A Colombian distributor of agricultural supplies was suffering from a fall in profitability despite growing sales. Previously defined initiatives had failed to revert the situation and the company was facing uncertainty due to difficult conditions in the country’s farming industry.
Context
A leading distributor of agricultural supplies was suffering from declining results in terms of EBITDA despite rising total sales. Internal measures had not yet managed to reverse the situation. Due to the fluctuating and delicate situation for most crops in Colombia’s agricultural sector at the time, the company’s strategic focus had become blurred. Given the context, the company decided that it needed to revise its strategic priorities and focus on the most pressing of them.
Opportunities detected
By revising the company’s strategic priorities and mapping its business base, it was decided the efforts of the company and senior management should focus on strengthening the core business and not on exploring side opportunities. On examining the core business, it was discovered that the company’s value proposal was very similar for all its clients regardless of size, location or crop.
A quantitative analysis of its clients found that an important number of these generated negative margins and this represented a major opportunity to improve returns through segmentation.
Proposed actions
Clients were grouped in 13 main families according to crop and location. Each family was then segmented based on potential sales and the costing of attending each family. Once these segments were defined, actions to strengthen or rationalize the value proposal were defined. Finally, the main facilitators in the organization were identified to ensure a correct implementation which was structured through roadmaps with clear responsibilities and timeframes.
Results
Fifteen client-adjusted value proposals were defined according to their potential and service costs. The strengthened value proposals were rolled out to achieve a 3% increase in margins and increased Share of Wallet sales from existing clients. New clients were captured in areas where the company was already present.
