Editor’s Note: This is the sixth and final article in a series of articles based on an over-lunch interview with Case IH’s North America’s Jim Walker, Vice President, and Melinda Griffin, Director, Network Development, at the headquarters offices last fall in Racine, Wis. The first article in the series focused on a new Sustainable Growth plans rolled out to dealers in early 2017 and the second article explained the logic behind the new volume incentive changes. The third article explained new communication initiatives and the re-emphasis on the Dealer Advisory Board. The fourth article, served to set the record straight on what Racine says about brand alignment (purity). The fifth article described some new initiatives put into place to encourage best practice sharing among the red dealers.
It was at the end of a 90-minute face-to-face lunch in Case IH’s Racine headquarters that Jim Walker, Case IH Vice President-NAFTA, was asked about whether his and Melinda Griffin’s dialog could be published in an industry business magazine (all colors) like Farm Equipment. Walker is the most accessible of the major-line execs and speaks frequently in front of other colors too, including the keynote talk at the United Equipment Dealers Association Meeting last month in Louisville. But since this lunch meeting was not “on assignment,” it was his call.
“The points we discussed here are all visible in the market as to what we’re trying to do. It’s all centered around the health of the dealer and quality of the product. I don’t care if John Deere or AGCO knows about it. I’ve not had a publication do it like you’re saying, but I’m OK with it.”
This last portion of that long interview, and the final piece in the Case IH Sustainable Growth series, covers the future of the network.
In a mature industry like farm machinery, consolidation has become something we need to deal with ... just like death and taxes. It’s very much like Darwinism and survival of the fittest. It’s not popular with some dealers, manufacturers nor farmers, but this business is “adapt or die.” And there are ways for even the smaller operations to adapt; as shared in articles in Farm Equipment, Precision Farming Dealer and Rural Lifestyle Dealer.
Back in 2006 when Walker was hired at Case IH, its dealer network stood at 1,100. Today, it is at 875, a 20% contraction that Walker says was about natural right-sizing and attrition, not a master plan. According to the annual Big Dealer list from Aq Equipment Intelligence, Case IH still has the second-largest “big dealer groups” behind John Deere.
Case IH’s Jim Walker and Melinda Griffin
Walker discussed the acquisition trend during his time in Racine. “There’s no doubt that we’ve got fewer ownership groups doing more business. Booth Machinery jumped from Arizona to California, H&R Agri Power jumped from Kentucky down to the Delta. Birkey’s spread out in Illinois. These companies made those moves on their own.”
Walker recalled one dealer who flat-out told Walker he didn’t buy into the multi-store concept; that he’d forever remain a one-store dealership. That dealer-principal views the business much differently today and has several stores in two states.
Walker was asked about the next wave of consolidation, and those that don’t have the will, or the next-generation management structure or personnel, to make it.
“People ask Melinda (Griffin, Director, Network Development) and me all the time, how many dealers do we want in North America? We always answer that the business environment and our expectations will dictate that number. It takes a certain amount of volume to justify the investments dealers need to make today, whether in training, capitalization or technologies, and experience of service and sales. You need a certain amount of revenue to justify that. So, part of that already affects some of our dealers. Some will reach the conclusion there’s just not a return on the investment they’d need to make.”
Griffin noted that the smaller dealers, the ones that do less than $5 million in Case IH wholegoods, are typically the ones that struggle the most — and tend to carry a lot of different brands. “One might think that because they carry all these different brands that they can be profitable. But they’re finding out that they’re serving so many masters they can’t keep up because of the costs associated with each line. Where we find the strongest dealers are the those that that are 75-85% in revenues Case IH because of all the investments that they have to make.”
Things like people, training and facilities become the Achille’s heel of the lowest performers in the Case IH network, she says. “We don’t want to give the impression that single stores aren’t in our future,” adds Walker, “because they certainly are. It’s about scale. There’s parts the country that warrant a $30 million single-store rooftop. Montana and the Plains have a big enough trade area that they can justify one store and survive and do well.
"There’s no doubt that we’ve got fewer ownership groups doing more business. Booth Machinery jumped from Arizona to California, H&R Agri Power jumped from Kentucky down to the Delta. Birkey’s spread out in Illinois. These companies made those moves on their own."
— Jim Walker, Vice President,
Case IH North America
“At the top end, you’ve got the larger stores today that will continue to pick up a store here and there to take advantage of that synergy they have in business and just expand slowing if they want to — at the right time, right place.”
It’s the middle group where things are ripe for consolidation, he says. “That group in the middle doesn’t always shave a large enough footprint to sustain and capitalize growth or may not have a good succession plan or someone coming behind them. They may be too big to sell out to somebody.”
Those are the areas that he, Griffin and the network development team must focus on ... trying to help bridge dealers in forming stronger dealerships. “We owe it to our dealers and their livelihood — that was their whole investment and they need to get a fair price for that regardless of whether they stay on or walk away. So, I think that’s our group that we look at as we work with the closest right now.”
Walker regularly mentions that Case IH must need to be at the top of its game to compete with the number-one network, the guys in green, who are also evolving quickly. “We need to up our game, too. Customers’ expectations are changing. Their needs of product vs. solutions are changing. And so, we must stay with that. We need to move forward with that and we need a dealer network that wants to be a partner with that.”
Walker is open about what he wants to do, and like several of the red Farm Equipment Dealerships of the Year, he doesn’t sweat about telegraphing his moves. “Anyone can see our playbook,” one Dealership of the Year Alumni told me. “They wouldn’t be able execute our strategy with their people with any more success that we could with theirs.”
The hard part, says Walker, is how to “go and do it.”