Where is the way out for the million dealers in the agriculture and animal husbandry industry?
Why do we say a million dealers? Of course, this is only an approximate figure, because no one knows exactly how many dealers there are. We can only make a rough estimate: based on the more than 6,000 feed enterprises currently in the industry, each enterprise has 100-200 dealers of various sizes with accounts, so the figure of a million dealers emerges. Of course, whether it is a bit more or a bit less does not matter. What matters is that, with the rapid transformation and development of the industry, where will these dealers go?
1. Dealers face eight major dilemmas
Dilemma one: The traditional dealer group will rapidly disappear
Dealers are in a period of consolidation and elimination. The predicted time for the transition period: 3 years for pig feed dealers. Future dealers will need to rely on more resources to serve end users; of course, their name will no longer be "dealer."
Dilemma two: End customers are changing rapidly
Next, family farms and large-scale farming will become the main body, and backyard farmers will decline sharply; medium and large-scale farms will purchase feed and other production materials directly from manufacturers; farmers will keep pushing product prices lower while continuously raising service requirements; overall, the arrival of the era of thin profits is unstoppable!
Dilemma three: Limited resources of their own, services cannot keep up with demand
Existing users no longer have a simple buying-and-selling relationship; demand for service platforms is urgent, such as financing, information, technology, insurance, sales, and so on.
Dilemma four: Lack of funds, serious credit sales, increased risk
End users are short of funds, and the demand for credit sales remains. Credit is like loan sharking: with capital there are users, and there is apparent profit, but this is obviously a high-risk gamble, a bottomless pit.
Dilemma five: E-commerce has emerged, promotions are diverse, and profits have fallen sharply
Sales are declining, and many traditional dealers rely one-sidedly on promotions to drive sales. Yet the result of promotions is often that sales happen only with promotions, do not happen without promotions, or even do not happen despite promotions. The disruption of e-commerce has gradually made feed prices and profits transparent.
Dilemma six: Poor brand awareness, extensive business management
Traditional dealers fight alone, and their brand influence is limited. A single feed sales business lacks comprehensive competitiveness. End users have poor brand awareness and are easily affected by no-name brands. The husband-and-wife store and family store model no longer meets market demand. A systematic operating plan is needed to build a platform, standardize processes, strengthen management, and optimize details.
Dilemma seven: Those who cannot keep pace with the times will inevitably be eliminated
The functions of advance funding, customer relations, logistics, and warehousing have changed, and the role of traditional dealers in the value chain is gradually weakening. Those who cannot keep pace with the times will inevitably be eliminated.
Dilemma eight: Existing channels face collapse, danger and opportunity coexist
The current crisis is also an opportunity! Dealers all want to change their model, but do not know how to change, ultimately appearing confused, hesitant, and drifting with the tide. Dealers are all looking forward to innovative models and to coordinated development with companies that have strength, resources, and clear strategy.
Apart from changing professions, if dealers want to continue to survive and develop in the industry, what exactly should they do? Combining the current situation of China's rural social, economic, and cultural development and the characteristics of the agriculture and animal husbandry industry, the cooperative model is indeed the primary choice. Why is that? Let us first look at what is advanced about the cooperative business model. A brief statement follows.
2. The cooperative business model is advanced
Advanced point one: The cooperative business model is prevalent worldwide
The Rochdale Equitable Pioneers Society, founded in 1843, is recognized as the first successful consumer cooperative, and its cooperative principles are known as the "Rochdale Principles." They mainly include: (1) voluntary participation in and withdrawal from the cooperative; (2) voluntary subscription to shares, with shares receiving interest but not dividends; (3) equality of members, democratic management, and one person, one vote in elections; (4) the cooperative conducts buying and selling at fair prices, ensuring genuine goods at fair prices and accurate weights and measures; (5) after year-end surplus is used to set aside reserve funds, public welfare funds, and education funds, the balance is returned to members in proportion to purchases; (6) the cooperative remains politically and religiously neutral. The Rochdale Principles are progressive principles and a leap in the history of the cooperative movement from utopia to reality. Materials about the Rochdale Equitable Pioneers Society are extremely abundant on Baidu, and interested friends can look them up further.
