RYK VAN NIEKERK: The Fortune 500 group AGCO has established a two-tier distribution model in SA. It is in the process of rolling out a dealer network to support its Fendt brand, one of the most technologically advanced agricultural machinery brands in the world.
This two-tier model is aimed to increase dealer profitability and extends beyond AGCO’s current dealer partners to any investor who understands the engineering mastery, innovation implementation, and service leadership of the Fendt brand.
Felix Seitz, head of sales at AGCO Africa, joins me now. Felix, thank you so much for joining me. Tell us about this investment opportunity
FELIX SEITZ: Ryk, firstly thanks for having me. Let me give you a few words about this opportunity. We as AGCO have been in the market here in South Africa for many years already. We brought one of our brands into the market also a few years ago. It is our, let’s say, most renowned and most technological brand, the Fendt brand.
In the past years we have sold this brand through a third party and it’s time to change a few things. So, amongst our new approach to distribution here in South Africa, we decided to go this route, as well, with the Fendt brand.
So, to be more specific, we as AGCO Africa in South Africa are changing our distribution model. We’re moving from a Tier 3 model to Tier 2 model.
That means, in fact, we are cutting out the middleman.
So, the distributor and we as the manufacturer are assuming this role ourselves. This obviously has a very important reason in ever more competitive markets. We feel the need to help our dealers to become more profitable and to move to such a, well, thinner distribution model. We think we can address this topic quite appropriately.
RYK VAN NIEKERK: So, it’s a lot flatter distribution model than some of the other big suppliers. Felix, what type of dealers are you looking for, and what would the potential capital investment be?
FELIX SEITZ: We are looking for partners that understand our brands. The Fendt brand is, as I said earlier, I think the most renowned brand, high-technology brand, very innovative and high value. So we need potential partners to understand what this brand represents and what they need to deliver to fulfil the Fendt promise that we want to stick to, as we do globally as well.
When it comes to the investment asset, it depends a lot on the business setup. So, there are very different scenarios that one can think of. If I would look at the preferred scenario in a perfect world, we would have a standalone Fendt dealer who does nothing but represent the brand and sell its products into the market. That most likely will be quite a bit difficult, because we in South Africa, having introduced the brand only in 2017, still come off a fairly small footprint.
So it would probably require for such a dealer quite a while to become profitable. Then there are other setups, like joining another dealer in a joint venture; for example, an entrepreneur or investment company with an existing dealer. They could form a business entity.
We even invite competitive dealers to look at this opportunity.
If they can separate the business from the competitive business they already own, why not? It is totally possible. And obviously let’s not forget our own dealer network that we have already here – our Massey Ferguson dealer network; they are also invited to participate.
So every setup has a different requirement of investment. But looking in general at the brand and what it stands for and the kind of equipment it carries, it is clear that quite a big size of investment is needed. We [are] only talking about high-value equipment. We are obviously looking at the infrastructural needs. They need to be appropriate to represent the brand. We look especially also at the staff, who need to be very well trained with the right knowledge; the right skill sets. They have to be dedicated to nothing else. And we look at the after-sale side of the business. So obviously from the workshop over to the service vehicles to special tools; they need to be acquired.
And most importantly, if the dealer wants to fulfil his role too – is he inclined to the farmer appropriately, then he needs to have the right amount of spare parts stocked in his premises, as well as be able to hold good stocks. After all, if he doesn’t have anything on the floor, he can’t sell anything. So all of this together will obviously generate quite a big requirement for investment, but I would not want to put any figure against it because that is really depending on the situation, every single potential candidate.
RYK VAN NIEKERK: Now, the key to success for such a dealership would be demand from farmers. Now Fendt is a premier international brand, but is there any indication, would you have seen [what] the demand is for the product?
FELIX SEITZ: I think the demand is there. We have an excellent product. As I said, the Fendt is considered to be the innovation leader, the technology leader in this world. And, if we look at the economic landscape as such, and farming as well, the industry is getting more and more competitive by the year. This is obviously influenced by a lot of different factors, but whether it’s politics or climates, windows for certain applications are getting shorter and shorter.
And for the farmer, especially the big commercial and professional farmers, it is more important to have a reliable product and a very efficient product.
This is where our Fendt brand comes into play. We are very confident that the Fendt brand is not only very much required, but also wanted by the farming community, because of its engineering mastery and also the service leadership. So, starting with the build quality all the way to the high technology that it entails, and obviously ending with a service promise that we will instil in our new dealer network.
So, to be more effective, you have to have the right product with the right technology in there. I think with the Fendt brand, we do cover and have a few unique selling propositions which nobody else has.
And it starts with our product as such, with the transmission which was the first variable transmission to be developed in the world. There is nothing better than this transmission. It goes over to our tractor-management system, which is an engine and transmission assistant. This system controls the engine speeds and transmission setting automatically, so the operator doesn’t have to do anything. The very intelligent software basically decides for the operator at what speed the tractor must move to reach maximum efficiency.
We have a so-called Fendt ID concept, which is nothing else but high torque, low engine speed.
So our tractors develop highest torques at very low speeds, which is again efficiency.
You bring the power much more economically to the ground. If you cover a big area, it’s easy to understand that you will run quite low on fuel consumption compared to other brands. And obviously also, if you look at the service life of the machine, the lower the RPM [revolutions per minute], the better for the engine.
Maybe just another example – our very famous Fendt Vario drive, which is a variable four-wheel drive, which does not exist in other brands with four-wheel drives, fixed torque ratio – and with us it’s variable. So, wherever the tractor needs the power, whether it’s the front axle or the rear axle, the power is diverted to this axle. And again, it’s about efficiencies, bringing the power as best as possible to the ground, hence covering more area, more efficiently, and saving fuel, and so forth. And there are other examples that I could carry on with, but these are some really unique selling propositions, which make our brand unique as the term says.
RYK VAN NIEKERK: Will you offer the full fee range in South Africa?
FELIX SEITZ: No. In Europe the Fendt brand a while ago was converted to a full liner.
We in South Africa started four years ago with the wheeled tractor line-up. We’re going to extend this product portfolio – also, certainly, to enhance the profitability of our dealers.
So, we have introduced this year the Fendt idea which is a high-capacity combine. We will carry on and introduce, next year, the new generation of tractors, and also our very famous Momentum wide-span planter.
So the product portfolio is extending. We will build it up over the coming years, but for the new dealer network, these were the products in the beginning, and that already covers a huge portion of the commercial farming segment.
RYK VAN NIEKERK: How many dealerships are you looking to establish?
FELIX SEITZ: We obviously need to cover the whole country in the most important areas where our Fendt product would be needed. We’ll probably structure this in two phases.
The first phase will run until the end of this year, where we have the target to appoint at least four dealers, maybe five.
And then the rest will follow in the coming year, and I at the moment would foresee a total number of around 10, maximum 12, partners throughout the country, not forgetting that a partner could obviously own more than one outlet.
It depends on the area; it depends on the approach and on the investment capabilities.
RYK VAN NIEKERK: Where can potential investors or interested parties get more information?
FELIX SEITZ: That is very easy. We have set up a website, www.fendtdealer.co.za. If any party is interested, please call up that website and simply submit your interest. We are very interested to hear from anybody who has an interest in potentially becoming a Fendt dealer. So I just invite everybody to please submit their interest.
RYK VAN NIEKERK: Felix, thank you so much for your time today. That was Felix Seitz, head of sales of AGCO Africa.
Brought to you by Fendt a proud AGCO brand.