“On the morning of June 12, 1995, Case approached me, asking if we would entertain selling our company, which was Concord Inc., a manufacturer of air drills in the U.S. That same afternoon, I got a call from John Deere. So, we visited with both and their interest got our attention. We had built the business to where it was very close to being mature and estimated that sales for air seeders would probably peak by 1998. After that, it would become almost a replacement market. We ended up selling Concord to Case in 1996.
“My brother, Brian, and I were way too young to retire, so we kept the sugar beet and soil sampling equipment businesses that we owned, as well as the rights to sell Concord products in Russia and Eastern Europe.
“We sold over 600 air seeders in Russia and Eastern Europe between 1991 and 2000, when we exited that market. If I’m not mistaken, we sold 600 air seeders in Russia before John Deere sold its first one there.
“We exited the air-seeder business when it became too complicated to work with Case after they were acquired by New Holland. At that point, they had both Flexi-Coil and Concord and were trying to consolidate them along with their other product lines. Eventually, Concord got swallowed up in the Flexi-Coil operation and moved to Saskatoon. It became very complicated for us to do business with them, so we ended our arrangement to market the Concord product in Russia in 2000.”
Getting Back in the Game
“We waited for a few years beyond the obligations of our non-compete agreement before we got back into the business. During that time, my brother and I launched Amity Technology with the WIC sugar beet equipment line that we purchased in 1995. We were able to utilize our presence in Russia and Eastern Europe to grow the sales of our equipment there, as well as in North America.
Location: Fargo, N.D.
Year Founded: 1996
Employees: Approx. 100
2009 Sale: $65 million for first 9 months
Product Segments: Sugar beet planting and harvesting equipment, soil sampling equipment and air-seeders
“Like most of agriculture, the sugar beet industry is cyclical. While it had been very good to us between 2003 and 2008, when the credit crisis hit Russia and the Ukraine, our sales plummeted. Because we relied on one product for the heart of our business, it was particularly difficult. “In addition, sugar beets have been a shrinking market in the U.S. It has gone from 6 million acres down to 1.25 million acres. The number of farmers is literally a fraction of what it used to be.
“Fortunately, we’re doing a lot of work with Wil-Rich and Wishek, both of which my brother and I own 50%. This allowed us to share people and manufacturing capacity, and to level out the load in our factories. Even with that, there were some empty spots in our manufacturing. That’s when we decided to get back Amity back into the air-seeder business. Not only does it give us better continuity for year-round manufacturing, it’s also a business we know and love.
“In 2008, our equipment sales were about $100 million. Half of that was the Amity business and most of the other half came from the Wil-Rich and Wishek business. Through the first 9 months of 2009, we’re at about $65 million in sales. So we’ll be down a little this year. Our overseas business will be about half of what it was in the previous year at about 25% of our total sales.”
New Products, Old Market
“With all that’s gone on, we felt it was time to diversify beyond the sugar beet equipment business. It just made sense to get back into the air-seeding business, which was clearly our heritage.
“We’re introducing three different ground-engaging tools. The air system is what I call a new and improved Concord air system. Two of the tools are similar to what we had with Concord, including the double-disc and the air-till drill. Chris Jones, a farmer in Australia, developed the idea for the new product, what we’re calling a single-disc drill.
“Through trial and error, we’re adapting it to the wetter soils here. To get something like this to work in every type of soil and every type of residue, it takes a lot of trial and error. We’ve paid our dues the last few years on this one, but we’re happy where it’s at right now.
“We have a strong sense that a lot of markets that we have not yet entered are going to be very strong markets, including Australia. We’re already looking at a number of other export markets and certainly we’re looking at virtually every state in the U.S. and any place that soybeans or wheat are planted, and we think we have a very good chance of penetrating those markets.
“We were naïve enough back in the golden years to believe that we could — if the product proves itself — compete just on the quality of the product. Maybe we still are. But we know that you need a good dealer network to get your product to market.”
Competing as a Shortliner
“It’s very difficult for a specialty manufacturer to compete in this market if the majors have a quality product in the same space. So the most important question for us is what is the space we can effectively play in?
“If you’re a small enough shortliner, and can live on $3 or $4 million dollars in sales, and work in niches, there are some great opportunities. You can have small enough engineering and marketing staffs and be very successful. But for the shortliners who are competing head-to-head with majors in the broader product categories, it’s going to be increasingly difficult.
“I have a friend who is a shortliner and primarily selling through Deere dealers. Deere came out with a product in the same space and it’s become impossible for him to continue developing his business because he’s been closed out of his distribution channel.
“You need something exceptional to set yourself apart from the majors and other shortlines, something farmers recognize as having exceptional value.
“Obviously, we believe that we have a niche product that’s clearly exceptional. So yes, there are still opportunities to compete with the big guys, but you have to really prove that it’s not just a 10% better product. It must be a dramtically better product.
