The Davis Family: A History of Entrepenuership and Sacrifice

 

This is a very unique story about four cousins and their company named AgStrong.  The extended Davis family and their entrepreneurial endeavors is rooted in a multi-generational family history of spreading the Gospel, supporting agriculture, family farms, local communities, and church planting from Africa to Brazil and now, in the American South. 

 

One of the most fascinating aspects of the Davis family is the kind of experiences they had that led up to their founding of AgStrong in Georgia.  Although their grandfather’s life and the lives of two of his sons were murderously cut short by jealous local marauders, the rest of family, including his four grandsons that started AgStrong, all continued to live out the vision in Brazil.  To this day, dozens of members of the Davis family live in Brazil as entrepreneurial missionaries proclaiming the Gospel of Jesus Christ like their Grandfather.

 

And it was there in Brazil that the four Davis cousins that founded AgStrong grew up, working in entrepreneurial endeavors from an early age.  While still in their teens, they managed farm operations, ran local stores and managed local employees. It’s important to note that these men started AgStrong after years of educational and vocational experiences that prepared them well for their entrepreneurial success.

 

For example, Robert, the CEO, is a professional engineer with an Agricultural Engineering degree from the University of Georgia.  At 39 years old, his work experience included assignments in the U.S. with John Deere and in Brazil as an executive for the Brazilian division of Champion International, a multi-billion dollar global timber and wood products company.  He also had his own professional engineering firm in the U.S. where his work included designing and building agricultural processing plants.  It was while running that firm with his cousin Mallory, that they developed the AgStrong business plan.

 

And Mallory, the Chief Operating Officer, is also a professional engineer with a degree in agricultural engineering and a master’s in food process engineering from Louisiana State University.  Mallory’s resume includes engineering and plant management roles at food processing giants such as Nestle Foods and JR Simplot.

 

Other cousins and extended family members working with AgStrong are equally experienced.  These U.S.-based cousins will often call cousins up from Brazil for special short-term projects based upon the diverse gifting of their large extended family members that still reside there.  This enabled them to take a very hands-on approach to building their processing plant.

 

Much of their success in building such a low-cost, capital-efficient business together has to do with their close life-long relationships with each other, their shared faith in Jeus Christ, and having grown up together in a close-knit family.

 

The early years of the company was spent researching various agricultural production ideas that would meet their vision, a vision that sounds a lot like their grandfather’s goal for Brazil, but this time in America’s heartland.

 

Once they decided to pursue Canola oil processing, they had to take a couple of important next steps which included developing seed stock that would grow in the south – since Canola is traditionally a northern crop.  They also researched different equipment and plant designs and negotiated seed oil and meal sales to bottlers and poultry operations.

 

And, rather than risking $4 million on a plant like the one you are just saw in Bowersville, they launched operations by first finding a farmer interested in growing Canola and once he had planted a large crop, they built a small, low-cost pilot plant in an unused building on his farm.  They also convinced that same farmer to invest in the project, along with their own hard-earned money.  The plant was small, with a processing capacity of only ten tons of oil seed per day.  But this small plant gave them a chance to test their ideas and the equipment, while trying to convince more farmers to plant more acreage to enable their company’s growth.

 

The farmer was so pleased with the plant and its profitability that he bought them out for eight times their investment and their financial gain was then invested in the Bowersville plant, a facility with five times the capacity of the pilot plant. AgStrong’s relationships with farmers is critical because they rely on the farmers to grow enough Canola in order to keep their plant running.  The company also relies on farmers to make an equity investment in each plant to help capitalize the venture.

 

In a typical food processing scenario, the farmer sells his harvested grain to an elevator – which is typically owned by a giant agricultural marketing conglomerate – and then they aggregate that grain and sell to the food processor, who in turn processes the grain into products that make their way to the grocery store shelf…

 

Part of Robert's  vision for AgStrong is to work directly with farmers.  In technical business terms, Robert’s goal is to “disintermediate” the value chain, that is to say, take out the marketing intermediary, more commonly known as the middle-man.  This enables AgStrong to pay the farmers a higher price, while still maintaining excellent margins for AgStrong. 

 

Once AgStrong had enough committed acreage in northeastern Georgia to build a larger-scale plant, the cousins looked for an ideal location to site the plant.  In short, they wanted to find a farm community to partner with and to invest in.

 

Bowersville, Georgia was just that type of community.  While neighboring Livonia was thriving due to [the nearby Interstate highway?  I will fill this in with info from Robert], Bowersville was suffering the same fate of so many rural towns with a shriveling economy, empty buildings and little hope.  Robert was excited to help invigorate the town’s economy and estimates that as many as 550 area families have been affected in some meaningful way by their plant. 

 

While Robert and his cousins are impacting many families in the area, they are careful not to lose focus on their own families.  Teen-aged Davis children frequently pitch in at the plant on various tasks from book work to painting to cleaning to operating plant equipment.  And family members are always nearby to drop off lunch or just say hello…

 

Here are a  few important principles about the AgStrong business:

 

First of all, The Davis's saw a great deal of creativity in terms of how they researched their idea and how they developed each aspect of their business model: from the seed, the farmer, the product, the market, the equipment and the pilot plant. 

 

Secondly, they settled on a market with very favorable characteristics that Robert rattles off without hesitation:

 - Canola is the healthiest oil of any common cooking oil in the marketplace

 - Canola oil has favorable cooking characteristics

 - Canola oil is the most popular cooking oil and demand keeps rising

 - Canola oil is nearly exclusively imported at a high cost, resulting in guaranteed demand for AgStrong’s lower-cost, locally produced oil

 - Canola oil pricing has continued to increase year-over-year since its introduction in the U.S. market 20 years ago

 - And, Southern farmers are looking for new, profitable crops to replace traditional lower-demand crops such as cotton and tobacco

 

In addition to their favorable market focus, their business model, like we saw with Holden Coal in our first episode, is very capital intensive, requiring millions of dollars of capital for each plant.  They’ve financed each of their three plants as follows:

 

First, they’ve invested their own money

Second, they convinced their farm suppliers to invest, locking in their source of seed supply

Third, they convinced local businessmen and banks to invest or provide debt, as part of their community development effort

 

And finally, AgStrong did a remarkable job of managing risk.  In addition to starting out small with the pilot plant and keeping their costs very low – which were two important risk mitigants – note that the company only builds a processing plant after a sufficient amount of acreage of Canola is planted.  Once the crop is in the ground, the company scrambles to build the plant and has it ready to accept the harvested crop several months later.  Once the plant is up and running, they use the success stories from that initial crop to convince more farmers to plant the following year, and hence, fill up the plant capacity and increase revenue and earnings.

 

AgStrong is now ready to go online with a new plant in another small community, this time in Trenton, Kentucky whre over 25  new jobs will be created! .  And based upon the company’s success in recruiting farmers and raising capital, this plant will be three times larger than the Bowersville plant, capable of processing 150 tons of oil seed per day.

 

AgStrong has also launched a grape tomato operation in order to provide a meaningful income to families with small acreage plots.  While it takes nearly 200 acres of Canola to provide a good annual income for a farmer, the same level of income can be produced on 10 acres or less of grape tomato production.  Similar to their strategy with Canola, the company has been meeting with families in small communities across the south to recruit them to grow tomatoes, while locating the right kind of seedlings for each growing area and building local tomato washing and packing plants. 

 

Incidentally, their first tomato washing and packing plant is right there in Bowersville in a building given to the company by a grateful community.