Nutrien targets independents, co-operatives

"Today, our retail competitors are operating in the 1980s model of ag retail," said Mike Frank, chief executive officer of Nutrien. "In fact, most co-ops and independents don't have the resources or scale to make the investments needed to serve the growers of today or the future." | Screencap via

The world’s biggest crop input retailer is determined to get bigger at the expense of co-ops and independents.

“We expect to invest $4 to $5 billion in our retail business over the next five years,” Mike Frank, chief executive officer of Nutrien, told investors at the company’s 2019 Investor Day, according to a webcast of the event.

More than 80 percent of that money will be spent gobbling up competitors in the Americas and Australia.

“Today, our retail competitors are operating in the 1980s model of ag retail,” he said.

“In fact, most co-ops and independents don’t have the resources or scale to make the investments needed to serve the growers of today or the future.”

Greg McDonald, president of Winfield United Canada, a company that wholesales products and services to its independent retail owners, disagreed.

“Independents have shown that they are able to adapt with the changes farmers are looking for,” he said.

“They can be more nimble through times of change and be really connected into really and truly what that local farmer is looking for.”

He said farmers like dealing with locally owned and operated independents because they can relate to that ownership structure.

McDonald acknowledged there has been a strong consolidation trend in the industry.

However, he believes a business model such as the one used by Winfield United will keep independents healthy and vibrant because of the access to the products and services of parent company Land O’Lakes, a $15 billion U.S. co-operative.

“Especially for Western Canada, I don’t think independent ag retail is going away any time soon,” he said.

Selling crop inputs is a $5 billion business in Western Canada and a $40 billion business in the United States.

Nutrien has set a target of adding $100 million of earnings before income, tax, depreciation and amortization per year through acquisitions.

One investment analyst questioned whether enough acquisition opportunities were available there to achieve that goal.

Frank said a lot of independent retailers recognize that large farmers are expecting more from their crop input providers and are choosing to leave the business rather than make the investments required to survive the next 10 or 20 years.

He also sees opportunities in acquiring co-ops, which collectively control more than 30 percent of the U.S. crop input market.

There has been “unprecedented mergers” among U.S. co-ops during the last six months.

“That model is not working and so co-ops are combining today to try to get to scale,” he said.

McDonald said Nutrien has the money and the desire to continue the consolidation process.

However, it also has a track record of paying “startling” amounts of money to acquire independents and then losing market share as other independents expand into that market or new businesses sprout up.

Frank said competitors have a hard time competing with Nutrien’s crop input supply chain, which is by far the biggest in the world.

The company is taking steps to streamline that supply chain and make it more efficient.

Nutrien is building 18 distribution centres across North America this year to reduce the amount of inventory held at the branch level.

It is also reducing the amount of crop protection suppliers with which it deals. The company started the year with 800 suppliers and by the end of the year it expects that number to have dropped to 500.

Frank said one thing that differentiates Nutrien from its competitors is its digital platform, which can be used to conduct digital agronomy with customers.

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