Mid
America
Cooperative Credit
RSAS
Presentation
April 18, 2013 | Richmond, VA
Conference
October 17, 2013
Privileged & Confidential
Table of Contents
Today’s Presenter
Southern States Cooperative
1. Company Overview
2. Credit
3. Growing the Business –
Technology, Prospecting, Sales
& CRM
4. Collections
5. Future Considerations
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John Hiatt
Vice President Credit & Asset Protection, SSC (2012- )
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Credit
• Wholesale credit
• Credit vendor relationships
• Store credit (coops/store accounts)
• Credit & gift cards
• Patronage management
• Sales Finance
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Asset Protection
• Corporate Asset Protection Specialists
• Store surveys, security systems,
investigations, and prevention activities
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Corporate Aircraft & Pilots
John Deere
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Deere & Company 2008-2012
• Global Security Manager
• Mgr. Security & Aviation Implementation
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John Deere Financial 1987-2008
• Manager NA Customer Management
• Manager, US Ag Installment/Lease Finance
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John Deere Parts Distribution Center 1981-1987
2
Company Overview
Southern States Cooperative at a Glance
• Farmer-owned cooperative founded in 1923 as Virginia Seed Service
• Leading supplier of agricultural products and services east of the Mississippi
• Broad offering of quality, performance-driven products and services essential to
growing crops and raising animals
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Crop Inputs
Farm & Home Supplies
Feed
Petroleum Products
Strong customer loyalty and brand recognition
250,000 active customers with a retention rate of at least 95% in each of the last four years
Primary customers are commercial farmers; also serve growing rural lifestyle customer segment
63.4% member vs. 36.6% non-member business
Fourteen (14) elected Board members and six Public Directors all with three-year staggered terms
Extensive distribution network with 1,299 storefronts across 23 states
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Company-owned Retail Stores
Managed Co-ops
Private Dealers
Commercial Accounts
• Knowledgeable employees with the expertise to deliver valuable growing solutions
FYE June 2013
$2.3 Billion of Revenue
4
Diverse and Loyal Customer Base
% of Gross Margin
Retail
Gross Margin % of Sales
Rural America
Producer
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Based on LTM 3/31/13 retail gross margin dollars
GFI greater than $250,000
Average 1,000+ acres
Expanding due to economies of
scale, succession planning, etc
Price sensitive
Seeking agronomic expertise
Prefers face-to-face approach
versus in-store
Rural
Residents
Lifestyle
Farmers
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GFI less than $250,000
Average 5 to 150 acres
Off-farm revenue if not full time job
Solutions based; quality service
Needs are more diverse; usually
have livestock
Some sales force interaction,
in-store as well
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Homeowners, Equine Enthusiasts,
B2B
Residential petroleum customers
Increasing in number as land is
developed and urban-sprawl
pushes people to the country
Solutions-based; quality service
Needs expand to pet, equine,
garden, lawn
In-store shopping; e-commerce
95% retention rate with our top 10,000 customers
5
Diversified Distribution Channels
64% of our sales are through controlled distribution
No single customer accounts for more than 1.9% of sales
WHOLESALE
DISTRIBUTION CHANNELS
SSC OWNED
RETAIL STORES (1)
(43%)
CROP INPUTS
Division
FEED
Division
PRODUCERS
MANAGED
COOPERATIVES (2)
(21%)
LIFESTYLE FARMERS
FARM & HOME
Division
INDEPENDENT
SSC DEALERS (3)
(11%)
PETROLEUM
Division
COMMERCIAL
ACCOUNTS (4)
(25%)
Percentage of Sales by Distribution Channel
are based on LTM 3/31/13
CUSTOMERS
RURAL RESIDENTS
SSC Controlled Retail Channel
(1)
(2)
(3)
(4)
SSC Owned Retail Stores are a dual-margin business for the Company, generating margins at both the wholesale and retail levels.
Managed Cooperatives operate through management agreements with SSC, but are not owned by SSC, generating wholesale margins.
Independent SSC Dealers sell Southern States or Agway branded products, generating wholesale margins.
Commercial Accounts and Independent Cooperatives provide ability to upsize procurement and balance inventories, generating wholesale margins.
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Stability In Core Territory
Crop Acres (10-States)*
16.0
14.0
12.0
(millions)
10.0
8.0
...
6.0
4.0
2.0
0.0
1990
1992
1994
Source: Actuals through 2012, and 2013 projection from USDA
* AL, DE, FL, GA, KY, MD, NC, SC, VA, WV
1996
Corn
1998
Wheat
2000
2002
Soybeans
2004
2006
Cotton
Total
2008
2010
2012
+/-- 14 million acres farmed since 1990
+/
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Extensive Distribution Network
No single competitor has the product assortment or
number of storefronts that we have in our core territory
1,299 Retail Storefronts
37 Wholesale Facilities
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Credit
The Credit House
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Almost all Patron Credit Through JDF
Over $5 Billion
Southern States Volume with John Deere Financial
2003
2004
2005
2006
2007
Services
2008
Coops
2009
Dealers
2010
2011
2012
2013
Credit Organization
John Hiatt
VP Credit & Asset
Protection
Manager Credit
Marketing & Operations
Imbedded John Deere
Financial
Account Manager
Sales Manager
5 Regional
Sales Finance Managers
Associate Credit Manager
(Wholesale Credit
Territory & Internal
SFM)
Wholesale Credit
Manager
Advanced Collections
SFM Coordinator
Sr. Credit Analyst
Manager Credit
Processing & Reporting
Manager, A/R and
Customer Support
Processing Team
Project & Process
Manager
Analysts
Reporting and Systems
Sales Driven Focus – Tie to John Deere Financial
• Systems Integration
– Credit limits part of our POS system
– Overnight transaction processing
• Imbedded JDF Account Manager
• Sales Manager within Credit
– Newly created – Now Hiring!
