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COVER STORY
HARVESTORE: THE REVITALIZATION OF AN ICON
Armed with exciting new products, a solid revitalization business plan based on extensive market research, and backed by an enthusiastic new owner, Engineered Storage Products Company (ESPC) owner of Harvestore, Slurrystore and other related products began aggressively reintroducing itself to the North American ag market in 2005.

In just 18 months, the results have been just short of spectacular, with revenues in 2006 jumping 25%, new Harvestore structure sales are increasing more than 200%, Slurrystore sales are up 200%, and pre-owned structure sales are climbing. Its sales to the ag market are now topping $15 million. It has also added five new dealerships in the past two years.

All that, despite a somewhat depressed market in its primary marketplace the dairy industry.

Considering its starting point (see sidebar), the ESPC turnaround could become ag's equivalent to the legendary comeback of Chrysler in the 1980's or Harley-Davidson in the 1990's.

The story begins with ESPC's purchase by CST Industries, Inc. (CST) in January 2001, from Harvestore's founder, A.O. Smith. Based in Kansas City, KS, CST is a leading provider of pre-engineered bolted storage tanks in the world. The purchase of ESPC was its entry into the agricultural market.

"What we saw in ESPC," explains CST Director of Marketing and Development John Garnett, "was a company with legendary brands that needed some product improvements, some new research that supported the benefits of its products, and a strong marketing push." Garnett, who has a dairy background, hails from New Zealand and moved to the U.S. in 2000. Garnett says, "CST made the acquisition and the necessary investments in those activities. Now just look at the results!"

CST Industries was recently purchased by The Sterling Group, a Houston, TX-based private equity investment firm. Sterling is no stranger to the ag market at one point, it has owned Purina Mills, Royster-Clark and Arcadian Chemical.

THE ROAD TO SUCCESS
Rick Jones is ESPC VP of Sales and Engineering and offices from ESPC's headquarters in DeKalb, IL. Jones joined the company as an engineer after graduating from the University of Illinois in 1969 and has spent his entire career there.

"We started the revitalization process by conducting focus groups with our dealers, our customers, and prospects two years ago," Jones reports. "We didn't necessarily like what we heard, but it provided us with the marketplace reality and the issues we would have to address if we were to be successful."

First on the list was the perceived slowness of the Harvestore's unloading capacity. "This was particularly important among the younger generation of dairy producers who were operating Harvestore systems their fathers had purchased," Jones says. "They are the ones who are rapidly expanding their operations and demand speed. So, this year we introduced the new XL Unloader which nearly doubles the system's capacity and is faster than our principal competitors bags and bunkers."

The second issue was outdated research proving the higher quality of feed that results from being stored in a Harvestore. "We built our reputation on providing herds with superior feed quality," Jones says. "In fact, we invented haylage as a feed source.

"However, the research we were using to prove it to our customers was conducted during the 1960s and 1970s. To update our information, we formed a partnership with the USDA Forage Research Center in Wisconsin to conduct new research on haylage storage options. The first year results showed significantly less dry matter loss and higher fat corrected milk production from cows fed from a Harvestore. Results from year two of the study will be available in 2007."

Third, the blue structures, which were once the pride of the farm, are now being called the "Blue Tombstones."

"Because of our limited resources," Jones explains, "we weren't able to communicate with the marketplace to tell our story and support our brand. In fact, our customers and prospects told us they didn't know we were even alive and that they could purchased new Harvestore structures.

"To correct this, we knew we needed to do a much better job of letting all parties know that we offered a valuable solution to their operations, Garnett says. "An important part of our revitalization success was our hiring of OPEN ROADS, a Milwaukee, WI-based business growth and development services firm." Jon Anderson has overall responsibly for the EPSC account. Also on the team are agri-marketing veterans Dean Potratz, Tina McDonald and David Potter.

"Re-positioning the Harvestore brand was a crucial first step. The industry had dictated the Harvestore position for more than 15 years. We kicked off the revitalization effort with the new theme 'The New Harvestore Back on the Horizon,'" says Anderson. "That theme is multi-dimensional and communicates the many facets of our revitalized brand and mission. First, Harvestore is still in business, building new Harvestore structures and refurbishing existing ones. Second, new innovations have made a Harvestore faster to fill and unload in today's modern farming operation, and third, a Harvestore is still the best storage option for maintaining the highest quality haylage when compared to bags and bunkers. Focusing on these points, we launched the revitalization program at the 2005 Wisconsin Farm Technology Days, right in the heart of Harvestore country."

Tactically, the company reinvigorated its exhibiting efforts at several trade shows including the World Dairy Expo (WDE) and the World Pork Expo (WPE). In addition to exhibiting, the company now sponsors special seminars at the events. For example, they sponsor a media breakfast at WDE featuring information from storage experts and the "Environmental Information Center" at the WPE where pork producers can learn more about ag nutrient storage issues and management options.

"We also have launched the Harvestore Today newsletter," Garnett says. "The newsletter is sent to approximately 30,000 producers and is our centerpiece to communicate our new products, services, research and producer experiences."

"Public relations outreach to the farm media has been an important strategy," Anderson reports. "As an icon brand in agriculture, the reemergence of Harvestore has been a high interest story to tell. We have been very pleased with its reception by ag media and Harvestore has been the feature on the front cover of several of the most prominent publications in the ag industry. We have also begun new advertising in farm publications and radio in Harvestore's key geographic markets that include the upper Midwest, New York, and Pennsylvania."

OPEN ROADS also helped ESPC launch refreshed websites, www.Harvestore.com and www.Slurrystore.
com. Web site traffic has nearly tripled.

