Context is pleased to announce its commitment and new partnership with the National FFA Foundation to support agricultural education opportunities for young people in the U.S.

 “We’re very excited about The Context Network joining us as a sponsor,” says Mark Poeschl, chief executive officer of the National FFA organization and the National FFA Foundation. Poeschl sees strong parallels between the work of Context and the mission of FFA, formerly known as Future Farmers of America. He notes: “Context is shaping the model for 21st century agriculture by helping companies think strategically and plan for the future, while FFA is preparing students to be engaged in 21st century agriculture. This is how we make the connection between young people and real life.”

Specifically, Context’s partnership will focus on supporting three key programs that deliver opportunities for members and expand recognition of FFA as a premier agriculture education resource. Context will sponsor the National FFA Marketing Plan Career Development Event, a competitive activity in which student teams from across the country write a marketing plan for an actual agricultural product, supply, or service in their community. “We’re excited about sponsoring this event because it’s at the heart of the work we do every day,” says Context Principal Mark Nelson. “Beyond our sponsorship, we will earnestly extend our support at all levels, including coaching and mentoring students in local chapters and serving as judges at state events, as well the national competition.”

Furthermore, Context will join the National FFA Sponsors’ Board, a cohort of corporate executives who leverage their industry relationships to assist the National FFA Foundation in raising funds. Context Principal Doug Griffin, who will serve on the board, recalls his time as president of his local FFA chapter as being instrumental in shaping his leadership abilities. He says, “There are very few, if any, organizations that develop young men and women the way that FFA does. I’m honored to give back to an organization that’s given me and my colleagues so much.” In addition, Context is co-sponsoring the convention’s Sponsors Recognition Dinner, an appreciation event that honors more than 600 sponsors and donors.

Since its founding by 33 farmers in 1928, FFA has grown far beyond its initial purpose of preparing young people to work in production agriculture. The organization now blends classroom instruction, leadership development, and hands-on work experience to expose young members to a wide range of career possibilities. The need for new talent across fields ranging from agribusiness, animal science, biotechnology, environmental science, food science and production, natural resources, plant science, mechanics, and more is pressing. Poeschl points to a 2015 Purdue University study indicating that 23,000-25,000 jobs directly related to agriculture currently go unfilled each year.

While the partnership marks a new level of commitment from Context as a whole, many individuals within Context have formative ties to FFA. Senior Business Analysts Jason Troendle and Seth Pratt held national offices with FFA during their college years. Both men recall the “sea of blue” at National FFA Convention & Expo, where more than 64,000 attendees gather each year with students donning the blue corduroy jackets that are the hallmark of FFA. Pratt says, “I wouldn’t be the same person without FFA. I started out as a Western boy who knew about one farm in one place. FFA broadened my perspective and allowed me to understand my farm within the context of agriculture across the country. I carry that understanding of the national agricultural economy into my work every day.” Having grown up one generation removed from his grandparents’ farm, Troendle credits his local FFA chapter for instilling his passion for agricultural economics. He says, “Without FFA, there’s a decent chance I wouldn’t be working in agribusiness.”

Poeschl says he looks forward to seeing Context principals, associates and analysts amid the “sea of blue” at the 90th National FFA Convention October 25-28, 2017, in Indianapolis. He says, “It makes a big difference when organizations like Context feel strongly enough about our work to financially support us.” Context’s commitment to FFA is meaningful to many in the network too. Troendle says, “Having joined Context recently, I’m excited that we have principals who are passionate about the same thing I am and who see the value in developing leadership in young people.”

To discuss the possibility of joining Context in its support of the National FFA Foundation, contact Doug Griffin at doug.griffin@contextnet.com or 678.772.1077.

The National FFA Organization is a national youth organization of 649,355 student members as part of 7,859 local FFA chapters in all 50 states, Puerto Rico and the U.S. Virgin Islands. The organization is supported by 225,891 alumni members in 1,934 local FFA Alumni chapters throughout the U.S. The FFA mission is to make a positive difference in the lives of students by developing their potential for premier leadership, personal growth and career success through agricultural education. The National FFA Foundation builds partnerships with industry, education, government, other foundations and individuals to secure financial resources that recognize FFA member achievements, develop student leaders and support the future of agricultural education.