“We know that we’re going to need to continuously prove the products we’re introducing. And the cost of proving them is a lot of blood, sweat and tears. We had many customers watch our Concord seeder, waiting for their neighbor who bought one to fail. And only after their neighbor ran it successfully for 6 years in a row did they say, ‘Well, I think I’ll go ahead and try it.’ We all know farmers and how they look at anything new.
“We are, and I’ll use the word again, naïve enough to believe we can still compete head-to-head with Deere and Case IH with our new products by having an innovative edge and great value for the customer. Then it takes a lot of hard work and demonstration that you have that innovative edge. We certainly see that with certain products like the Wishek disc harrow. There’s nothing that Case or Deere have that’s in the same category.
“If someone wants a heavy disc harrow, we know we have a high probability of getting the business. Our hope with our new single-disc air seeder is that we can demonstrate that it is distinctly superior to what’s out there.”
Protect Your Customer’s Investment
“One of the ways we set ourselves apart is by helping customers protect their equipment purchases. Customers are always thinking, ‘Are they going to come out with something next year that’s a lot better than they have this year?’
“At Concord we used the slogan, ‘Your safe choice today for tomorrow.’ What we were telling farmers was to look at our history. If they bought one of our machines in the past, we probably added other features to it — harrow attachments, fertilizer knives, variable rate system — but they could all be retrofitted to the original machine. As much as possible, we’ve done this.
“It gives people a lot of comfort and when you prove year after year that you do what you say you’re going to do, you build a lot of trust with your customers. Nearly 98% of the Concords we built 15 or 20 years ago are still running.”
Dealers & Distribution
“The biggest change we’ve seen in the farm equipment industry in the last 10 years has been in the dealership structure.
“It seems the executives at the majors have found the Caterpillar distribution model very attractive, where they have basically one dealer per state. They seem to believe that if they have only one principal to deal with, it will make their lives a lot simpler. Clearly, this trend is accelerating.
“It’s amazing how heavy handed some have been in forcing the changes; who can buy who, and what products their dealers can carry. I’m not even sure if much of what they’re doing is legal.
“It seems the number of dealers around today is a fraction of what they were when we were actively selling our Concord line. Looking back, we probably had the sparsest dealer network of any company, but the average sales per dealer of our equipment was outstanding.
“In the early ‘90s, we did some work with DMI, which was a much bigger company than we were. They had one single-store dealer that did more than $400,000 in volume with them. We had 15 dealers that did more than that. In fact, we had one dealer that did about $2.5 million with us and a number of others that sold more than $1 million of our product. So we were a meaningful part of a number of dealers’ business. We had the leading market share for air seeders in the U.S. and covered all of South Dakota with one dealer who did a very good job.
“We had a great dealer organization. In Canada, it was more Deere dealers than Case, in the U.S. it was more Case than Deere. All-in-all, about 40% of our sales were through Deere dealers, 40% through Case dealers and 20% through a combination of shortline and AGCO dealers.
“We had to work hard to earn the trust of the dealers.”
Developing a Dealer Network Today
“We believe that if you do the proper training and have the right product, that it’s possible for a dealer to cover a much bigger area than they were able to previously.
“With our Amity business, we have about 100 dealers and about 200 for Wil-Rich equipment. But distribution is a different world with sugar beet equipment, where we have a mixture of Deere, Case and shortline dealers. Many of them are niche dealers, and they’re some of our best dealers. Many specialize in sugar beet equipment and carry other shortlines. We’ll need to expand this for our new equipment and air seeder lines.
“Fortunately, we have a lot of historical relationships and a lot of people that we worked with for years, so we’re beginning with a relationship already. So we’re talking with many of the 70 Concord dealers we had.
“Remember, we sold as many air seeders through our 70 dealers as Deere did worldwide with its 1,400 or more dealers. Our 5 biggest dealers then were in Canada and were all Deere dealers. It would be very difficult to get those dealers back — but you never know.
“We believe our best prospects may still be the Deere dealer who is determined to stay a one- or two-store dealer. But we’re thinking through this. We’re having a lot of conversations with certain dealers and we know we still have to prove the product — it takes time.
“There are a few of our dealers that have seen it and believe in the product. And if the product’s great — really great — we will get quality dealers who believe that this can help their customers. There are still some brave Deere dealers who say, ‘I’m going to do what’s best for my customer.’
“You also need to determine if you want to work through the multi-store organizations. Do you have a chance of getting the attention of a dealership where 80% of its business is tractors, combines, sprayers and parts from their major? No matter how good your product is, is it worthwhile working on that relationship?”
Smarter, Savvier Farmers
“Another big change that’s taken place since we sold the Concord line is that farmers are a lot healthier financially today. Their debt-to-equity ratio is outstanding. They’ll always complain about the price of this and the price of that — but as far as a balance sheet, we have very healthy farmers in North America.
