A Sign of Things to Come?

The single biggest challenge preventing specialty ag equipment manufacturers from expanding their operations and market reach is the lack of adequate distribution channels. Or more plainly stated, they can’t find dealers to sell their products. Or maybe it’s the kind of dealers they want — and need — to sell and service their equipment.

Demands by the major equipment manufacturers on their dealers to not carry other equipment brands, usually referred to as “dealer purity,” are often cited as the biggest hurdle for the shortlines. But there are other reasons.

I believe it has been an inability to find dealers that played at least a part in the recent spate of shortline consolidations and acquisitions, particularly in the area of sprayers. In January, a private equity group acquired Bestway Inc. and Exel of France purchased Equipment Technologies, maker of Apache sprayers. Last week, Hagie Mfg. entered into a joint venture with John Deere, in which Deere dealers will handle distribution of Hagie’s sprayers.

Faced with being shut out in key markets, forage equipment specialists Claas and Krone were left with little choice but to open their own dealerships and service centers. It’s what the now retired CEO of Krone, Rusty Fowler, called the “nuclear option.”

While we’ve explored various alternative distribution possibilities in the pages of Farm Equipment over the years one we’ve not addressed is the possibility of an overseas dealership group moving into the North American market.

Last week, Claas announced it was partnering with one of Europe’s biggest farm machinery dealership groups, BayWa of Germany, to serve its customers in Canada.

According to Ag Equipment Intelligence’s European correspondent, BayWa, a former co-operative based in Munich, is an agricultural trading group with international reach that operates four business units within its Agriculture Segment: Agricultural Trading, Fruit, Digital Farming and the Agricultural Equipment unit, which operates a large network of sales and full service dealerships.

With limited opportunities to expand in its current markets, Germany and Austria, BayWa has been looking for openings overseas. “We are experienced with the Claas product range within an established market environment and we therefore know how to address the customers’ needs to be successful,” says Roland Schuler, member of BayWa’s board of management responsible for Agri Services.

And it would appear that BayWa has some financial juice behind it. In its 2015 financial year, ag equipment sales of $1.4 billion accounted for 12% of the $11.6 billion in sales generated by the Agriculture Segment and just under 8.5% of the group’s $16.9 billion revenues.

I’ve addressed the subject of how nature abhors a vacuum in the past.

The same is true with a free and open marketplace. As hard as the major equipment makers try to stamp out their smaller competitors, sooner or later the void they create — whether it’s in product innovation or distribution — will be filled. It will be worth watching to see how the Claas-BayWa partnership develops. I wish them much success.

The only thing that could be better would be to see more North American dealers take on the challenge of filling the dealership void.