It’s human nature to think big. Within the crop protection industry, most companies aspire to reach a big, wide universe with each of their products. This explains why the word “niche” is often used dismissively or, at best, is associated with small, entrepreneurial companies entering the market with a specialized product or service that has limited sales potential. However, Context has seen that “finding a niche” is not a small or trivial matter. It’s one of the most powerful ways to drive sales growth and profitability. This is every bit as true for large companies as for mid-size or small ones.

Instead of aiming to be “master of the universe” with broad-label products, companies are wise to uncover each product’s strengths and points of uniqueness, relative to competitors. By narrowing the target market focus until a strong and unique position is possible, the product finds its niche—the place where higher share, margins and higher return on investment is possible. In essence: identifying smaller ponds where the product can be a big fish.

Ideally, niche identification occurs before product rollout, but it is also a very valuable way to reposition an existing product. Take, for example, an older fungicide/bactericide product that has been marketed under a broad label. It performs well in controlling several diseases on a broad set of different crops, but sales are trending flat and margins are low because plenty of other products vie for this same market and deliver comparable results. However, by performing a relative competitive position analysis (RCPA) that examines and narrows the variables (i.e., uses, crops, pests, diseases, etc.), it becomes clear this product outshines everything else on the market for inhibiting black chaff in wheat.

Based on years of performing product and portfolio assessments, Context Principal Mike Borel says, “It’s rare to see a broad-label product that has a strong-unique relative competitive position.” Conversely, narrow-label niche products meet a specific and well-defined need. They yield higher margins and achieve higher market share of a smaller target market because they offer a distinct value proposition. Borel points to the Profit Impact of Market Strategies^® (PIMS) database from the Strategic Planning Institute, a comprehensive collection of anonymized information from more than 3,000 companies across all industries. “The PIMS data clearly shows that a strong relative competitive position has more influence over market share and business profitability over time than anything else,” says Borel.

Granted, it is hard to shed the belief that more customers and bigger markets are better. By its very definition, a niche market has fewer customers than a broad market. However, the customers within a niche are willing to pay premium pricing for products that meet their needs markedly better than any competing products. On average, cumulative profit of products with a strong relative competitive position (RCP) pursuing a niche market are often greater than 25 percent higher than products with a fair RCP pursuing a broad market, as in the following chart.

It’s also useful to think in terms of finding niche products with a strong RCP, not striving to be a niche company. A large crop protection company might, for instance, fill multiple niches with its product lineup. The growth rate for segmented markets compared to unsegmented markets is illustrated here.

Of course, focused or narrow targeting is not a new concept, but it is a surprisingly overlooked one. It’s especially relevant as the ag input sector undergoes another wave of consolidation, while also seeing exciting new technologies come to market.

Context Senior Associate Mike Kostrzewa notes: “Whenever there’s consolidation, you see overlapping portfolios that need to be rationalized, product by product.” Kostrzewa says insights from the RCPA can be leveraged a number of ways to maximize the value of existing portfolio assets, either through outlicensing, product extension, increased marketing to drive share, increased pricing, or disposition of products. “It’s worthwhile to consider the realizable niche value of older products before abandoning them or reducing support for them,” says Kostrzewa.

Kostrzewa says the RCPA process is equally valuable for companies introducing new technologies, such as biostimulants and biopesticides. He says: “There’s a big shift to softer chemistries coming to market, and it will be critical to understand how these new technologies compare to conventional ones. Performing an RCPA highlights any product’s strengths and weaknesses in specific situations and quantifies a product’s competitive position through a rating and/or ranking scheme.”

