Agriculture Reference
In-Depth Information
Case study: Richmond Supply and Elevator, Inc.
Richmond Supply and Elevator (RS&E) is a family-owned feed, fertilizer, and grain com-
pany located in Central Iowa. The fi rm is owned and managed by Lance and Paul Taylor, the
sons of the original owner, Joe Taylor.
RS&E handles the Rapid Gain line of animal feeds. The fi rm currently employs eight
full-time personnel, in addition to Lance and Paul. In 2011, roughly 15 percent of their total
$12 million in sales was feed, 60 percent was grain, and 25 percent was fertilizer. Richmond
sold about 4,000 tons of feed in 2010. Over time the fi rm has been profi table, but not excep-
tionally so. In 2010, the fi rm reported a loss of $50,000 on sales of $12 million while in 2011
the net income after taxes was $65,000 on about the same level of sales.
The Market
. Consolidation has been the keyword in the central Iowa market and a smaller
number of larger farm customers have been the result. RS&E had more than 180 feed
accounts in 1999. In 2010, RS&E was serving fewer than 50 farmers (because farm size had
increased), but was selling twice as much feed (through some good management decisions
and some competitors going out of business). The average customer farms about 1,500 acres,
typically one-half in corn and one-half in soybeans. Hogs are essentially the only livestock in
Richmond's market area and swine feed makes up 90 percent of Richmond's feed tonnage.
Competition
. Richmond has a number of other fi rms handling feed in its market area. RS&E's
toughest competition comes from a Lake Feeds dealer, Princeton Elevator, Inc. Lake Feeds
entered the market ten years ago and has pursued expansion aggressively. They market a
quality product and sell aggressively on the farm. The Lake Feeds dealer has held its price
up over the period, taking some of the price pressure off Richmond. Lance feels that Lake
Feeds' growth has primarily come by taking business away from companies selling cheap,
low-quality feed. In fact, RS&E's tonnage has increased over the past fi ve years, despite the
presence of Lake Feeds. Lance believes that Lake Feeds' aggressive quality push has actu-
ally helped Richmond increase sales.
The Firm
. Lance (38) is the older of the brothers and handles the “inside” jobs—waiting on
customers, writing orders, ordering, monitoring the topics, and so on. Paul (36) handles the
fi rm's operations—overseeing the fertilizer plant, feed mill, and grain elevator. Paul also
handles RS&E's outside selling effort. The fi rm takes a very low-pressure approach to sell-
ing on the farm. Paul's customer visits are viewed as problem solving and public relations—
not really sales calls. Paul makes few calls on farmers to whom RS&E doesn't currently sell.
Lance and Paul considered hiring an outside salesperson, but feel they just “can't make it
pay” at this point. They are also looking into more email communications with their custom-
ers but have not made this move yet. Of the other 16 employees, two drive feed trucks, two
run the feed mill, one is a bookkeeper, and the rest are general warehouse employees/drivers.
With the exception of one warehouse employee who has been with Richmond four years, all
employees have been with the fi rm at least fi ve years. Lance and Paul also hire seasonal
labor to help them through the Spring and Fall peak selling seasons.
The fi rm owns two bulk feed delivery trucks. Their feedmill was constructed in 1990 and
is in excellent condition. Paul fi gures the mill runs at about 80 percent of capacity. The fi rm
is located about 60 miles from the nearest Rapid Grow feed plant. RS&E sells little pelleted
