The attitude of marketing staff and the overall experience of just being at AGCO’s giant display at Agritechnica this year was different than I’d seen in past years. The stand was clearly divided between the company’s two primary brands sold in Europe: Massey Ferguson and Fendt.
Then, an incident really drove home the reality of that division.
I was talking with one of the senior Massey Ferguson executives involved in the development of the Ideal combine. We were, of course, in the MF portion of the display when two jugglers who were tossing Fendt signs around wandered over and stood nearby.
That MF executive excused himself from our conversation for a moment, strode over to those jugglers and abruptly sent them back to the Fendt area. “This is a Massey Ferguson display, guys,” he said as they walked away. “Come on.”
When they left we resumed our conversation — after I took a moment to process what I’d just seen. That demonstrated how one of AGCO’s biggest corporate decisions this year — in Europe, at least — is putting more distance between its two major brands from a marketing perspective.
“You will see a stand (at Agritechnica) that is radically different than what we used to do in the past,” said Thierry Lhotte, the executive behind Massey Ferguson’s global brand presence.
It’s all part of a new marketing approach for AGCO that finds the right place for everything within its product portfolio and gives each brand at least a feeling of independence.
“We have a very clear two-channel market approach,” explained Rob Smith, senior vice-president and general manager for Europe and the Middle East. “Both channels are exclusive and full line. As a matter of fact, we call it ‘full, full lines,’ because we have a full line, but when we find the right additional, incremental (short-line brand) fit to our business we’re very happy to acquire this and integrate it into our full line. A great example is the Lely business we bought this year. It gives Massey Ferguson a fantastic round baler, and it gives us a full, full line on the hay and forage side.
“But it’s two channels: Massey Ferguson with a full-line product lineup and Fendt with a full product line as well. And where it makes sense, we bundle Valtra with Fendt, to have a full line. (Valtra tractors are no longer sold in North America.)
“Both of them (MF and Fendt) are separate. Both of them are exclusive.”
That means customers in Europe will see separation at dealerships, which will sell either MF or Fendt, not both.
“It’s a big change for us,” added Lhotte, nodding in agreement with Smith.
As MF and Fendt take centre stage in AGCO’s product offering over there, the Challenger brand has been made extinct in Europe. Its machines, instead, have been integrated into the Fendt brand, giving AGCO’s green brand a much-expanded range of equipment and, most notably, the full-liner status that Smith mentioned.
“We discontinued Challenger in Europe,” said AGCO CEO Martin Richengen when speaking with Country Guide at Agritechnica. “It’s really an American brand. Nobody needed it here.”
All these decisions are the product of the new way of looking at market demand that is driving management decisions at AGCO, producing a much stronger focus on customers that analyzes their perceptions, demands and preferences.
“You will be able to measure how much we’ve put the customer at the very centre of our activities,” said Lhotte.
“They (Challenger) were very successful products, but the brand wasn’t known well,” added Smith. “We’ve done very clear work on customer segmentation and targeting our customers. Massey Ferguson addresses a specific customer segment in the market. So does Valtra. So does Fendt. What we found was for many of the Challenger customers there was a significant overlap between Challenger and Fendt. So we took some outstanding products and integrated them into the Fendt line.”
But there is more than customer preference at the heart of that decision. When speaking to the group of journalists at the MF press conference, Smith said product differentiation at the dealership level is likely to make retailers more successful and boost sales.
“The reason Massey Ferguson puts customers in the centre of its approach, in the centre of its stand and the centre of all its activities is for growth. Focus. Why do we have exclusive distribution channels, exclusive partners that carry the Massey Ferguson lineup? It’s been demonstrated time and again that exclusive distribution partners have higher market share, higher sales, and higher growth than a non-exclusive distribution partner.”
Here on this side of the Atlantic, the company has already gone a long way toward differentiating its primary North American brands, Challenger and MF, at dealerships. Aside from upgrading its overall dealer network, the company has put a focus on finding the right niche for each brand, according to Richenhagen.
“In the U.S. we reduced our dealers over the last 10 years by almost 50 per cent,” he said. “We had too many small dealers and that diluted the franchise value. Now we are in the process of adding some dealers in certain areas for the small tractors, for the Massey Ferguson Global, because those tractors are sold not in the typical rural areas but closer to big cities because they’re used in landscaping and what we call lifestyle farming.”
AGCO has made Challenger its flagship brand for the mainstream agricultural sector in Canada and the U.S., Richenhagen acknowledges. But he adds MF remains popular with smaller farmers. And he adds enticingly, in the not-too-distant future MF may see some product line changes.
