Industrial tycoons going into farming must have long-term thinking
Investing in agriculture requires long-term thinking; only after enduring a fairly long investment and cultivation period can sustainable profits be formed.
In this year's Chinese Super League, Guangzhou Evergrande won a fourth consecutive championship, and the “Kawawabear Infant Formula” printed on its jerseys attracted attention. After investing in mineral water and grain and oil, it then entered the dairy industry, and the real estate giant Evergrande made move after move in laying out modern agriculture. In recent years, industrial giants have continuously plunged into modern agriculture. In August this year, LeEco announced plans to build an industry chain integrating modern agricultural production and processing with a fresh agricultural products e-commerce platform. Before that, NetEase raised pigs, Lenovo grew fruit, JD.com grew rice…… Why are industrial tycoons one after another “going to the countryside to farm”?
The direct motivation is mainly that it is becoming harder and harder to make money in their main businesses. To continue to grow and strengthen the enterprises, only by transforming and taking a diversified path can they achieve steady and long-term progress. Take Evergrande as an example. With the real estate boom declining, to achieve the goal of becoming a Fortune Global 500 company, a diversification strategy is imperative. Entering modern agriculture, a sunrise industry with enormous potential, to expand and enrich its own “industrial empire” naturally becomes an important part of the layout.
⟦NL> On the other hand, many agricultural products are fast-moving consumer goods, and more and more consumers are willing to pay higher prices for trustworthy agricultural products. Market demand is huge, and profit margins are also relatively high. “Three Rural Issues” policies continue to improve, and state support is constantly increasing. With such “natural beauty,” it is hardly surprising that modern agriculture has won the “favor” of capital from all sides.
Industrial tycoons are one after another “investing in agriculture,” and through hard work, there is great hope of achieving a win-win result. But there are also many reasons for pessimism, the most important of which is that the vast majority of today's industrial tycoons are amateurs at farming. Previously, NetEase publicly responded to why it had still not sold pork, saying, “We indeed overestimated ourselves and underestimated the problems faced in raising pigs. Agriculture really is a completely new field for NetEase, and complex supply chain management is indeed not NetEase's strong suit.”
If industrial tycoons want to succeed at “farming,” handling the following issues well is crucial. First, be prepared for long-term investment. Many bosses who originally worked in real estate, mining and other industries are used to quick money and high profit margins, and often cannot adapt to the rhythm of agriculture's long production cycles and slow returns. Driven by the urge for quick success and instant benefits, they often play tricks such as hoarding land for non-agricultural development in hopes of making quick money, but the result harms both others and themselves. Investing in agriculture requires long-term thinking; only after enduring a fairly long investment and cultivation period can sustainable profits be formed.
Second, there must be sufficient risk awareness. The agricultural industry chain is relatively long and has many uncontrollable factors. The risk of “depending on the weather for food” and the risk of market fluctuations cannot be completely avoided even under conditions of large-scale operation. Therefore, there must be sufficient risk preparation, and preparations must be made for losses in the first few years or even for the main business to continuously channel funds into agriculture in the early stage.
In addition, relations with farmers must be handled well. No matter how advanced the concepts of green and organic are, and no matter how developed the technology of the Internet of Things and big data is, in the end the vast majority still depends on work in the fields. One cannot simply think that tapping a keyboard and clicking a mouse is modern agriculture. In managing every link of the industry chain, one must learn to deal with farmers. Farmers' awareness of the market economy, modern production techniques and business concepts is relatively weak, but they better understand the “temperament” of the land and the laws of agricultural production. Managers should learn to deal with them as equals and learn from each other's strengths to make up for each other's weaknesses. Especially important is to fully respect and protect farmers' interests and form a community of shared interests with them. Only in this way will farmers treat the enterprise's business as their own undertaking. Conversely, if one thinks only of taking advantage of farmers, one may make money for a time, but ultimately it cannot last.
As the scenery should be viewed with a long view, if industrial tycoons want to succeed in transforming to “farming,” besides better injecting modern production factors and advanced management concepts into agriculture, they must also bend down to better understand this land, become familiar with the laws of agricultural product production, and give farmers real benefits.