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 AGRILIANCE''S GEORGE THORNTON by Lynn Henderson, Editorial Director May 2006 From tending and marketing honeybees, to opening a new sales territory, to running the country's largest supplier of crop inputs, this year's National Agri-Marketing Association's (NAMA) AgriBusiness Leader of the Year, George Thornton, president and CEO of Agriliance, St. Paul, MN, has, as he puts it, "seen just about everything." Since Thornton took over the reins of Agriliance in 2001, the company's pre-tax earnings have tripled to $77.1 million on total sales of $3.7 billion. Agriliance is North America's largest crop input supplier, engaged both as a distributor and retailer of crop protection products, crop nutrients, seed and agronomic services (see more about Agriliance on page 10). Thornton's story is well worth telling, and one that should be studied by any aspiring AgriBusiness Leader of the Year. "When I started out," he says, "I decided that to make the contribution that I wanted, I would need to get as broad a range of responsibilities as possible. Every time that I was offered a new opportunity, I took it. I never wanted to pass up an opportunity to learn something new." The result: In his 35 year career, Thornton and his wife Beth - whose support he credits for much of his success - are now in their 14th home. Along the way, they have lived in four countries and five states. Born and raised in the small western Georgia town of Columbus, Thornton says that he has always loved production agriculture. "When I left Columbus to attend the University of Georgia," he says, "I thought I would be coming back to teach and farm." It turned out that opportunity never developed. "While I was in college," Thornton says, "I was studying entomology. My major professor had a small cattle ranch and honeybee operation, so I spent a good deal of time working for him. I tended the cattle and helped establish a honeybee lab. We formed a partnership breeding, raising and marketing honeybees around the U.S." For more on his career steps, see the accompanying sidebar on page 6. "As it turned out," Thornton says, "Many of my assignments have been to turn around difficult situations." One of his most difficult assignments was in 1990 to study a distribution system that was faltering in a foreign country, recommend a solution and then implement it. "The easiest decision would have been to just close down the business," he says. "We had declining market shares, poor management and distribution partners whose goals differed from ours. "However," he continues, "we also had employees that knew what needed to be done, and customers who were looking for help." His solution was to turn the distributors into agents. Thornton's organization took over the accounts receivable, insurance costs and working capital needs. The results were immediate and extremely positive for all concerned. With a clear understanding of the opportunities and challenges facing Agriliance when he joined it, Thornton set clear goals for the organization, motivated his teams and provided them the resources needed to achieve a dramatic turnaround in every facet of the company's business. THE THORNTON APPROACH Thornton's approach to leadership is simple: Put the right people in charge, then hold them accountable for defined results. Since joining Agriliance, he has established three resounding themes: customer focus, improved profitability and excellent communications. Through consistent messages, clear expectations and sound business decisions, he has delivered on all three. One example is the almost miraculous turnaround of the organization's southern retail business unit. "When I joined Agriliance," Thornton reports, "it had been decided to sell off the unit. In fact, the employees had been told of this decision. "I didn't agree. My view was we would lose scale, lose our window to the grower, we wouldn't be as valuable of a resource to our wholesale-customers, lose valuable market intelligence on manufacturers' programs and would be relegated to being strictly a Midwestern distributor." He presented his board of directors with these observations and recommended the unit not be sold. It was controversial, but they voted unanimously to accept his recommendation. His next step was to hire Jim Blome, a widely respected veteran of the crop input retailing business to run the operation. Thornton then traveled to meet with the employees. "I told them their jobs were secure and their families were important to us. We were committed to them." The response was remarkable. In 2001, the unit had a net loss of $57 million. In 2004, it made a profit of $16 million. INNOVATIVE ABILITY To bring Agriliance to the leading industry position Thornton envisioned, he provided both necessary resources and incentives to his teams, encouraging them to think globally, expansively and for the future. Under his direction, Agriliance launched a number of remarkable industry firsts: • To maintain control over crop nutrient sources and costs year-round, new sources were identified. In September 2003, the first shipments of urea from Kuwait were accepted, jump-starting a new era for Agriliance. The company has imported more than two million tons of crop nutrients over the past three years, with plans for continued growth in this area. • Agriliance expanded access at the Port of Galveston to provide a deep-water port for global crop nutrient shipments. Previously, much of the industry relied on Mississippi River traffic, which caused backlogs and delays during critical shipping periods. Dealers and growers in the Midwest and Pacific Northwest benefit from this expanded network. With completion of that expansion in early 2006, the site is equipped to receive and handle 70,000 tons of product. • Managing price and supply risk more effectively was the impetus behind a number of new services and partnerships introduced by Agriliance. As manufacturers of crop nutrients continue to shift risk to dealers and growers, the stage is set for year-round purchases based on short- and long-range price and supply trends. To help dealers cope with these changes, Rod Schroeder led the development and introduction of CN Exchange, the industry's first online, real-time crop nutrients purchasing site. This resource helps dealers manage supply risk and provides price transparency. A few months later, Agriliance was named lead market maker for the Chicago Mercantile Exchange (CME), bringing liquidity to crop nutrient trades on Globex, the CME platform for crop nutrient contract trading. • The AgriSolutions brand of proprietary adjuvants, herbicides, insecticides, fungicides, and seed and grain protectants, has grown extensively to 200 products. Many of the AgriSolutions adjuvants are crop-based, which offers a highly compatible and effective platform for matching these products to crop