Afterward, in 1895 the International Co-operative Alliance (abbreviated in English as ICA) was founded in London, United Kingdom, and continued to develop into an organization with 258 member organizations from 96 countries, representing more than 1 billion cooperative members worldwide, becoming the world's largest independent non-governmental international organization. In 1946 it was among the first non-governmental organizations to obtain Category I consultative status with the United Nations Economic and Social Council. In 1992 the United Nations General Assembly adopted a resolution declaring the first Saturday of July each year as the United Nations International Day of Cooperatives.
In 2016, UN Secretary-General Ban Ki-moon said in his message on the International Day of Cooperatives: "I urge governments to create an enabling environment for cooperatives to thrive. Let us harness the power of cooperatives, this vital force, to work for the Sustainable Development Goals and build a world of dignity and opportunity for all."
The International Co-operative Alliance defines a cooperative as: a cooperative is an autonomous organization of persons voluntarily united to meet their common economic and social needs through a jointly owned and democratically managed enterprise. To date, cooperatives have flourished globally: in Denmark, 98% of farmers participate in agricultural cooperatives; in France, the Netherlands, New Zealand, Australia, Japan, and South Korea, more than 90% of farmers participate in agricultural cooperatives; in the United States, Brazil, and Chile, more than 80% of farm owners join cooperatives.
Advanced point two: Ten years of advocacy at the national macro level
The Law of the People's Republic of China on Specialized Farmers Cooperatives was adopted by the 24th Session of the Standing Committee of the 10th National People's Congress on October 31, 2006. It came into force on July 1, 2007. The law defines a farmers cooperative as: a mutual-aid economic organization in which producers and operators of the same type of agricultural products, or providers and users of services for the production and operation of the same type of agriculture, voluntarily unite and exercise democratic management on the basis of rural household contractual operation. It takes its members as its main service targets and provides services such as the purchase of agricultural production materials, and the sale, processing, transportation, storage, and related technical and information services for agricultural products.
As early as when President Xi Jinping worked in Zhejiang, at the provincial rural work conference on January 8, 2006, he put forward the grand concept of the "three-in-one" integration of farmer professional cooperation, supply and marketing cooperation, and credit cooperation. Afterward, he conducted many surveys and visits to cooperatives in various places and maintained sustained high attention to the development of cooperatives.
During President Xi Jinping's research visit to Anhui on April 25 this year, he chaired a rural reform symposium in Xiaogang Village, Fengyang County, and delivered an important speech: "We must persist in making solving the 'three rural issues' a top priority in the work of the whole Party, step up efforts to advance rural reform under the new situation, fully implement policies that strengthen agriculture, benefit farmers, and enrich farmers, and promote a solid agricultural foundation, harmonious and stable rural areas, and farmers living and working in contentment." On the morning of May 24, President Xi Jinping came to the Jiucheng Rice Planting Professional Cooperative in Fuyuan City, Heilongjiang Province, and exchanged views with local cadres and the masses on exploring the advancement of supply-side structural reform in agriculture. He pointed out: agricultural cooperatives are the direction of development, and they help the path of agricultural modernization to proceed steadily and with bold strides.
The No. 1 Central Document further points out: cooperatives are the basic main body that drives farmers into the market; they are new-type entities for developing the rural collective economy; they are effective carriers for innovating rural social management. Premier Li Keqiang's government work report emphasized: we must vigorously develop a new type of agricultural operating system, cultivate new-type agricultural operating entities such as specialized large households, family farms, and farmers cooperatives, and develop various forms of appropriately scaled operations.
The core principles for the construction and development of farmers cooperatives mainly include: (1) members are mainly farmers; (2) the purpose is to serve members and seek the common interests of all members; (3) voluntary joining and freedom to withdraw; (4) mutual aid and cooperation. These are the essential attributes of cooperatives: helping one another, uniting and cooperating, and with many people adding fuel, they gain more and greater voice in the market. This is how cooperatives differ from other economic organizations in their mode of behavior.
