With the majors adding to their product lines and pressuring their dealers to remain "pure" in the equipment they carry, it's becoming increasingly more difficult for shortliners to find the right dealers in the right markets, Rusty Fowler, the retiring president and CEO of Krone North America, told Ag Equipment Intelligence.
Reflecting on how working with dealers has changed over the last 20 years, Fowler says the biggest change has been the limitation of the options available to shortline manufacturers in developing and maintaining strong distribution channels.
Krone specializes in high-end hay and forage harvesting equipment.
"If you're a company like us, when we made the decisions to produce the Big M self-propelled mower, the Big X forage harvester and the Big Pack baler, we more or less laid out the direction we had to go to successfully compete. At that same time, we limited ourselves in the options we had in dealers," he says.
Recently Fowler announced he would be retiring from Krone North America after 26 years. He had also spent 15 years with International Harvester before his stint with the Spelle, Germany-based Krone.
He'll be succeeded by Thomas F. (Tommy) Jones, a 28-year veteran with John Deere.
"When I started with Krone in 1987, we only offered traditional hay tools. We could go out into the ag marketplace and there were plenty of good dealers. If you lost a contract in a town, there was usually someone else you could go to that was an acceptable dealer. Today, there isn't anywhere close to the number of dealers there were back then. So our options are very limited. Having the wrong dealer," says Fowler, "is worse than having no dealer."
At the same time, the major farm equipment manufacturers began producing similar products to Krone, like large forage harvesters and big square balers. This became another constraint for shortline manufacturers to retain top-notch dealers.
With fewer dealers around and limited options due to competing products with the majors, where can shortliners go? "If you're not going to pull out, then you're going to have to do something else," Fowler says.
This scenario is what led Krone to open four company stores - three in California and one in Wisconsin. "It's a very expensive way to keep your channels open to the market, but it is absolutely the last option that you've got. So that's the way we looked at it. We're seeing the same thing happening in Germany as well," Fowler says.
Krone North America recently opened its fourth store in the Imperial Valley in California, a huge hay market. "Again, we ran into the situation where we were losing the focus of the dealer we had, and we saw a very clear possibility that we could be without representation in that market completely in the next 18 months," Fowler explains.
Opening the company store was a preemptive strike. "It was clear what we had to do, so we looked at our options. It's the same old thing, but it's a great market for our product that we couldn't afford not to be there. So we went ahead and opened our own facility. It's a real brutal ballgame out there today," he says.
Opening the stores, which operate as independent dealers, is a strategic move to keep Krone North America competitive in key markets.
"We're not trying to get into the retail end of the farm machinery business - the only thing we're trying to do is keep our channels open. That's all we're doing. I'm not trying to make a ton of money at these stores; they're not there for that. They're there to keep our channels open to the market.
"If you look at it honestly, that's really all you're doing and you're paying a heavy price to do it, but the price not to do it is even heavier."
In order for shortliners to remain competitive, Fowler says its imperative that their products are exceptional and have a meaningful competitive advantage. "If you've got an exceptional product, then you will always have a channel open to the market, but you have to find how to get there. And you better take your wallet with you when you go because it's going to be expensive," he says.
Jones will begin his tenure at Krone NA on August 1. Fowler says he will remain with the company in a consulting and advisory capacity for at least 6 months.