"We are always on the lookout for ways to help educate our customers and prospects on issues that are important to them and to us," Garnett says. "For example, a few years ago, the federal government funded the Environmental Quality Incentives Program (EQIP) that provides financial assistance to owners of Concentrated Animal Feeding Operations (CAFO). Our Slurrystore is the perfect solution for livestock waste storage and handling, so we developed and launched the 866/376-EQIP hotline in which callers can learn if they are eligible for funds and how to go about applying for them."

THE ROAD AHEAD
A new 25- by 90-foot Harvestore can cost around $175,000 and an unloader around $35,000, so they remain a significant investment to its buyer. "We must have our dealer force well equipped to sell the systems," Garnett says. "To help them, we hold extensive training sessions on animal nutrition and how our system works. In addition, we have equipped them with a new software program, StoragePro, which allows them to show customers how our system can help them save time, labor and reduce feed spoilage."

"The revitalization effort carried through to our national dealer sales meeting," Jones reports. "The meeting's Harley-Davidson comeback theme, 'Get your motor running!', succeeded in bringing a renewed level of enthusiasm to our dealer network. The meeting featured Clyde Fessler, former Mktg VP of Harley-Davidson as our keynote speaker and a motivational video, 'Back on the Horizon,' with specially written lyrics for the revitalization effort. Both were a hit.

We also introduced new system innovations and programs to improve parts, service, and financing."

The basic manufacturing process for the familiar blue structure re-mains the same since its introduction nearly six decades ago, however there have been significant technological improvements, including innovative new glass formulations. Glass particles are fused to steel and affixed by firing in a 1,500F enameling furnace, protecting the structure's metal from the high-moisture feed being stored and creating the oxygen-limiting environment which preserves the quality of the feed.

However, new markets are always being found for glass-fused-to-steel. In fact, over half of the company's revenues now come from municipalities and industrial plants, which purchase AquaStores for potable water and waste water treatment.

To meet this growing demand and be able to adjust for ever-changing market conditions, the company recently purchased and installed a state-of the-art enameling furnace for its DeKalb manufacturing facility. "The furnace has higher through put capacity and is much more efficient than our old system," Jones says. "One major change in our manufacturing process that we made several years ago was we used to build and store systems in the anticipation of what we expected the market to be. Now, we build systems when we have a solid order. We need to be able to deliver it within 90 days, and our manufacturing process now can accommodate that timeline."

In addition, the company is now able to customize its products to the specific needs of its customers. That can include size of the unit and even its color. "There are now a few green Slurrystores out there," Jones reports.

Obviously, this is not your father's Harvestore anymore.

SIDEBAR
HARVESTORE & SLURRYSTORE TIMELINE
1930s: A. O. Smith Corp. discovers method of controlling corrosion by fusing glass to steel. It was used in the brewing industry.
1939: First hot water heater designed.
1949: First Glass-fused-to-steel tank in service as Harvestore silo.
1950s: Creates a North American dealer organization.
1966: Goliath unloader introduced.
1974: Slurrystore introduced to ag industry.
1975: New manufacturing plant in DeKalb, IL, is completed.
1978: Municipal and Industrial division created. AquaStore introduced.
1980: Life-to-date sales of Harvestores exceeds 70,000 units.
1986: Goliath II introduced.
1993: Alliance unloader introduced.
1995: A. O. Smith purchases Peabody Tech Tank and merges with A. O. Smith Harvestore Products to create Engineered Storage Products Company (ESPC).
1999: Fifty year anniversary of Harvestore introduction is celebrated.
2001: ESPC purchased by CST Industries, Inc. in Kansas City, MO.
2004: First 204- by 19-foot Slurrystore (capacity over 4,000,000 gallons) installed on a large dairy farm in Michigan. Life-to-date Slurrystore sales exceed 4,000 units.
2005: Harvestore and Ag Division revitalization program started.
2006: XL Unloader introduced. CST purchased by The
Sterling Group.

SIDEBAR
"OLD BLUE'S" ROCKY ROAD
Towering over its owner's farmstead, the sky-blue Harvestore is the most visual of all status symbols since its introduction to North American agriculture in 1949.

Selling a product that was up to two times the price of a standard cement stave silo required rock solid proof of the product's financial benefits, top of the line salesmanship, continual product innovation and development, and break through communications strategies. Harvestore had it all and became one of the legendary success stories in the world of agri-marketing through the 1970's.

During its peak years, the company was selling and installing thousands of structures each year. It had 90 dealerships serving the U.S. and Canadian markets. But then the perfect storm hit the agricultural economy in 1983. All ag commodity prices (crop and livestock) crashed, inflation was rampant, interest rates hovered around 20%, and farmers were carrying record debt levels. Land values plummeted nearly 50% in a 12-month period, forcing lenders to foreclose on farming operations that had been financially solid as a rock.

Purchases of nearly all capital equipment, including Harvestores, came to an abrupt halt. Even crop input companies felt the pain when the U.S. federal government implemented the PIK program that took 40% of the country's cropland out of production.

In the wake of the disastrous ag economy, farmers and their lawyers began searching for scapegoats and unfortunately for Harvestore, it became one of their targets.

Even after the ag depression healed, the market place began to change dramatically for the company. Dairy producers, Harvestore's primary market, started to expand. New bunker and bag storage systems were introduced to the market place which buyers claimed were much quicker to unload than Harvestores.

So, burdened by legal issues, a changing market place and a disenchanted owner, the company struggled for nearly two decades, relying on a few new structure sales each year, selling rebuild kits that are needed when a structure is moved, and replacing an aging fleet of feed unloaders. Its dealer ranks fell to 40.

But all of that is history. Through a revitalization plan that includes new product innovation, feed nutrition research, changes in its manufacturing process, a re-energized sales force and refreshed communications, the company is re-building itself into the proud market leader once again.

To view Harvestore's video for its dealers, click here www.harvestore.com/multimedia.htm


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