“But also you see what Massey Ferguson has to offer now,” he said, referring to the brand’s mainstream ag product line. “I think this might change over time. Massey Ferguson, of course, has more history, more tradition. So it’s more popular on family farms and so on. But I think our competitors are fully aware of what we have in the pipeline.”
In conversation with Martin Richenhagen
It was typical Martin Richenhagen as he took the microphone to address a group of machinery journalists at a Massey Ferguson press conference at Agritechnica in November.
After some initial good-natured ribbing of AGCO vice-president and global brand manager for Massey Ferguson Theirry Lhotte’s French accent (Lhotte had been speaking just before Richenhagen and introduced him), he turned the joke on himself.
“I’m from Georgia, you can hear that from my accent,” he said in his heavy German accent. Although originally from Germany, he became a U.S. citizen a few years ago and now lives in Georgia, home of AGCO’s global headquarters.
Richenhagen’s trademark down-to-earth demeanour belies his lofty status as company CEO.
“I want it to be understood, I’m not a VIP guest,” he said, changing to a serious tone. “I want to be a member of the team. Maybe you don’t take me (that way). We are very normal people here. We are hands on.”
This press conference was one of the first I’ve attended following the announcement of the company’s new brand distribution strategy, which puts clear delineations between AGCO’s Fendt and MF brand dealership sales in Europe and its reorganized product line.
“Massey Ferguson has always been a full liner,” he said. “So that’s not a new strategy. We already had certain gaps in our product line and we had certain products which were not as up to date as we wanted them to be.”
And he referenced what MF marketers were calling an “avalanche of new products,” all of which were parked a short distance away. The development of many of those machines is now the responsibility of staff at the factory level. AGCO execs believe they’re the ones who know the machines best. And they’re best positioned to know where improvements can and should be made.
“We are moving management more and more to the factory,” he said. And, he added, “We believe administration, manufacturing and product development should be centred where it’s made.”
Apparently the resulting “avalanche” of new products has caught the attention of senior executives at other brands. Richenhagen recounted being contacted by the CEOs of some of the other major brands ahead of Agritechnica who wanted to talk to him.
“When you come to a show and all of a sudden you are treated very well by the competition, you know you did a great job,” he said with a smile.
Later, I had another chance to speak privately with him. Being only the second CEO of the youngest global mainline ag equipment brand, Richenhagen said his management team’s vision for the company is starting to come together. And now the pace of progress is starting to quicken.
“We have a clear vision; it’s like a pile of puzzle stones,” he said. “And now towards the end, the picture does come together with some acceleration. Now we are very close to most probably the best full line in the industry. Now we have to make sure we can deliver.”
Delivering those products and their support to farmers has involved reorganizing dealerships worldwide. What changes were necessary depended very much on which region they were in. And some changes were forced on AGCO and its dealers by policies of other manufacturers, in particular at those dealerships that sold both AGCO and competing product lines.
“(We made those changes) I think very organically, compared to some of our peers,” he said. “And it varies by region. Here in Europe we saw some consolidation because some competitors wanted (dealers) to stay exclusive. Fortunately, here in Germany all our dealers stayed with us, so our competitors did the job for us.”
AGCO has had a strong presence in China for several years, but building sales volumes there involves many more challenges, as many farmers turn to mechanization for the first time.
“In China it’s a challenge because there is not distribution,” he said. “We invested almost $500 million in factory and (machine) design. So we have a complete new range of tractors. And now we have to basically develop a distribution network. The Chinese aren’t used to that so much. A lot of business was done between the factories and the state or the cities and so on. So we basically have to develop it.”
The goal for AGCO is to set up typical western-style dealerships, something new for that part of the world. And Massey Ferguson will be AGCO’s flagship brand there.
“That’s what we’ll try, and it will be only within China,” he said.
With all the political upheaval in the U.S., Richenhagen’s adopted homeland, I wanted to get his views on the current American administration’s erratic behaviour and frequent threats to stifle trade. Was the rhetoric coming from the White House causing him and his peers at other major equipment brands any grief?
“Yes,” he said flatly. “It’s very bad, so that means there are two things the industry needs: one is consistency, and two is free markets. We unfortunately have a president that does polarize far too much. He does damage the image of America outside America quite a bit. I became an American citizen in 2010 and I’ve tried not to become emotional so far. But what he did is not good for the country.”