NAMA Shortcuts
Member Directory
Best of NAMA 2014
Upcoming Events
Chapters
Agri-Marketing Conf
More NAMA












VTRACTION
VTRACTION.COM AND THE STATE OF THINGS TO .COM
Editor's Note: It is estimated that as much as $400 billion will be traded online in food and agriculture vertical markets in the next three years. vTraction.com, Rabobank's recently announced e-cooperative initiative, is blazing the trail for food and agriculture e-commerce. Rabobank is the world's leading bank for the food and agriculture industry. Driven by an initial operating budget of $100 million, vTraction.com has made headlines in recent weeks by investing millions of dollars in its portfolio companies, or e-cousins.

Agri Marketing had the oppor-tunity to speak with Ejnar Knudsen, the new CEO of vTraction.com, about this groundbreaking way of doing agribusiness.

AM: How did the concept for vTraction.com come about?

EK: I was fascinated by the effect super stores had on small-town America - the way they moved in, caused local businesses to close, and changed the dynamics of a community. So, I wanted to know how the Internet would impact business, who would be the ones to lose value, and what vehicle would allow people to share in value creation, rather than have change forced upon them. The vTraction.com concept began when I went to the Netherlands last year to work on a 20-year strategy for Rabobank. As part of our review, we considered the impact the Internet would have on the food and agriculture industry.

After contacting food companies in the United States, it became apparent that the method of transacting business would have to be substantially different. The bank would have to deliver to an electronic marketplace instead of the standard way of financing and supporting a company. When I came back from the Netherlands, it was shocking how much the Internet had progressed in only four months. Everything had shifted from a business-to-consumer to a business-to-business focus. When I opened the Wall Street Journal, everything was .com, so we really had to move quickly.

My concept was to develop a strategy that was good for the bank and good for the client. But it couldn't be one that the bank would capitalize on in a traditional way. It had to be structured to allow other banks and other strategic parties to participate.

AM: What is your ultimate goal for vTraction.com?

EK: We want to "amazon" agriculture. We want to change the way we do agribusiness from within the agriculture community. Our positioning statement is "From agriculture. For agriculture." We want to be proactive and ready to head-off Internet companies coming from outside agriculture and capitalizing on our business.

AM: What is it about the culture of Rabobank that allowed vTraction.com to happen?

EK: Rabobank is not like traditional Wall Street banks. Partnering has always been part of its international strategy. It's much more client-focused than other banks and oriented to joining forces with local players.

Rabobank realized that a successful Internet strategy can't be started, hosted and owned by one company because of potential channel conflicts. It needs to have a totally separate ownership, one that allows for employee-ownership and incentive.

We identified the bank's core competencies as our brand, our history of positive client relationships, our knowledge and expertise, and our excellent research in the food industry. These core competencies matched the key qualities critical to Internet startups - trust, branding and credibility. These are essential for a market maker to be a neutral, trusted, third party. And the bank already had an established tradition as a trusted third party.

AM: What kind of impact do you think vTraction.com will have on the way the food and agriculture industry does business?

EK: I don't want vTraction.com to have an impact on agriculture. I want our portfolio companies to have an impact by facilitating new ways of distributing, marketing and trading food and agriculture products. For example, the Internet company that facilitates a traditional company's electronic purchase of $100 million worth of products is going to become very valuable in the new economy.

AM: Why did vTraction.com choose to invest in your various portfolio companies?

EK: We wanted to focus on dirt-to- dinner-table companies. We were also looking for a highly fragmented market, whose participants could benefit from an electronic marketplace. It also made sense to choose a sector that would gain the most from the information-rich decision-making we would provide. Our portfolio companies have the power to leverage off someone else in the vTraction.com family, while still retaining the freedom to go elsewhere, and that makes them a much more powerful allied force.

AM: How did you implement vTraction.com?

EK: vTraction.com has a three-phase plan. In Phase I, we developed partnerships with vertical market-makers, from seed to feed. On one end of the spectrum, we chose eHARVEST and Farms.com, with their focus on farm inputs and outputs. And on the other we chose FBiX, with its focus on food service to food distributors.

In Phase II, we have begun introducing our portfolio companies to the vertical market-makers, including programmers, consultants, logistics, and finance companies to help them devise better solutions.

In Phase III, we will work with various marketplaces and companies in the food and agriculture industry to help them plan their e-commerce strategies and introduce these market-makers and their investment into vTraction.com.

AM: Who are your competitors?

EK: Our competitor is a technology company coming into agriculture and creating an electronic marketplace. I want vTraction.com to bring technology and capital resources, but I want our shareholders to be primarily people from within agriculture, people who are actually going to choose our portfolio companies and make them successful.

For example, large food companies could decide to host their own marketplace. They could spend $5 million to $20 million hiring programmers and consultants, building their own marketplace, and getting people to transact in its market. But that's equivalent to a manufacturer hosting a retail shop right in their factory. Traditional brick and mortar companies are going to spend a substantial amount of money to host an electronic marketplace, but I think that's a challenged strategy because the Internet tends to empower the buyer and level the playing field.

AM: Can companies invest in vTraction.com?

EK: My concept is to give the manufacturers, the distributors, or even the buyers the option to become equity investors into vTraction.com - if the portfolio company determines they are of strategic importance. Investors are not going to get actively involved in vTraction.com's management, nor are they going to be directly involved in the marketplace or the exchange because they have a distant ownership stake. Privacy and neutrality is not jeopardized by their investment because it is twice removed. That would not apply if a large industry hosted an exchange.

AM: Will Rabobank will be a minority shareholder?

EK: In every country, Rabobank works in partnership with different financial institutions and other institutions serving agriculture.

If our endeavor couldn't be shared with these current partners, they would have to develop their own strategies and compete. We don't have the ability to deliver all the products that are needed to our electronic marketplace, so at least several financial institutions are going to own part of vTraction.com. We are investing in companies that will be technology partners, the programming, the consulting, the e-consulting companies, the logistics and financing pieces. All of these companies are part of vTraction's Phase II portfolio that will add to the market-makers' product offering.

AM: What's down the road for vTraction.com in the next year?

EK: We're gaining ground in North America and we want to expand our network to Europe, Australia and South America in the next few months. After that, we are on a momentum towards an IPO in about nine months. Several companies exist only for the IPO. We don't. But if vTraction.com's shareholders and board members decide that an IPO is the best method of evolving, then that's what we'll do. AM


Search News & Articles



















Proudly associated with:
American Business Media Canadian Agri-Marketing Association National Agri-Marketing Association
Agricultural Relations Council National Association of Farm Broadcasters American Agricultural Editors' Association Livestock Publications Council
All content © Copyright 2014, Henderson Communications LLC. | User Agreement