To realize the "Chinese Dream," the cause of the "three rural issues" is the key and the support. However, at present China's urban-rural and regional development is unbalanced, the agricultural foundation is weak, and rural development lags behind. The "three rural issues" remain the focus and difficulty of building a moderately prosperous society in all respects. How can China's "three rural issues" be solved? In fact, it is very simple: develop modern agricultural cooperatives!
Advanced point three: Multi-party win-win for users, platforms, and enterprises
Through the mutual integration of the three major operating entities, a new type of agricultural operating entity featuring division of labor and cooperation, complementary advantages, and mutual benefit is formed. This creates an operating model in which enterprises handle the market, cooperatives handle services, and family farms handle production. Internal linkage mechanisms are established, forming benefit linkage models such as order transaction linkage, integration of production factors, and mutual-aid linkage. This effectively solves many difficulties in family farm production and operation, such as technology, market, services, and funds, and strengthens the guarantee of members' benefits.
First, what benefits can members who join the cooperative get? There are many benefits, such as: (1) unified procurement lowers intermediate costs; (2) financing provides financial support; (3) insurance lowers farming risks; (4) services improve farming efficiency; (5) mutual aid enhances group feeling; (6) dividends provide additional returns; (7) collection and settlement solve end sales; (8) associations seek policy support, and so on.
And what gains are there for dealers who take the lead in establishing and operating cooperatives? In summary, there are at least eight: (1) successfully realize business transformation and upgrading; (2) turn per-unit price differences into overall returns; (3) turn fighting alone into teamwork; (4) turn personal credit into bank financing; (5) reduce the dual physical and mental pressure of debt collection; (6) improve management and increase information capabilities; (7) integrate resources to obtain returns across the entire chain; (8) enhance the brand and achieve life elevation. Of course, it is not limited to these.
Then, when enterprises lead and guide dealers to build cooperatives, what are the enterprises' gains? To put it concisely, (1) they can upgrade and optimize a group of potential customers; (2) the enterprise then possesses the ability to support customers' development and upgrading, thereby attracting a group of high-quality customers to join its system; of course, at a deeper level, in the process of building the cooperative system, the enterprise integrates a large number of high-quality resources and builds the industrial chain from another dimension.
3. A prediction of mixed joy and sorrow
Can all dealers run cooperatives? Obviously not. If we make a rough prediction, how many people have the opportunity to run cooperatives and thereby successfully upgrade? Less than 20%! This is the general trend of industry development and basically does not change according to human will.
What kind of dealers have the opportunity to transform and upgrade? Can some standards be given? To speak truthfully, some standards combining soft and hard factors can be given. If dealers meet the following conditions and add an excellent enterprise as a background platform, successful transformation is a high-probability event.
(1) Rank high in the local regional market, and the local area does not ban farming (restrictions on farming are not too important, but farming cannot be banned);
(2) Have the demand and willingness to become bigger and stronger;
(3) Have the philosophy and broad-mindedness for win-win cooperation.
As for other things such as financing ability, network resources, technical service ability, and various kinds of resources, of course the more the better. If they are not available at present, it does not matter; in the continuous operation of the cooperative, everything can be integrated.
Of course, the source of cooperative chairpersons is not limited to dealers; it can also be large-scale farms, as well as existing marketing service personnel. The key points for the construction and operation of various forms of cooperatives also differ greatly. We will share more when there is an opportunity later.
In view of the fact that cooperatives are an inevitable ecosystem in the industry, Beijing Nonghe Company under Conson International, with ten years of experience, focuses on in-depth research and active exploration of the development model and operating mechanism of modern agricultural cooperatives, and creates a sustainable modern agricultural cooperative business model. At present, it has a professional team of more than 30 people providing enterprises and outstanding individuals in the agriculture and animal husbandry, agricultural materials, agricultural fertilizer, and agricultural products industries with professional cooperative top-level design, systematic building and operation guidance, big data services, and professional talent coaching, and has achieved fruitful results. At present, the team is still steadily expanding. We hope more aspiring talents will join this professional team and provide more and more professional services for the entire large agriculture and animal husbandry industry.