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
EquipmentDeere Announces Soucy Track Distribution Alliance
August 28, 2015
John Deere announces an alliance with Soucy Track to sell and distribute products through the John Deere dealer channel. “This Read More
FertilizerFall-Applied Phosphorus: A Rooted Investment
August 28, 2015
As commodity prices decrease and input prices continue to rise, farmers are seeking more efficient strategies for meeting a high Read More
Monsanto Sign
Crop InputsWhat’s Next For Monsanto, Syngenta?
August 28, 2015
After dropping its $47 billion bid to take over Swiss agribusiness firm Syngenta, Monsanto may be turning its focus to Read More
Golden Harvest Corn stalks
Crop InputsMonsanto: Syngenta Not The Only Horse In Crop Protectio…
August 28, 2015
Monsanto Co, having ditched an audacious $46 billion (£30 billion) offer for Syngenta AG, may downshift to a humbler strategy Read More
ManagementConsolidation hits and a miss; And a look at China’s ch…
August 28, 2015
As Monsanto suspends its pursuit of Syngenta, consolidation news at the retail and distribution level heats up. CropLife magazine’s Executive Read More
Corn Field
MicronutrientsHuma Gro Introduces New Boron Liquid Nutrient Formulati…
August 28, 2015
BORO-MAX, a new boron (B) 10% liquid nutrient formulation, has been added to the Huma Gro product line. This new Read More
Crop InputsNFU: Monsanto Decision To Withdraw Syngenta Bid ‘…
August 26, 2015
National Farmers Union (NFU) President Roger Johnson said the organization was very pleased by the news that Monsanto has withdrawn Read More
Crop InputsMonsanto Withdraws Bid For Syngenta
August 26, 2015
Monsanto Co. abandoned its latest effort to acquire Syngenta AG, the world’s top maker of pesticides, after a sweetened bid Read More
Syngenta Sign
Crop InputsSyngenta Comments On Monsanto Announcement
August 26, 2015
The Board of Syngenta confirms that it received a verbal proposal from Monsanto to acquire the company at a price Read More
Case IH Patriot 2250 Sprayer
EquipmentHigh-powered Case IH Patriot 2250 Sprayer Pushes Throug…
August 26, 2015
Engineered with more muscle, the new 660-gallon-capacity Patriot 2250 sprayer features best-in-class horsepower, along with the fuel efficiency that comes Read More
Crop InputsLand ‘O Lakes, United Suppliers Finalize Merger
August 24, 2015
According to a press release on August 24, owners of United Suppliers, Inc. and members of Land O’Lakes, Inc. “have Read More
TMX-2050 In-Cab Display Launch Run Screen
Eric SfiligojPrecision Ag Could Shine In Increased Spotlight On Agri…
August 24, 2015
By any measure, 2015 is turning into one of the most challenging years agriculture has ever experienced. All throughout good Read More
ManagementCrop Conditions In Minnesota and Traveling Time
August 21, 2015
Editors Paul Schrimpf and Eric Sfiilgoj discuss the crop outlook from a field trip to Minnesota and upcoming travel plans. Read More
HerbicidesREUTERS: Anti-GMO ‘Scientist’ Calls For New…
August 20, 2015
EDITORS NOTE: We feel that it is important to note that there are those that believe one of the lead Read More
Rendering of Syngenta Seedcare Institute expansion
Seed/BiotechSyngenta Announces Seedcare Application And Resource Ce…
August 19, 2015
Syngenta recently announced the Seedcare Application and Resource Center, a collaborative new website designed exclusively for Syngenta Seedcare customers to Read More
Winter Wheat
Industry NewsArysta LifeScience Announces Two New Regional Sales Man…
August 19, 2015
Arysta LifeScience North America recently announced Steve Vining and Phil Reding have each accepted new positions as Regional Sales Managers. Read More
West Central Cooperative, Jefferson, IA
CropLife 100Iowa Cooperatives To Explore Unification
August 19, 2015
The boards of directors at two of Iowa’s leading farmer-owned cooperatives yesterday signed a letter of intent to study the Read More
Golden Harvest Corn healthy leaves
Industry NewsAligned Ag Distributors Names Vice President, Crop Prot…
August 18, 2015
Aligned Ag Distributors LLC have appointed Warren Hragyil to VP Crop Protection. Hragyil comes to Aligned Ag Distributors LLC with Read More