“There aren’t many bad farmers today. More and more farmers are doing a better job of marketing, and those who are very disciplined in their approach year in and year out are doing the best.”
Loyalty to Color is Fading
“I also like the fact that there is less brand loyalty among farmers today. Going back to 1950s and ’60s, you were either a Ford guy or a Chevy guy, a Lutheran or Presbyterian, a Republican or Democrat for life. Farmers were either John Deere, International Harvester or New Holland guys. There wasn’t a lot of change in loyalties. “Today, there’s not as much loyalty toward brands as there once was. And there’s some good and bad in that.
“The really good farmers want the best value and they’re constantly looking for the right combination of economic value of the products they buy and return on investment of the equipment and systems they buy.
“Younger farmers in particular don’t have the loyalty or color blindness that their fathers did.”
Dealer Loyalty Makes a Difference
“But there still are a lot of farmers who have a relationship with a particular dealer and they buy the equipment because of that relationship.
“Also, there are some farmers who are making so much money and are so successful that, whether they buy Brand X chisel plow, field cultivator or disc harrow, it’s not going to make a huge difference in their farming operations.
“They don’t see their choice of that equipment as important, so they stick with the major based on their relationship with their dealer. “But the majors are building a lot of products that are not of the highest quality. They continue building certain products that are less than top quality with the idea of having their dealers’ total attention.
“But dealers need to do some soul searching and ask if what they’re doing is best for their customers, even if it hurts their relationship with their major. Every dealer needs to ask themselves: ‘Am I selling the product that’s best for my customer?’ ”
Maintain Your Values
“Whether you’re a dealer or a manufacturer, you need to maintain the values and practices that made you successful. For Amity, most of what we do today goes back to our father.
“No matter what the lawyers said, in every contract he added a preamble that stated the intention and the purpose of the contract. For him, every contract had to be a win-win. He always looked 5 and 10 years out and said, ‘I want to make sure that our partner in this contract will feel this is fair 5 years from now, 10 years from now.’ Fairness was the heartbeat of everything he did. My brother and I are trying to replicate this.
“The other thing that drives us is innovation. We love the description of what separated Wayne Gretzky from other hockey players. Good hockey players skate to where the puck is. Wayne Gretzky skated to where the puck was going to be.
“We know on the air seeder and precision agriculture side we were way ahead of the curve. We constantly pushed the envelope on innovation. When we find something we believe in, we’re relentless in pursuing it. This will be our legacy.”
BONUS COVERAGE from Farm Equipment:
The Promise of Biofuels & Opportunities to Innovate
“Clearly we haven’t seen the big breakthrough in biomass for biofuels yet. At the heart of biomass economics is transporting the material. We’re working on something for the compression of the biomass, to take it and make it very dense for transport. The equipment that we’re researching right now could work regardless of what crop it is — corn stover, switchgrass or miscanthus.
“There are machines in Switzerland and China designed to compress biomass, but their price tag is something like $500,000, and their throughput isn’t great. We have a prototype that we’re fine-tuning. It had some bugs in the first iteration, but on paper the engineering calculations look very good. Theoretically, it will handle more throughput at roughly one-tenth the cost. It still has a long way to go to be viable, but it’s interesting enough that we’ve been working on it for some time.
“We hope that tropical sugar beets become a very significant player in the development of biofuels. There’s some pretty compelling evidence that sugar beets are a much better source of ethanol than corn. In the tropics, they may be a better source than sugar cane because, with the same amount of water, farmers can get 2 crops in — sugar beets and another crop — compared with only one harvest of sugar cane in a year. There are varieties of tropical sugar beets being developed primarily for this purpose.”
— Howard Dahl, President & CEO, Amity Technology
Where Water is an Issue, No-Till Will Expand
“We didn’t realize that we were developing a no-till tool in our Concord drill. I was speaking at a Manitoba/North Dakota No-Till meeting in the fall of 1982, and someone said, ‘Your Concord unit will do work in no-till.’
“At the time, there was some argument about how much soil you could disturb and still call it no-till. So the Canadians came up with the term ‘direct seeding’ to describe seeding without tillage. It’s something that we clearly have been involved with for a lot of years. We believe this new single-disc no-till drill is as innovative as the Concord was back then because it has some features that we’ve never seen in other products.
“But where moisture conservation is an issue — clearly it’s already a significant concern in many areas — or where you have too much rainfall and no time to do tillage, there’s opportunities for no-till. In much of the world where moisture and soil conservation are issues, we see continued growth. Of course, with 200-bushel corn you’ve got residue issues that will need to be managed.”
— Howard Dahl, President & CEO, Amity Technology
Read the other four executive interviews by clicking here