Ag Retail Consolidation Trending Up

For anyone who grew up during the 1980s, a common sight in many business establishments was a video game called Pac-Man. In this game, players controlled a hungry yellow character who spent his time gobbling up white dots, scoring points along the way.

To many in the ag retail marketplace, the consolidation trend of the past few decades has, in many ways, resembled a Pac-Man-like game. Big ag retailers have systemically swallowed up smaller ones, expanding their market penetration in the process. Indeed, in an average year back in the early 2000s, approximately seven companies would disappear from CropLife magazine’s annual CropLife 100 listing via the acquisition/merger route.

But then came the market crash of mid-2008. As ag retailers were forced to write down millions of dollars in fertilizer inventory (as grower-customers pulled back on their fall orders), many of them stopped playing the consolidation game. In fact, between 2008 and 2011, only a total of six regular CropLife 100 ag retailers were acquired by larger ones.

“The last 18 months, there hasn’t been a lot going on with consolidation,” says Larry Arndt, agronomy team leader/sales & marketing team leader for MaxYield Cooperative, West Bend, IA.

The reason for this is simple, says Devin Mog­ler, vice president of agronomy operations for Farmers Cooperative Co., Ames, IA — a string of strong revenue performances by CropLife 100 retailers during the past three years. “Con­solidation has slowed somewhat in recent years,” says Mogler. “Typically, merger and acquisition activity is heightened when times are bad, and we’ve been experiencing some pretty strong years across our trade territory and across the ag sector in general.”

Turning Back On

Of course, now that many ag retailers have rebuilt their businesses from the downturns of 2008 and 2009 — and in some cases, are flush with cash as a result — they are looking to get back into the consolidation game. And in the minds of many market watchers, this is a good thing for the marketplace as a whole.

“Consolidation is a natural process,” says Jeff Tarsi, senior director, business strategy for Crop Production Services, Cordova, TN. “There’s more demand on retailers to provide bigger, faster equipment. This will probably push out the smaller retailers that don’t want to or cannot re-capitalize and invest another $2 million to $3 million to expand their services, equipment and other important supporting items such as bulk seed and fertilizer storage. Those that choose to re-invest will be the long-term players.”

MaxYield Coopera­tive’s Arndt agrees. “We think that consolidation drives efficiencies, and that’s probably okay,” he says. “There are always those that hate to see change and feel that they’re losing competition, but I don’t see it as a long-term disadvantage. I think consolidation helps drive costs out of the whole retail system.”

The past year or so, one of the hot beds for retailer consolidation has been the state of Wiscon­sin. One of the Badger State’s largest cooperative, United Cooperative of Beaver Dam, has spent the better parts of 2011 and 2012 gobbling up neighboring cooperatives, including Mid-County Cooperative, Pulaski Chase Cooperative and Cooperative Services. Put together, these acquisitions have helped the company move from No. 52 on the 2009 CropLife 100 to No. 24 today.

According to David Cramer, United Cooperative pres­ident/CEO, all of these mergers tie into the company’s long-range plans. “The world population will grow significantly in the next 30 years,” says Cramer. “As a result, the agriculture industry now puts a great deal of effort into improving efficiencies and sustainability so this generation and future generations can continue to produce food and fuel efficiently.”

Another Wisconsin cooperative, Wisconsin River Co-op, Adams, WI, appears to be taking a similar path. In October, the company announced plans to merge with Farmer’s Co-op Supply and Shipping Association, West Salem, WI. According to Scott Firlus, CFO-COO for Wisconsin River Co-op, this consolidation will help the company “to improve its facilities and equipment utilization and add efficiencies to our sales and delivery routes.”

Still, there are those ag retailers that think consolidation can present a “game over” scenario in some situations. “It potentially homogenizes the ag retail presence,” says Bill Hubbell, general manager for Wil­co-Winfield, Mt. Angel, OR. “The more markets that are supported by a single headquarters, the less uniqueness will be available and affordable by more market-specific retailers.”

Herbert Woolsey, president of Woolsey Brothers, Van­dalia, IL, shares this view. “I think retail customers will have less options for products and services with fewer dealers in their areas, and that cannot be good for them,” says Woolsey. “They need some options and some significant competitive situations, and in some cases, that’s getting a little slim.”

Then there’s the potential impact on some of the smaller ag retailers themselves. “Consolidation of retail has made it difficult for small distributors and manufacturers,” says Kyle Baltz, manager for Baltz Feed Co., Pocahontas, AR. “Having fewer suppliers is causing some interruptions in the supply chain.”