• 5 SSC Sales Finance Managers –
Geographically Dispersed
• Sales Finance Funds high six figures to
support programs
• Marketing Funds low six figures to
support JDF sales
• JDF/SSC executive customer visits
• JDF Credit team customer visits
Communication
SFM
Farm Credit
Local Bank
Other Lenders
Customer
JDF
Account
Manager
SSC
Agronomy
Salesperson
JDF Analyst
Managed Cooperatives
• 21% of our business through this
channel
• Many choices for credit
– JDF
– In house
• Management assistance from our SFMs
• Corporate credit approval standards
• Coop board can choose to modify
corporate standards
– Arrangements with other lenders
• We monitor, report, and provide
assistance catered to each location
• Part of coop management fee
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Other Credit
• Managed in-house
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Budget heating
Direct to customer business
Rejected by JDF (Services – owned locations)
Held tickets?!?
• Credit to our merchant channel
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Over 1,000 customers – low 10 figure volume
Limits from $5,000 to $Millions
In-house staff
Terms - Net 30 or less
• Credit card relationship
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Growing the Business
Technology, Prospecting, Sales & CRM
Technology To Grow The Business
• Customer Relationship Management (CRM)
– Proprietary system housing sales and production information on 250,000 customers
– Drives wallet share and prospect conversions
– Make informed decisions based on past purchases or performance
• Telematics
– Installed in 550 vehicles; 850 more in 2014
– Equipment utilization, optimization and employee productivity
• Retail Rejuvenation
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Replaces 30 year old proprietary Point of Sale with leading technology
Complete overhaul of “back office” processes in stores and at Central Office
Provides tools for coupons and loyalty programs
Provides enhanced tools that support up-sell, cross-sell and suggestive-selling
Customer Portal; enhances customer experience
• Inventory Optimization
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Phase I implementation complete (Distribution Centers)
Centralizes and automates inventory replenishment
Forecasts demand and minimizes out-of-stocks
Maximizes buying power
Visibility across entire supply chain – Phase II adds Company-owned retail stores
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CRM – Sales Finance Managers (SFM) & Sales Team
Crops Potential Compare - with
actual YTD Sales.
Use Purchased Market Data and Internal Intelligence
Final Acres – and our
GrowMaster formulas drive the
Wallet Share calculation.
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Existing Customers –Wallet Share
Review – page for new
sales opportunity.
Predict - what they
should be buying in
the next 60 days.
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Mine Prospects
Location - of existing
customers (green dots) and
prospects (yellow dots).
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Dot Size - indicates
current purchases or
total estimated crop
spend (prospects).
Territory Management – identify
prospects that are close to our
existing customers.
Credit and Sales Work Together
Credit Tab – allows you to plan for
additional customer credit needs.
Prepayment - information
is also available on this
screen.
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Using Web & Social Media to Connect with Customers
• Web:
– ~300,000 visitors / month
– 70% are new to our site
– 30% use the store locater tool
– Ability to search local inventory; 1,500 a day use this tool
– 30% use mobile device to access webpage
• Social media:
– Poultry Pal app; 5,000 have downloaded
– 200,000 Facebook fans, monitored daily
– 1,700 Twitter followers
– Pinterest – a bulletin board of shared
interests, recently launched
– YouTube presence and “How to Videos”
• Poultry
• Dairy
• Beef
24
Collections
Credit Programs
• Retail Credit
– 62% of Retail sales financed through JDF
– 97% was “Preferred” (No recourse to SSC)
• Bi-weekly calls with JDF collection and acceptance team
• Joint effort on all escalated collection accounts
– SFM
– Agronomy Sales Team
• Internal team (Richmond) manages collection administration
– Leverage internal system and staff
– Smaller & Older collections sent to agencies
• Retail bad debt expense averaged less than $235,000 per year over the past 5 years
Our risk paradigm is much lower because we do not lend to our producer customers
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SSC’s Retail Risk Profile
SSC Recourse on JDF Accounts
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
20%
Dec-12
30%
Jan-13
50%
Feb-13
Mar-13
100%
Apr-13
MA
May-13
Jun-13
Jul-13
Future Considerations
Grow the Business
• Refine JDF program offerings using business intelligence
• Further Promote use of CRM within team & across teams
• Continue to strengthen relationships with other lenders
– How can we help each other?
– Use our programs as a seasonal advantage
• Grow service value proposition with customers – more than a commodity…
• Sell more & maintain margin structure
• Continue to investigate other credit options