Size Matters

Focusing on niches where a strong, unique competitive position can be established and maintained yields big advantages, including:
• Little or no serious competition within a targeted market
• High margins because customers are willing to pay premium prices
• Stronger relationships with customers
• Focused spending on marketing
• Easier to sell

The Context Network has a strong record of helping ag input companies understand the relative competitive position of their products and the appropriate/optimum segmentation of markets to achieve higher profits and market share. For more information, contact Mike Borel at mike.borel@contextnet.com.

Refining business operations can help manufacturers of crop protection products dig up what might be called buried treasure, increasing profits without generating a response from competitors.

Taking steps to uncover that treasure—by improving inventory turns—can improve not only the company’s balance sheet, but also its profit and loss statement.

A Context Network^® benchmarking study of crop protection manufacturers in North America shows that inventory turns averaged 1.7 per year in 2016. Performances ranged from 0.8 to 4.4 turns per year—a vast spread from low to high. The best-in-class performance was more than 2.5 times the average and a whopping 5.5 times the low.The numbers show that manufacturers have an outstanding opportunity to improve inventory turns and thus their return on capital employed and, ultimately, their bottom lines, says Context Principal Mike Borel. He cites one manufacturer that had inventory turns of 1.0 but believed much more was possible. “The company instituted a good process and made what turned out to be a very smart ‘out-of-the-box’ hire of a supply chain manager from an unrelated industry in which high inventory turns were the norm,” he says. In just three years, the manufacturer achieved turns near the best in the industry.

Such improvements fly under the radar. “The beauty of this is that it doesn’t attract a competitive response like you would see with a change in prices, terms, or programs,” Borel says. “You get the benefit without having to fight the battle.”

In planning and implementing improvements in inventory control, it’s critical to maintain a customer focus. “The goal is to get the right inventory in the right place at the right time,” says Context Senior Associate Mike Danner. “Inventory turns require the product to be in the hands of those who need it within 24 hours—wherever they are.”

Different products call for different inventory-control standards. “Some products can be made available ‘just in time’; others must be available ‘just in case’ they are needed,” Borel says. “It’s critical for the company to segment its portfolio of products.”

Some products have high profit margins, are critical to customers, and/or are key to the company’s competitive strategy. “Such products require the company to maintain supply ‘just in case’ it is needed,” Borel says.

Other products have generic competitors and lower profit margins. “You want to manufacture those products ‘just in time,’” Borel says. “The perfect situation is that you make just enough product and, at season’s end, you have none left. In many cases, it’s actually OK to run out of these products!”

Improving inventory turns can require a sometimes-difficult change in thinking about business metrics. It might mean looking beyond such measures as revenues and market share—through which functional groups have traditionally been rewarded—and helping manufacturers see the bigger picture. “Business executives who can do that can dramatically improve their company’s financial results,” he says.

For example, Borel recommended that one manufacturer cut about 25 percent of its SKUs because they were more of a distraction than a value to the company. “The sales organization had a target on my front and my back,” Borel says. But 16 months after cutting the extraneous SKUs, the company’s sales were up and its profitability had improved dramatically.

Danner adds: “As you improve your turns, your profitability goes up—sometimes without even increasing your sales. That frees up cash in the business to apply where you need it.”

One of the trickiest parts of managing inventory turns is forecasting demand for crop protection products up to 18 months in advance. Forecasters look at factors such as weather patterns, crop prices (and thus how many acres farmers will plant in various crops), and anticipated pest pressures. “There are a lot of moving parts,” Borel says. “If you’re inaccurate in forecasting, you’re going to have a heck of a time managing inventory.”

One factor in improving working capital, Borel says, is simply recognizing what is possible within the industry. For example, 4.4 turns—the best-in-metric figure in 2016—would have been viewed as impossible a decade earlier, when the average was 1.0. “Now, across the industry, working capital management has improved significantly, but we still have vast opportunities for further improvement,” he says.

He notes that the process and benefits that apply to crop protection products apply to other products as well, regardless of business category or sector.

The Context Network has many years of experience in helping companies dramatically improve working capital turns while assuring appropriate service levels for customers. For more information, contact Mike Borel at mike.borel@contextnet.com.