The Bigs Keep Getting Bigger
April 29, 2014
We just put the final touches on the Ag Equipment Intelligence “2014 Big Dealer” report, and subscribers will be getting their copies in the next several days. Together with George Russell of Currie Management Consultants, we’ve been tracking and analyzing the consolidation of farm equipment dealers since 2009.
To sum up the trend in ag equipment dealer ownership: the bigs keep getting bigger. No surprise here.
According to our latest estimates 181 dealer groups now own and operate 5 or more farm equipment stores. But even more telling is that an estimated two dozen groups now operate 15 or more ag locations, which includes 557 individual locations. That averages out to slightly more than 23 stores each. This is up from 20 dealer groups that owned 15 or more farm equipment dealerships covering 456 stores last year, or an average of slightly less than 23 locations each.
There’s no sign that the dealer consolidation movement will lose steam anytime in the foreseeable future. As long as farming operations continue to get bigger, dealers will follow their lead.
On the other hand, I believe it would be a mistake to lose sight of the other end of the dealership spectrum when it comes to size and focus. This was brought to my attention when an old friend and industry consultant Stan Jackson responded to a news post on the Farm Equipment website last week.
Jackson was responding to some other dealer comments when he wrote: “Meanwhile a very strong movement toward smaller farms, organic farms and hobby farming continues to grow even faster than in the past several years. This is the trend to watch in the machinery industry. Don't be concerned about the large consolidated dealers — that path is already clear. The development of the smaller dealers to serve the localization of farmers markets, etc., in many areas is the place to watch.” Recent data coming from USDA’s census of agriculture would seem to bear Jackson’s suggestion out.
It’s often easy to ignore these smaller segments of the business, but when they’re growing we need to take notice. Even the biggest dealers weren’t always big.
When Jackson mentions the “localization of farmers markets,” there’s no doubt that these are expanding. Look at the chart below. In 1994, USDA registered only about 1,750 farmers markets in the U.S. By 2013, they had grown to more than 8,000.
Now, consider the growing acreage being dedicated to organic farming over the past 10-15 years, which is shown in the adjacent chart. While miniscule when compared to overall acreage devoted to agriculture production, nearly 5.5 million acres is nothing to sneeze at. With the exception of the recent recession years of 2008-2010, the growth of certified organic acreage in both cropland and pastureland has recovered and resumed a very healthy upward trajectory.
According to USDA, “Consumer demand for organically produced goods has shown double-digit growth during most years since the 1990s, providing market incentives for U.S. farmers across a broad range of products. Organic products are now available in nearly 3 of 4 conventional grocery stores, and often have substantial price premiums over conventional products.”
While we’ll always be interested in what the big guys are doing — be they farmers or dealers — you can be pretty sure that not many of them are focusing on these type of market segments out there.
The “eat and grow locally” movement is only now starting to grow real legs. The many smaller dealers, who like being good smaller dealers, should sit up and take notice of niche markets like these and others. There’s nothing wrong with being a successful small dealer.