Parallel Universes

As a trade magazine editor, I spend a lot of my time reading up on other industries that utilize a similar manufacturer/distributor/end-user chain to our own ag retail market. One such item appeared recently in the Wall Street Journal.

This story told the tale of how some John Deere equipment retailers were upset with Big Green because the company was pressuring smaller ones to either “bulk up by acquiring another dealer or cash out.” Many of the retailers quoted in the article felt this treatment went above and beyond their contract with John Deere, which states dealers have to meet certain performance targets or risk losing their right to sell Deere products. A few even hinted that they would consider taking legal action against Deere if the company continued this course of action.

Not surprisingly, this scenario reminded me of one I saw play out back in the late 1980s involving The Coca-Cola Co. and its bottlers. This episode was identical to the Deere/dealers one — parent Coke was pressuring its bottlers to “get bigger through acquisition” and “reaffirm their commitment to Coke products over those of other soft drink companies.” Many bottlers, unhappy with being told how to run their family businesses, threatened legal action. Ultimately, Coke backed down — but only for a short while.

It was later in 1988 that Coke began actively buying out its bottlers, forming its own massive bottling operations under the Coca-Cola Enterprises name. Within 10 years, Coke directly controlled over three-fourths of its entire U.S. distribution network. Arch-rival Pepsi followed a similar course. Last time I checked, Coke and Pepsi owned better than 85% of their distribution networks across the country, with centrally located facilities replacing locally grown ones along the way.

Will John Deere follow a similar path to that of Coke and Pepsi? Time will tell, but I wouldn’t be surprised if the company did. After all, based upon the revenue numbers over the years reported by both soft drink giants, it’s pretty profitable to control your products from syrup to supermarket.

Naturally, this made me ask a simple question — will ag retail take the same path? At first glance, it would seem unlikely. The market is too spread out by its nature to make this work. As Agrium Retail President Richard Gearheard says in this issue’s cover story: “In the retail business, you are not dealing with multiple states out of one location. You are dealing with a 25- to 40-mile radius.”

Still, it’s no secret that the Big Six crop protection product manufacturers are under tremendous pressure from their retailers and post-patent producers to keep margins high and costs low. Many observers predict the number of basics will shrink to three or four in the next few years because of these market dynamics. Likewise, retailers are under pressure to firm up their revenues as grower needs evolve.

To ensure their survival, could some of the larger, better positioned basics begin buying (or signing exclusive agreements with) ag retailers to assure themselves of continued market share? Or could they bypass retailers altogether and sell directly to the larger grower-customers out there?

It will be interesting to see if history repeats itself in our parallel marketplace or takes a different course.

