2024/25 Purchasing Challenges
As we rapidly head to the close of 2024, we cannot help but hear the "noise" in the marketplace. A tight election, political instability in the Middle East and Asia, shipping challenges, and extreme weather events hitting our southern states. All these items make the current raw material landscape a bit challenging and unpredictable. As we approached the 2024/25 raw material purchasing season, we had three main goals: secure the most competitive price possible, ensure that all raw materials can be delivered to our facility promptly, and most importantly, we cannot compromise the quality of our product. One thing we have learned over seventy years of being in business is when Growers ships from our facility, we are 100% sure that our product meets all our quality specs and is safe to sell to the customer and consumer.
Matt Schoder, Asa, and I have worked together for the last few years on the raw material purchasing project. It is a large expense for us, very time-consuming, and at times particularly challenging. Our focus has always been on treating our suppliers in the same honest way that we would like to be treated as a company. We are transparent with our bids, we reach out to every winner and "loser" and explain our decision, letting each know that we will give them the opportunity to potentially earn our business in the future.
This year was a bit different, with the aforementioned "noise" in the market. We knew that it would be challenging to meet our three key criteria. Fortunately, we have a few things working in our favor. The DAP market has become exceedingly difficult and with almost all product coming from China and Russia, it is a challenging raw material to source. Thankfully, we have a strong relationship with a key supplier who sources all their product from Mexico and stores their product in Chicago. Their sales representative has been to our facility, knows us well, and as a result, we were able to secure the product at a favorable price with a minimized delivery risk for the upcoming season.
One thing we failed to mention is we ask all companies who bid to hold their pricing firm for the entire season. As you well know, raising the price mid-year makes it incredibly challenging to close sales. This is not popular with suppliers, but we are very upfront that this is necessary if they would like to earn our business.
After "round one" of the bidding, we selected the top three suppliers in each raw material category and asked them to submit their final bid in two weeks. We also asked each of those companies to visit our facility during this time, in person accompanied by a manager, or have a Teams meeting with our team. We do this to answer any questions they may have, and confirm volumes and delivery dates, but we primarily do it to let each of these companies hear our "story." I learned years ago that having a decision-maker in the room is often critical to being able to come to an agreement not only on price, but also the terms of the agreement.
Another point is that our suppliers like hearing that our best days are ahead. We have a strong sales team, and we are adding employees in key areas to assist our sales team. We discuss that we are building a new facility, and we have a management team that is invested in the future.
One of my favorite times in this process is when a supplier mentions having visited our facility years ago to meet with Joe Henry (my uncle). It is the best, as I know he made them sit through many OSU football and sailing stories, and then would squeeze them professionally for the best price possible. If they met Joe, I know the odds are in our favor.
After the first round of bidding was complete, it looked like a 2-3% price increase was in play. We knew this could be a challenge for our sales rep team. We made sure we mentioned this in every second-round meeting, and the importance of supporting our sales team and farmers is key to our success. I know Matt and Asa got tired of hearing my pitch to all these companies, but the message was clear: we just can't raise our price this year, and if you would like to partner with Growers, you are going to need to come in with your best offer in hand, and be able to deliver the product timely.
When the final numbers were in, we were able to lower the price by 1.5% for this season. We heard two comments from nearly every supplier: "I can't believe our margin is this tight, but we want to earn your business this year;" "We had to have multiple internal meetings to gain the approval to hold your pricing firm for the entire season, as this is something we rarely do." Joe would be proud!
It is a lot of work for us, but we are happy to do it. Our mission at Growers, as it has always been, is to support our sales team and farmers, and to never take a shortcut in quality. Please do not hesitate to reach out with any questions, please look to us for support if ever needed, and please know that the Growers "family" is as committed as ever to serving you and our customers.
This is an excerpt from the Late Fall Growers Solution (2024) written by Jim Ward, VP of Sales, and Matt Schoder, VP Finance & Operations.
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