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

FertilizerCF Industries Terminates Merger Discussions With Yara International
October 21, 2014
CF Industries Holdings and Yara International have terminated their discussions regarding a potential merger of equals transaction. Read More
StewardshipThree Ohio Ag Retailers Honored With 4R Certification
October 13, 2014
The 4R Nutrient Stewardship Certification Program has announced its first three agriculture nutrient service providers to achieve certified status. Read More
FertilizerJ. R. Simplot To Build New Ammonia Plant In Rock Springs, WY
October 7, 2014
The new plant will supply both the Rock Springs, WY, and Pocatello, ID, phosphate fertilizer production locations while having the capacity to meet the company’s next phase of anticipated phosphate expansion plans at Rock Springs. Read More
CropLife 100Hintzsche Fertilizer To Sell Business To Helena
October 2, 2014
Hintzsche Fertilizer of Maple Park, IL, has agreed to sell its business to Helena Chemical Co., Collierville, TN, according to a report on ElburnHerald.com. Read More

Trending Articles

Crop InputsPlatform Specialty Products To Acquire Arysta LifeScience
October 20, 2014
Once the acquisition is complete, Platform Specialty Products will combine Arysta LifeScience with previously acquired companies Agriphar and Chemtura Crop Solutions. Read More
Seed/BiotechMonsanto Offers New Support For Ferguson, Area Communities
October 8, 2014
Monsanto Co. has committed $1 million in new support for several collaborative efforts in Ferguson, MO, and surrounding communities in North St. Louis County. Read More
Seed/BiotechUnapproved Genetically Modified Wheat Found In Montana
October 3, 2014
USDA reports that one year after discovery of Monsanto's unapproved wheat in a single Oregon field disrupted U.S. wheat export sales, the GMO wheat has again been found in Montana. Read More
Equipment2014 Product Of The Year Voting
September 19, 2014
The deadline to vote for the 2014 CropLife IRON Product of the Year is October 31. Please cast your vote today to help us determine the winner. Read More
FertilizerFall Fertility 2014: Forecasting Fertilizer Use
September 7, 2014
Great crops this year have tapped the soil, and fall work is definitely called for, but how challenging will that get? Read More
CropLife 100CHS To Build $3 Billion Fertilizer Plant In North Dakota
September 5, 2014
The fertilizer plant in Spiritwood will be the single largest investment in CHS history, as well as the single largest private investment project ever undertaken in North Dakota. Read More

Latest News

EquipmentAgraScout App Available At No Cost To Universities
October 21, 2014
AgraScout, a fast and easy to use mobile crop scouting app, is now available at no cost to University students, Read More
LegislationNew Farm Bill Program To Provide Relief To Farmers Affe…
October 21, 2014
The USDA has implemented a new Farm Bill initiative that will provide relief to farmers affected by severe weather, including drought. Read More
ManagementGreenfield Scholars Program Aims To Sustain Agronomy Wo…
October 21, 2014
The program encourages talented students to study agronomy, crop and soil sciences while cultivating networks to develop the necessary workforce to sustain the profession. Read More
Paul SchrimpfPrecision Ag: Taking It To The Hill
October 21, 2014
A new coalition took the good news message of precision agriculture to Washington, DC, last month. Read More
ManagementUSDA Awards $18 Million In Small Business Research Gran…
October 21, 2014
The grants will provide high quality, advanced research and development that will lead to technological innovations and solutions for American agriculture. Read More
FertilizerCF Industries Terminates Merger Discussions With Yara I…
October 21, 2014
CF Industries Holdings and Yara International have terminated their discussions regarding a potential merger of equals transaction. Read More
Seed/BiotechSyngenta Ranked A Top 10 Biotech Employer For Third tim…
October 20, 2014
Syngenta ranked in the top 10 among the world’s top biotech employers, according to an annual survey conducted by Science magazine. Read More
CropLife 100Wheat Growers Break Ground For New Facility At Kennebec
October 20, 2014
Wheat Growers has broke ground for a state-of-the-art shuttle loader grain handling, fertilizer and agronomy facility in Kennebec, SD. Read More
FertilizerVerdesian Life Sciences Signs Agreement With Los Alamos…
October 20, 2014
Verdesian Life Sciences has signed a licensing agreement with Los Alamos National Laboratory to develop and market LANL’s latest nitrogen enhancement technology for plants. Read More
MicronutrientsStoller Group Announces Groundbreaking At New Office Bu…
October 20, 2014
Jerry Stoller, founder and president of Stoller Group, announced the groundbreaking at the site of the company’s future headquarters in Read More
Crop InputsBioSafe Systems Opens New Production Facility In Nevada
October 20, 2014
BioSafe Systems has completed construction of a state-of-art production facility in Sparks, NV, for its line of activated peroxygen products. Read More
Crop InputsPlatform Specialty Products To Acquire Arysta LifeScien…
October 20, 2014
Once the acquisition is complete, Platform Specialty Products will combine Arysta LifeScience with previously acquired companies Agriphar and Chemtura Crop Solutions. Read More
Seed/BiotechEPA Approves Dow’s Enlist Duo Herbicide
October 15, 2014
The Enlist Weed Control System, breakthrough technology to fight resistant and tough weeds, has received the long-awaited green light from federal regulatory authorities. Read More
MicronutrientsGypsum On Farms Could Help Keep Water Clean, Not Green
October 14, 2014
Gypsum, which has roots in the past as a farm soil treatment, also may have a bright future, and not just as a booster of crops but also as a protector of water. Read More
Photo credit: The United Soybean Board/The Soybean Checkoff.
Crop InputsVerdesian Grows Sales Staff
October 14, 2014
The new account managers will drive sales growth and support relationships with key customers in the plant nutrition and seed treatment and inoculants product categories. Read More
WebinarsUpcoming Webinars
October 14, 2014
Register for one of our upcoming Webinars or access our archive of past Webinars to view recordings of presentations that may be of interest to you. Read More
CropLife 100The Andersons Purchases Six Grain Elevators, Four Agron…
October 14, 2014
The Andersons has acquired Auburn Bean and Grain of Auburn, MI, which will increase the storage capacity of its Grain Group by about 13%. Read More
StewardshipThree Ohio Ag Retailers Honored With 4R Certification
October 13, 2014
The 4R Nutrient Stewardship Certification Program has announced its first three agriculture nutrient service providers to achieve certified status. Read More