A Super-Charged Player

Good, bad or indifferent, ag retail consolidation appears to be ready to pick up significant speed in 2013 as a new super-charged player enters the game. In mid-2012, Pinnacle Ag Distribution officially launched. Financially backed by Apollo Global Management, LLC, and headed up by former United Agri Products veterans L. Kenny Cordell and Dean Williams, Pinnacle is on a mission “to be a top five retail supplier by 2017,” according to its company Website. Naturally, to do this, the company will likely go the consolidation route.

In September, Pinnacle announced it entered into a strategic partnership with Jimmy Sanders, Inc., Cleve­land, MS (ranked No. 8 on the 2012 CropLife 100 listing with annual sales in the $200 million to $999 million range). Market rumors indicate that other such deals involving Pinnacle and current CropLife 100 retailers are in the works, which should push the company’s revenues above $1 billion by the end of 2013.

Perhaps responding to these market moves, current large ag retailers are seeking to keep their own consolidation games going. At presstime, 2012 CropLife 100 No. 4 Wilbur-Ellis Co. purchased No. 97 Mott Grain. Earlier in the year, No. 5 CHS purchased the assets of Hamilton Farm Bureau (ranked No. 80 on the 2011 CropLife 100 list) while No. 1 Crop Production Services acquired Ritter Crop Service (ranked No. 46 in the 2011 CropLife 100).

As for the smaller players in the ag retail game, an uptick in consolidation in 2013 will lead to plenty of decisions. According to Wilco-Winfield’s Hubbell: “It forces us to manage our business more efficiently to remain competitive.”

For others such as Baltz Feed, the question is a matter of market fit. “Consolidation leaves us wondering if we will have a place in the new world,” says Baltz.

However, according to Cliff Love, general manager for Carolina Eastern-Vail, Auburn, NY, the ultimate outcome for retailers remains unchanged, whether the consolidation game is being played or not. “At the end of the day, any retailer’s success or failure will be based on their ability to meet the needs and desires of their market as it appears today,” says Love. “The next question is ‘what will that market be like tomorrow?’ Some issues and needs will be broad-based. However, others will be more localized. A retailer that pays close attention to the marketplace they compete in and adapts to it will have satisfied, individual customers. And these customers become some of the best salespeople they could ever have.”

Topics:

