atlas, 1994, São Paulo, 4ª Ed., 492p.
CZINOTA, M.R. et al. Marketing: as melhores práticas. Bookman , 2001, Porto Alegre, 559p.
JOHNSON G. & SCHOLES, K. Exploring Corporate Strategy, Prentice Hall, London, 4ª Ed.. 1997, 873 p.
KOTLER, F. Administração de Marketing. Prentice Hall, 2000, São Paulo, 10ª Edição., 763 p.
ROGERS, L.. Administração de Vendas e Marketing, Makron Books, São Paulo, 1993, 389p.
SHAPIRO, B. et al. Conquistando Clientes. Makron Books, 1995, São Paulo, 365 p.
SVIOKLA, J. et al. Mantendo Clientes. Makron Books, 1995, São Paulo, 420 p.
WAACK, R S. - Distribuição de Insumos Agroindustriais: Aplicação da Economia dos Custos de Transação à Indústria de
Insumos Veterinários - Dissertação de Mestrado Apresentada à FEA/USP, 2001, 200 p.

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