Rabobank sees changes in consumer demographics as challenging for the future
When looking toward the future, USDA asked panelists at the Agricultural Outlook Forum about the biggest challenges for the agriculture industry moving forward, and Rabobank’s Rajiv Singh tapped young people and the changing demographics of the United States as big challenges.
“When I took over the role to handle our business in North America about two years ago,” Singh said, “one of the challenges I was faced with was how to attract the best and brightest young talent to Rabobank.
The challenged was in that, first, the financial services industry had been discredited following recession in 2008 and, second, that the food and agriculture industry are not attractive.
In looking for the best way to attract young people and young talent to the ag services industry, the bank invited graduate student trainees to discuss what motivates them to get involved. Rabobank shared materials describing the bank’s credentials and data, and the group of students noted that the data doesn’t work to motivate young people today.
“They said this doesn’t resonate with our generation,” Singh said. “They told us what we have to do is talk about things that touch students and touch the public more generally.”
The graduates developed a slogan, saying agriculture is food, fiber, feed, fuel and pharma.
“I think that is a good way at looking at the future of ag in terms of who is it that it touches,” he said.
Increases in profitability
As he looks toward the future, Rabobank and Singh see the next expansion phase as relatively short and moderate.
He said that the next cycle will be similar in the 1982-86 or 1992-96 expansions in agriculture, which saw 30 to 40 percent increases.
“Our most recent increase was enormous, 278 percent from 2001-11,” he said. “While we are looking to stabilizing and improving slightly, we are not looking, at any fashion, to returning to the good, old days like the early part of the century.”
At the same time, over the last quarter, Singh said a number of large mergers in agriculture companies have addressed reduction in farm income, increases in efficiency and a transformation of producer to provider.
“These mergers address all of the realities that the sector is facing,” he said, adding that growers will likely benefit from these mergers. “There will be a renewed effort to come up with new products and services at price points that are attractive to growers.”
The fertilizer industry and grain and oil seed segments will see a more mixed impact. Singh said distributers will be the hardest hit, as commission levels and concessions for distributers will be impacted.
“These are big mergers, one in a generation or once in a lifetime events, that are happening,” he emphasized, “and they are being driven by issues that were there in the past.”
“Whether we look at food, pharma, fiber or any of the things that touch consumers, their preferences are changing as a result of broader trends,” Singh continued.
Rather than getting information from a family setting, he said that consumers are looking elsewhere.
“Transparency is important for consumers today. They are yearning to figure out what is right for them,” Singh emphasized. “They don’t have the kind of ecosystem that many of us had growing up, in terms of what is right and what is wrong and learning from others. It’s much more reduced.”
Consumers are looking for value and the best experience, and convenience also remains a big factor.
“Lastly, it is mostly about novelty,” he said. “People are tired of Kellogg and Kraft telling them what breakfast should be. They want to try it out on their own, and therefore, consumers are moving away from big brands.”
Consumers are also driving new trends, like gluten-free, natural and organic, which are not fads.
“Gluten-free has led to a 10 percent reduction in wheat consumption in the U.S.,” Singh said. “That is not a fad anymore.”
The ag sector can respond by looking at the past.
“The ag sector has been able to develop and deliver value over a period of time,” Singh said. “This is not something new, and it’s a challenge we have met.”
However, USDA data has shown that biggest increases come from total factor productivity growth, which came mainly out of seed and fertilizer.
“That has its limits, so what worked in the past may not work anymore, at least if more of the same is done,” he continued. “What we need to do is innovate.”
To do that, Singh suggested looking beyond mainstream products, using technology and global linkages and connecting with consumers.
“There’s a lot of resonance of values between what consumers want today and what the ag sector represents traditionally, but I think we need to reach out, educate and be in those conversations ourselves,” he commented.
Singh continued, “If we can address the trends of the past but also look at some of these budding macro-societal trend, I think our companies, especially in the U.S., have a lot of upside, but we will have to work to make it happen.”
Saige Albert is managing editor of the Wyoming Livestock Roundup and can be reached at firstname.lastname@example.org.