Leave a Reply

State of the Industry Stories

Fertilizer Tender close-up
MicronutrientsHow Micronutrients Fit Into 2017 Fertility Plans
January 10, 2017
Where do micronutrients stand going forward in fertility plans? For one thing, Tim Mundorf, Field Representative with Midwest Laboratories, says Read More
Fertilizer application
State of the IndustryCautious Optimism On Fertilizer In 2017
January 10, 2017
What kind of fertilizer rates are growers and retailers looking at in 2017 and beyond? According to stakeholders CropLife magazine Read More
Asmus Farm Supply crop protection products in storage
State of the IndustryCrop Protection Products Market: Complexity Begets Opportunity
January 10, 2017
While other key market segments in agriculture continue to see tumultuous shifts in sales volumes going forward (large equipment sales are Read More
Pioneer corn seed in storage
Special ReportsState Of The Seed Industry: Better Later Than Never
January 3, 2017
Traditionally, the majority of the nation’s grower-customers made their seed planting decisions in the late fall. Normally, when folks attended Read More
Trending Articles
Crop InputsFlying Under the Radar No More, FMC Goes Big
April 13, 2017
Describing FMC as “under the radar,” admittedly, is probably a stretch. But in a snap of the fingers, FMC upped Read More
Young Corn Plants
Crop NutritionStill Hunting Yields
April 1, 2017
There’s no denying it — the agricultural marketplace today is undergoing a fundamental shift in fortunes. Not too many years Read More
Nutrients for Life Foundation Teacher
FertilizerNutrients For Life Foundation Celebrates 10 Years Teaching Fertilizer Education
March 23, 2017
Those in agriculture know fertilizer is a vital ingredient to grow strong, productive crops. In fact, fertilizer is responsible for Read More
AdjuvantsA New Weed-Control Era Begins: But First, One Last Obstacle
March 4, 2017
There is trepidation, there is reluctance, and there is excitement. Ag retailers feel it all about the new dicamba and Read More
LIFT Academy video screenshot
Crop InputsLIFT Agriculture Academy: A Q&A With West Central Distribution’s Dean Hendrickson
March 1, 2017
West Central Distribution recently launched its LIFT Agriculture Academy, a new, premiere training and professional development resource for West Central’s ag Read More
Farmer and aptop
Matt Hopkins10 Warning Signs Your Website Is Grossly Outdated
February 8, 2017
Your Website is often a visitor’s first impression of your ag retail business. A positive first impression can set the Read More
Latest News
ManagementWashington Update, Dow-DuPont Earnings, and the Passing…
April 27, 2017
Editors Paul Schrimpf and Eric Sfiligoj talk about the latest Beltway news, crop protection company 1st quarter numbers, and the Read More
BRANDT
CropLife 100Former PotashCorp COO Joins BRANDT Board
April 27, 2017
BRANDT has announced the appointment of another industry veteran to its board of directors. David Delaney, most recently EVP and Read More
Syngenta headquarters in Basel, Switzerland
Crop InputsFortune: Inside China’s $43 Billion Bid for Food …
April 26, 2017
(Via Fortune.com) The worst famine in human history occurred in China from 1959 to 1961. An estimated 34 million people Read More
Syngenta Sign
Crop InputsSyngenta Announces Changes in Board of Directors
April 26, 2017
ChemChina and Syngenta announced changes relating to the new Board of Directors of Syngenta following the closing of the ChemChina Read More
Crop InputsBioSafe Systems Introduces PerCarb Broad-Spectrum Bacte…
April 26, 2017
BioSafe Systems announces PerCarb (Sodium Carbonate Peroxyhydrate), a new alternative to potassium bicarbonate and lime sulfur products for use in Read More
Deere Twitter
EquipmentTop 10 Twitter Pics for #Plant17
April 26, 2017
Despite some wet weather in parts of the Midwest, growers and ag retailers are working feverishly to plant this year’s Read More
Donald Trump
Crop InputsTrump Targets Agriculture with Latest Executive Order
April 26, 2017
(Via UPI.com) President Donald Trump on Tuesday took executive action in an effort to help grow the domestic agriculture industry Read More
AGCO Ratliff featured
EquipmentAGCO Mourns Passing of Company Founder, Industry Vision…
April 25, 2017
AGCO Corp., a worldwide manufacturer and distributor of agricultural equipment and solutions, mourns the passing of founder and former President, Read More
Engenia soybeans
Crop InputsINNVICTIS CROP CARE Introduces VANDAL MOC Soybean Herbi…
April 25, 2017
INNVICTIS CROP CARE, LLC has announced the U.S. EPA registration for VANDAL MOC, a combination of sulfentrazone plus metolachlor. VANDAL Read More
Kochia
HerbicidesINNVICTIS CROP CARE Launches STAVE Post-Emerge Broadlea…
April 25, 2017
INNVICTIS CROP CARE, LLC has introduced STAVE as the newest addition to­ its expanding portfolio. STAVE will be a great Read More
Sonny Perdue
LegislationSonny Perdue Confirmed by Senate as Next Agriculture Se…
April 25, 2017
After months without a secretary of agriculture, the Senate voted Monday evening to confirm former Georgia Gov. Sonny Perdue to Read More
BPIA logo
Seed/BiotechBPIA Files Comments with USDA
April 24, 2017
The Biological Products Industry Alliance (BPIA) has filed comments with the USDA’s Animal and Plant Health Inspection Service (APHIS) Plant Read More
Eric SfiligojHope for Application Equipment Sales
April 24, 2017
The old saying goes that a “rising tide lifts all boats.” If this is indeed the case, then things may Read More
Stewardship video screenshot
ManagementNew Video Raises Awareness of 2,4-D Stewardship
April 24, 2017
A new public service video developed and produced by the 2,4-D Research Task Force, in conjunction with the American Soybean Read More
ManagementAn Inside Look at Award Winning Ag Retailer Gar Tooteli…
April 20, 2017
CropLife Editor Eric Sfiligoj discusses An Inside Look at Award Winning Ag Retailer Gar Tootelian Read More
Students Soybean Field
Industry NewsMACA Announces 2017 Young Leader Scholarship Recipients
April 19, 2017
The Mid America CropLife Association (MACA) Board of Directors selected 11 college students to receive the MACA Young Leader Scholarship Read More
Growmark FS Outlet
SoftwareKnoa Software Solution Helps GROWMARK Boost System Perf…
April 19, 2017
Knoa Software, a leading provider of user experience management (UEM) software, has announced that GROWMARK, Inc., a regional agricultural cooperative Read More
Crop InputsFBN Publishes ‘Voice of the Farmer’ Agricul…
April 17, 2017
Farmer’s Business Network (FBN) released today its “The Voice of the Farmer”, which the company is describing as “a special Read More