Messi on the soybean field
Grupo Los Grobo is an Argentinian agricultural group which has become the second largest grain producer in Latin America. Professor David Bell (Harvard) analyzes its rise and success at acting as a network coordinator
The story of Los Grobo begins in 1912 when Abraham Grobocopatel emigrates to Argentina, starting out with 15 hectares of land near Buenos Aires.
His son Bernardo followed in his footsteps and by the early 1960s had 1000 hectares under lease for crops and cattle. Land leasing was a logical outcome of a peculiar feature of Argentinian law whereby all the deceased’s next of kin received a part of the estate (the forced heirs principle). This meant that non-farmers inherited farmland which they preferred to lease to specialists.
A new generation
Great-grandson Gustavo became the first family member to earn a professional degree. He subsequently split his time between teaching soil conservation at the School and applying innovative agricultural techniques and information technology to the family business.
One such technique was no-till farming. No-till farming does not disturb the soil but requires herbicides;, making it quite complex. A solution came in the form of genetically-modified plants that could withstand powerful herbicides. This form of GMO-based no-till farming led to what has been called the third pampa revolution.
Gustavo first started experimenting with no-till farming in 1989 and by 1994 the majority of the hectares he managed were farmed in that new, more productive and more soil-conserving manner.
In the 1990s the hectares under management grew rapidly and the company had to call upon third-party contractors to handle various parts of the agricultural chain. Increasingly, the company saw itself as a coordinator of a network of suppliers. As organizer of such a network, the control of information quality and distribution became critical.
One major step was formalizing business processes, after which the group invested in hardware and software to boost productivity. Using smartphones, it became possible to measure soil characteristics within a five hectare grid.
The company’s service turn was the source of tension between the father, Adolfo, and the son, Gustavo. Adolfo was more of a traditionalist and believed foremost in owning land. Gustavo believed in soft assets such as training and technology, key for the transformation into a service provider.
The heart of the soft-asset strategy was to enter a region, to rent land to grow crops, and for very hectare of land rented, to offer services on another two hectares in the same area. The services included seeding, fertilization, crop rotation, market conditions and hedging.
Geographical diversification
Then came international expansion. One prerequisite was finding a partner knowledgeable about local farming conditions. First came neighboring Uruguay in 2004 where Los Grobo founded Agronegocios del Plata which quickly became Uruguay’s second largest soybean producer.
After Uruguay, came Paraguay. Tierra Roja was founded in 2005 but has been a source of frustration due to Paraguay’s different work ethic and the relative lack of a professionalized middle class, a key to Los Grobo’s networked services model.
The next and most ambitious move was into the northern giant, Brazil. Here, Los Grobo built up a partnership with an investment firm, Pactual Capital Partners. Los Grobo also formed a partnership with Sollus Capital which specialized in identifying, acquiring and developing agricultural land to sell at a profit.
As the case states, it is too early to say whether Los Grobo will succeed among Brazil’s differences. But it has certainly come a long way from the 15 hectares of 1912. It now manages 250,000 hectares of which 160,000 are outside Argentina. In a world that will grow to ca. 9 billion people by 2050, feeding these newcomers entails some 50 million hectares of additional arable land, much of which could come from Latin America. Gustavo’s hope is that Los Grobo will be there to help manage many of those new hectares.
Reference:
Harvard 9-511-088
"Los Grobo: Farming's Future"
Professor David Bell and Cintra Scott
Harvard Business School
