Company aims to more than double revenue this season
Amid challenges faced by major agricultural input distributors, such as declining input prices and rising financial costs, Naval Fertilizantes, based in Campo Novo do Parecis (MT), is preparing to expand by adopting a franchise model. The company, specializing in biological products, nutrition, and technology for crops and pastures, plans to launch 40 franchise units by the end of the 2024/25 harvest and increase revenue from R$ 52 million last cycle to R$ 120 million this season.
“We are currently selecting franchisees and have 17 in advanced negotiations,” says Luís Fernando Schiavo, CEO of Naval Fertilizantes. The company is seeking entrepreneurs with experience in reselling agricultural inputs and an established client base.
Naval offers three franchise formats:
- Basic: Starting at R$ 83,100
- Senior: Starting at R$ 120,500
- Master: Starting at R$ 138,500
By 2030, the ambitious goal is to reach 1,140 franchise units across Brazil, generating over R$ 2 billion in revenue.
“This is a bold yet feasible project, given the expected increase in fertilizer demand in Brazil,” Schiavo stated. Currently, Naval serves around 400 clients in states such as Mato Grosso, Pará, Goiás, Minas Gerais, Rio Grande do Sul, and Paraná. The expansion will initially focus on Minas Gerais, Goiás, São Paulo, Rondônia, and Tocantins.
In addition to providing marketing plans and training for franchisees, Naval will supply the fertilizers. The raw materials are sourced by Naval, and the formulations are mixed by a third-party manufacturer. Eventually, the company aims to establish its own manufacturing facility.
Schiavo views the current market situation as an opportunity. “During times of crisis, the departure of competitors creates room for growth.” To support its expansion, Naval is considering raising R$ 16 million through options such as an Agribusiness Receivables Certificate (CRA), a Credit Rights Investment Fund (FDIC), or an Agribusiness Credit Rights Certificate (CDCA).
Agrex’s Expansion Plan
Similarly, Agrex do Brasil, owned by Japan’s Mitsubishi Corporation, plans to expand its retail network. Currently operating 22 stores under the Agrex and Synagro brands, the company aims to grow to around 30 locations by 2028. Agrex recently announced investments of R$ 700 million to enhance its distribution operations, boost soybean and corn production, expand its seed business, and develop storage facilities.
A Challenging Market
Naval Fertilizantes and Agrex are pursuing growth in a difficult market for large distributors. Declining input prices and rising financial costs have pressured the sector. According to the Brazilian agribusiness GDP data from Cepea (Esalq/USP) and CNA, the input segment saw an 8.13% drop in the first half of 2024 compared to the same period in 2023, driven by falling commodity prices and production losses, especially in soybeans, due to adverse weather.
For example, Agrogalaxy filed for bankruptcy protection with debts totaling R$ 4.6 billion. High customer delinquency, reaching 60% of revenue due to poor harvests and falling commodity prices, left the company illiquid, forcing store closures from 169 to 74 locations.
Similarly, its competitor, Lavoro, reduced its retail footprint by 39 units, now operating 181 stores. The company ended fiscal 2024 with a net loss of $154.6 million, compared to a $43.7 million loss the previous year. Despite a 5% revenue increase to $1.9 billion, the drop in input prices continued to strain profitability.
