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ONE SIZE DOES NOT FIT ALL
If you follow the quarterly earnings of farm equipment manufacturers, you may have noticed a trend. Like other publicly traded companies, most equipment makers have reported lower earnings in North American markets over the past year or so. That's no surprise, but what is happening in the European markets might catch your eye. Sales in global markets have been the only bright spot on the balance sheet, at least until John Deere reported better fourth-quarter 2002 results.

The European-produced Fendt 800 Vario has a combination front-mounted disc cultivator and rear-mounted power harrow and drill to minimize the number of passes, which lowers fuel costs and soil compaction.
When a few farm equipment executives were asked why sales are higher in European markets, there were many more answers than expected. You might guess higher farm incomes or a larger number of farms, but what about stone fences or no-till practices? Who knew there are so many cultural factors involved in international marketing and sales?

SIZE MATTERS

Oliver Neumann, spokesman of Deere & Company's European office, based in Mannheim, Germany, says the main factor affecting farm equipment sales is the varied size of farms in the different global regions. He says the farm size can range from a few hectares in Southern Europe, where vegetables, fruits and wines are predominantly produced, to several thousand hectares in the former German socialist cooperative.

Rich Christman, president of North American, Australian and New Zealand agriculture business for CNH Global, Lake Forest, Ill., says North Americans are used to large farms where tractors of 150 horsepower (HP) or larger are needed. But in Europe and other global markets the size of farms and tractors varies greatly. He says one cultural reason for the smaller farm size in the UK is the ancient and beautiful stone fences. "Farmers either can't or won't take the stone fences down, which limits the size of individual plots and thus tractor sizes."

AGCO Corp., Duluth, Ga., which markets numerous equipment brands across the globe, sees a trend to larger horsepower tractors because of cultural factors. Jim Seaver, senior vice president of global sales and marketing at AGCO, says, "More people are moving from manual farm labor, and the number of farms is decreasing in parts of Europe. We see a trend to larger tractors, averaging about 120 to 130 HP."

Seaver also noted the increase of horsepower requirements in Japan. He says the sizes of Japanese farms remain small on average, but the horsepower of tractors is increasing.

John Deere's Neumann also observes the shift to mechanized labor. "The developing/emerging markets like India and China are in the process of replacing human and animal labor with low spec technology," he explains, "but they are demanding quality products."

SUBSIDIES = SALES

Another major factor in global marketing and sales is the net income of producers, which is often supplemented in Europe by hefty subsidies. According to CNH's Christman, agriculture subsidies account for half of the EU budget. Naturally, this allows producers a sizeable disposable income to spend on equipment and agriculture inputs.

In many other countries, such as Australia, subsidies are low or relatively non-existent. Therefore, producers' net incomes are much more affected by the global ag environment, Christman says.

In some areas of the EU, environmental issues have moved up the priority list and play an integral role in equipment-buying decisions. Steve Wood, UK-based vice president of Europe, Africa and the Middle East markets for AGCO, says there is a chance subsidies in the EU will also go toward conservation, not just food production. This lucrative move could increase the demand for environmentally friendly equipment. AGCO is already manufacturing and marketing several of these products.

Wood says tractors with front- and rear-mounted equipment are growing in popularity because they minimize field passes. Conservation-minded customers are also rapidly adopting no-till practices, Wood says. "As minimum-till growth gains popularity, so do tractors with more horsepower to handle equipment such as no-till planters," he says. "These are sought after for their environmental and economic benefits, which include less fuel consumption through no-till practices."

Another specialized product that AGCO delivers is the Nutrient Management System or NMS. This sophisticated machine is being used in The Netherlands, where waste application is carefully regulated. The NMS injects waste into the soil, which eliminates fertilizer costs and environmental runoff into rivers and streams - a major concern for The Netherlands. What makes this system different from the rest is its integration of GPS technology that monitors and reports the rate of application. Wood explains that dairy farmers in Holland use the system to reduce the smell of their operations.

With the opportunity to make more money on conservation, you can bet farm machinery makers will be marketing more environmentally friendly products in the years ahead.

CUSTOM BUILT

Just like the restaurant chain that invites you to "have it your way," equipment manufacturers are seeing the benefits of customizing products to the requirements or preferences of given regions around the world.

Except for tractors, the main products that John Deere markets in Europe, Africa and the Middle East range from combine harvesters, sprayers, and balers to no-till drills and GPS equipment. According to Neumann, any of these products may be tailored to suit the buyer. "These products are mixed, matched and specified by the individual marketing organizations according to their own requirements," he says.

AGCO Corp. takes a similar approach by also catering new product introductions and models to specific regions. Seaver says, "We build a common platform, then homologate the unit to the country requirements." This may occur to adhere to safety regulations, cultural concerns or conservation practices.

The New Holland Model 3630 is a simple and versatile tractor series produced and sold in India, where producers are moving from manual to mechanized labor.
Both AGCO and CNH Global have several brands that offer unique attributes to fit the varying requirements of the global customer. For example, AGCO markets its high-tech Fendt brand in European markets, along with the Massey-Ferguson brand. Similarly, CNH markets three agriculture brands, which include Case IH, New Holland and the regional European brand Steyr.

Marketing multiple brands is one solution to the variance of customer needs, but modifications are still made within each brand to satisfy the regional customer. "Not every product fits into all of the markets," Seaver says. "An example is the size of swath, which is narrower in the United States than in the EU. So we make the appropriate engineering changes to meet producers' needs."

SALES AND SUPPORT

When you operate in 160 countries or market numerous brands, it takes an organized structure to keep it all together. The secret to a successful global system is often held in the local dealer or service provider. The most important element to marketing globally seems to be the ability to adapt to the local market.

The John Deere 7000 Series Self-Propelled Forage Harvester, made in Aweibruecken, Germany, is tailored to suit the needs of regional producers.
Neumann explains that John Deere's global business is made up of sales branches in key markets and local distributors in smaller areas. "In key markets, John Deere maintains its own sales branches, which in turn operate with their own domestic dealer organizations." These key markets include Germany, France, UK and Ireland, Spain and Portugal, Italy and South Africa.

To serve Northern and Central Europe, the Benelux countries, Africa and the Middle East, John Deere has established a special sales branch known as John Deere International, Schaffhausen, Switzerland. This branch coordinates the sales activities of appointed distributors of John Deere equipment, Neumann says.

He also explains that sales promotion, aftermarket support and product support are all handled locally, while communications are covered by regional Deere headquarters.

CNH recently adopted a regional structure that allows the company "to focus on the tactical execution of regional needs," Christman says. He says the company has a global strategy with local execution when it comes to advertising, marketing, brand positioning and even sales support. For example, in Uzbekistan the company has formed a local service joint venture to support farmers and their equipment after the sale.

Christman stressed the importance of a local dealer and service infrastructure to keep customers coming back to CNH brands. "We count on local personnel who understand the people, dealers and culture of a region," Christman notes. "It's virtually impossible to understand a place just by visiting."

One thing is apparent when marketing internationally; you can't take a cookie cutter approach. Europeans are different from North Americans and Asians and Middle Easterners; therefore, products and strategies must also differ.

Although, common ground does exist. "I see many synergies and common needs," AGCO's Wood says. "Farming needs may differ around the globe, but the need for machinery is everywhere." AM


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