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

Latest News
Crop Protection Products in storage
Crop InputsNewsweek: World Is ‘Awash In Glyphosate’
February 11, 2016
The world is awash in glyphosate, the active ingredient in the herbicide Roundup, produced by Monsanto. It has now become Read More
Crop InputsEPA: Let’s Talk Imidacloprid, Bees On February 18
February 11, 2016
EPA will hold an online technical briefing on its preliminary pollinator risk assessment for imidacloprid, a neonicotinoid insecticide, on Feb. Read More
ManagementThe latest on Syngenta-ChemChina Deal
February 11, 2016
Executive Editor Paul Schrimpf invites Jackie Pucci and Dave Frabotta from sister publication AgriBusiness Global to discuss the latest developments Read More
AdjuvantsUniversity of Illinois Confirms Adjuvant’s Perfor…
February 11, 2016
An independent University of Illinois study has shown that WETCIT adjuvant, now with TransPhloem technology, provides greater herbicide uptake and Read More
Crop InputsSyngenta’s Acuron Flexi Receives EPA Approval
February 11, 2016
Growers looking to control their toughest weeds with flexibility will have access to Acuron Flexi corn herbicide from Syngenta, now Read More
EquipmentAGCO Showcases White Planters 9800VE Series Planters AT…
February 11, 2016
AGCO unveiled the new White Planters 9800VE Series planter during the 2016 National Farm Machinery Show in Louisville, KY. The Read More
EquipmentCase Unveils 2000 Series Early Riser Planter At NFMS
February 10, 2016
Case IH revealed the all-new 2000 Series Early Riser planter to media and attendees at the opening of the National Read More
Syngenta Sign
Crop InputsSyngenta: Keep Ag In Mind During Election Season
February 10, 2016
As presidential candidates stake out their 2016 election platforms and key priorities, growers and their business partners should seek opportunities Read More
Crop InputsMarrone Bio Innovations Submits New Bio-Fungicide For E…
February 9, 2016
Marrone Bio Innovations, Inc. (MBI) today announced that it has submitted a new biological fungicide (MBI-110) to EPA. The broad spectrum Read More
Crop InputsWeed Expert: Adding A Second Herbicide Not Always Easy
February 9, 2016
In my last post, I reviewed some recent research that suggests one of the best ways to delay the evolution Read More
Crop InputsGenetic Literacy Project: Farmers Need More Herbicide C…
February 9, 2016
There are two things that I think just about every weed scientist can agree on, writes Andrew Kniss for The Read More
HerbicidesWeed Expert Warns North Dakota Growers Of Coming Herbic…
February 9, 2016
Ford Baldwin painted a bleak picture of weed control at a recent workshop here exploring the future of ag production, Read More
HerbicidesWSSA Announces New, Updated Free Web Resources
February 9, 2016
Today the Weed Science Society of American (WSSA) announced that new and updated educational materials for both weed scientists and Read More
Soybean field
FungicidesFour Arysta Fungicide Formulations Given FIFRA Approval…
February 8, 2016
Arysta LifeScience North America recently announced the issuance of Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) Section 2(ee) Recommendations for Read More
FungicidesAgri-Fos Systemic Fungicide Plus Receives EPA Registrat…
February 8, 2016
Vivid Life Sciences has announced the EPA registration of Agri-Fos Systemic Fungicide Plus, a highly concentrated active ingredient phosphite fungicide, Read More
Crop InputsBayer Contests EPA’s Decision On Valuable Insecticide F…
February 5, 2016
Crop Science, a division of Bayer, has announced it has refused a request by the Environmental Protection Agency (EPA) to Read More
Wheat Field North Dakota
Seed/BiotechSyngenta Wins Seed Fraud Suit Against South Dakota Grow…
February 5, 2016
Syngenta has obtained a $25,000 settlement from Paul and John Mayclin, Mayclin Farms, Plankinton, SD, in response to their Plant Read More
ManagementOABA Annual Conference Wraps Up In Columbus
February 5, 2016
More than 300 Ohio AgriBusiness Association (OABA) members and industry professionals were on hand to engage in collaborative learning and Read More