protection products, plus creates new demand for crops grown by Agriliance customers. The high-value product line is unique within the agricultural inputs industry. * Thornton spearheaded introduction of a 2004 customer segmentation program called Differentiated Offerings, which employs a comprehensive customer interview process and data collection to help sales professionals collaborate with their customers to define the services customers are willing to pay for from Agriliance. The information learned in these interviews is used to develop customized business plans, which help predict customer service needs and manage resources and profitability for Agriliance customers. • To solidify Agriliance's retail presence in the southern United States and bring increased distribution efficiency, a joint venture was formed in 2003 between Agriliance and Alabama Farmers Cooperative. Agriliance-AFC has far exceeded expectations, reducing costs and increasing volume for cooperative dealers in Alabama. • In late 2005, Agriliance began offering wholesale customers several business support options, including direct management of their retail sales and marketing programs. • Faced with a number of outdated, smaller dry fertilizer hub plants, Thornton led efforts to create strategic partnerships with local cooperatives to build new, large-scale plants for ensured supply and more efficient production. With more effective movement of crop nutrients from ports into country locations, handling and product costs have been reduced. An additional benefit is less duplication and more productive joint efforts by local cooperatives, now working side by side instead of competing for crop nutrient supply and business. • Overall, emphasis on strategic alliances has sparked development of 15 joint ventures, strategic partnerships, hub plants and other innovative business relationships with customers and supply partners. • Thornton led efforts to coordi-nate activities with Croplan Genetics, the seed brand of Land O'Lakes. Previously, both companies were providing services and consultation to growers, resulting in duplicate efforts and missed opportunities in terms of matching seed genetics with agronomic inputs for optimal results and reduced selling and consulting costs. Through coordination, duplication was eliminated, yet dealers and growers continue to have access to industry-leading agronomy expertise and technical training. In 2005, Agriliance and Croplan Genetics worked together to conduct training for 4,000 local agronomists at 74 Answer Plot locations in 26 states. Today, Agriliance and Croplan Genetics partner in recruiting, technical support and a comprehensive demonstration plot program, and both companies are well positioned for the ongoing impacts of seed bio-technology and crop protection product market devaluation. • The Agronomy Production Specialist (APS) program has grown significantly over the past five years with Thornton's commitment to putting additional trained professional specialists in local cooperatives working with growers. There are now 540 APSs working at local cooperatives. All receive career-track planning and continuous agronomic and sales training designed to improve results at local retail locations. • To help fill the need for entry-level agronomy employees at local cooperatives, Thornton drove efforts to expand the Agriliance college recruiting program, assisting dealers in identifying and hiring talented students graduating from major land-grant universities. This fee-based program continues to grow, with numerous success stories demonstrating the value of connecting well-educated graduates with on-site experience provided by cooperatives and training available only from Agriliance. LOOKING AHEAD "I think this is a great time to be in farming in the U.S.," Thornton says. "Especially for those who are bright, aggressive and financially responsible. "The growing caloric needs of the world will continue to spur demand for our products. And, as the world becomes more prosperous, it will demand high-quality products and be able to afford them. I think U.S. farmers are in the best position to provide them." He also thinks that U.S. farmers, especially those with mega-sized operations, should look to diversify their investments by establishing farming operations offshore. "Many are reaching the scale to do that," Thornton says. "I would look first at getting started in Brazil and Argen-tina. The production costs there continue to be relatively attractive." Looking to his industry, Thornton says, "The market is currently over-supplied with distributors. There are many redundant costs and with the pressure everyone is facing on maintaining margins, if a distributor doesn't add value, they won't be here much longer. You simply can't compete in the long run by relying on reduced pricing of products. He believes the same is true for the retailer segment. "I see rapid consolidation coming, both on the ownership of retail operations and in the number of locations," he says. "We currently have around 2,000 separately owned co-ops. In five years, I think we will have half that number." Retailers must also differentiate themselves from their competitors, he adds. "The new technology that is and will be delivered by seed will continue to have a negative impact on the margins received by retailers who have traditionally relied on crop protection products for the majority of their profit." When looking at the Manufacturer segment, Thornton sees a future that is not nearly as clear as that for farmers, distributors and retailers. "In the past decade, manufacturers consolidated rapidly, primarily because of the new technology that was introduced to the marketplace," Thornton says. "They are all now experimenting on how to work with the distribution channel. Some have chosen to work directly with the grower and some are concentrating on the traditional channel." He states, "At this point, it feels that most are afraid to partner. Unfortunately, many have lost sight of the benefits of having a responsible trade channel that can perform its function very well. "Many manufacturers are developing models they think will get them into the marketplace and increase their sales," Thornton reports. "However, I don't believe these models are necessarily the most efficient answer, and our industry is all about efficiency these days." SUMMING UP "The greatest satisfaction I have had in my career is leading our teams to the success we have been achieving at Agriliance," Thornton says. "I believe it is my role to set the stage for people to do their best, receive the recognition they deserve and enjoy their work." With a philosophy like that, and the steps he has implemented to accomplish it, there is no wonder why George Thornton is the 2006 NAMA AgriBusiness Leader of the Year. AM Tweet |
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