Leave a Reply

Featured Stories
Matt Hopkins5 Bold Predictions For Ag Retail In 2015
January 21, 2015
This past year was filled with ups and downs for the nation’s top ag retailers, but what will 2015 have in store? Read More
FertilizerTFI President To Give Update On Nutrient Management Efforts At Annual Conference
January 19, 2015
The Fertilizer Institute President Chris Jahn will give the keynote address at the 2015 Ohio AgriBusiness Association Industry Conference February 4. Read More
Green Valley Ag facility
Paul SchrimpfRightsizing Ag Retail
January 9, 2015
Seeking the right balance of facilities, efficiency and customer service will make our businesses stronger and, truth be told, more capable of competing effectively with the likes of Pinnacle. Read More
Matt Hopkins10 Best New Agriculture Apps For 2015
December 15, 2014
Has the app market reached a saturation point? Consider Google Play and the iTunes App Store combined have more than Read More
Top 100 Articles
CropLife 100The Andersons Starts Venture Capital Subsidiary
January 26, 2015
The Andersons has established Maumee Ventures, a venture capital subsidiary designed to foster promising innovations that strategically align with the company’s core businesses. Read More
CropLife 100CHS Partners With Northern Partners Coop On Fertilizer Warehouse
January 21, 2015
In addition, the two companies will form a joint venture to build and operate a grain barge loading facility that will handle corn, soybeans and wheat for export through the CHS terminal at Myrtle Grove, LA. Read More
CropLife 100Wilbur-Ellis Move To Colorado Complete
January 20, 2015
Wilbur-Ellis Co. announces the opening of its new Agribusiness Division location in the Denver, CO, Metro Area. The new facility will host key personnel as the company shifts the base of its Agribusiness operations from California to Colorado. Read More
CropLife 100United Suppliers, McGregor Co., Five Others To Form Aligned Ag Distributors
January 20, 2015
These companies will continue to operate as independently owned and operated businesses, however, their crop protection divisions will now be formally aligned under the umbrella of Aligned Ag Distributors. Read More
CropLife 100Bozeman Named SEEDWAY Chief Operating Officer
January 16, 2015
He succeeds Donald Wertman, who will retire at the end of August 2015 after 40 years with the GROWMARK subsidiary. Read More
CropLife 100Wilbur-Ellis’ Craig Bair Honored For Safety Contributions To Ag Aviation
January 14, 2015
The William O. Marsh Safety Award recognizes significant achievements in safety, safety education or an outstanding operational safety program. Read More
Latest News
Seed/BiotechDow Details Enlist Trait Stacking Standards
January 30, 2015
Dow says it will allow the Enlist trait to be stacked with advanced glyphosate traits only, and will not allow stacking with the first generation of the Roundup Ready trait. Read More
ManagementCropLife Retail Week: IFCA’s Jean Payne on Illinois wat…
January 30, 2015
Editor Eric Sfiligoj shares insight from the Illinois Fertilizer and Chemical Association conference including a chat with IFCA President Jean Read More
ManagementOABA Conference Set To Highlight Trends, Technology And…
January 29, 2015
The third annual Ohio AgriBusiness Association (OABA) Industry Conference is set to take place February 4-5. Read More
FertilizerThe Fertilizer Institute President Jahn Testifies Befor…
January 28, 2015
The committee hearing, "Freight Rail Transportation: Enhancing Safety, Efficiency, and Commerce," looked at challenges facing our nation's freight rail network created by higher demand, rules and regulations and infrastructure needs. Read More
HerbicidesPurdue University Acquires Technology For Herbicide Mol…
January 28, 2015
Protea's LAESI DP-1000 Instrument System will be used in Purdue's College of Agriculture, the Department of Botany and Plant Pathology, for the molecular imaging of herbicide active ingredients and other related compounds to optimize herbicide applications and improve weed management.  Read More
FertilizerH.J. Baker Hires New Crop Peformance Marketing Manager
January 27, 2015
As Marketing Manager for the Crop Performance division, Usman Khalid will work out of H.J. Baker’s global headquarters in Westport, CT, and will drive new initiatives for the division. Read More
CropLife 100The Andersons Starts Venture Capital Subsidiary
January 26, 2015
The Andersons has established Maumee Ventures, a venture capital subsidiary designed to foster promising innovations that strategically align with the company’s core businesses. Read More
Exclusive state-of-the art Stueve Construction designed “Vista View” Elevated Control Room.
Eric Sfiligoj2015 Agricultural Market Read: Mixed
January 26, 2015
The agricultural market could look radically different this year, profit-wise, depending upon which segment you do business in. Read More
Edward Chell Biosafe
Crop InputsBioSafe Systems Names Ed Chell California Territory Man…
January 26, 2015
BioSafe Systems has announced the recent addition of Ed Chell as California Territory Manager for the agrichemical division, supporting the crop protection, water treatment and food safety business segments. Read More
InsecticidesBayer CropScience Introduces Sivanto Insecticide
January 26, 2015
Sivanto precisely targets key damaging pests at multiple insect life stages to prevent damage to plants and help minimize the spread of diseases from insect carriers. Read More
ManagementRetail Collaboration, Communicating Agriculture’s Good …
January 23, 2015
Editors Paul Schrimpf and Eric Sfiligoj discuss the recent creation of Aligned Ag Distributors, and the US Farmers and Ranchers Read More
FertilizerOSU Expert: Toledo Water Crisis A Turning Point For Ohi…
January 23, 2015
The August 2014 water crisis in Toledo, OH, impacted Ohioans’ views of Lake Erie algae problems by increasing the attribution of blame of algae growth on agriculture. Read More
FertilizerH.J. Baker Launching TIGER XP
January 22, 2015
Tiger-Sul introduces this next generation sulphur-bentonite product with a proprietary activator – ensuring farmers have a well-balanced nutrient replacement program. Read More
Crop InputsH.J. Baker Expands China Sales Force
January 21, 2015
Global Agricultural firm H.J. Baker announced that sales veteran Shi Dongshen has joined their Shanghai office in China. This newest hire follows the recent opening of their Lianyungang Sulphur Bentonite Plant. Read More
CropLife 100CHS Partners With Northern Partners Coop On Fertilizer …
January 21, 2015
In addition, the two companies will form a joint venture to build and operate a grain barge loading facility that will handle corn, soybeans and wheat for export through the CHS terminal at Myrtle Grove, LA. Read More
Matt Hopkins5 Bold Predictions For Ag Retail In 2015
January 21, 2015
This past year was filled with ups and downs for the nation’s top ag retailers, but what will 2015 have in store? Read More
SoftwareDeere Launches App Center
January 20, 2015
The John Deere App Center provides users the ability to search and find apps most useful to their business or operations. Read More
Crop InputsNew Syngenta Herbicide Approved In Soybeans, Sunflowers
January 20, 2015
Syngenta will sell BroadAxe XC herbicide in 2015 for use on soybeans, sunflowers and dry peas Read More