Strong Com­pe­ti­tion drives NZ ma­chin­ery mar­ket

Australian Farmers & Dealers Journal - - NEWS -

LAND­POWER Aus­tralia direc­tor Merv Ge­orge says there are sig­nif­i­cant dif­fer­ences be­tween the Aus­tralian and New Zealand ma­chin­ery mar­kets.

Mr Ge­orge, who is him­self a Kiwi and con­tin­ues to travel to his home­land at least once a month on busi­ness with Land­power, says New Zealand's “softer en­vi­ron­ment” con­trasted greatly with Aus­tralia's parched lands.

“I go to New Zealand and fly in on a plane and I see every­thing is green and beau­ti­ful, even though they say they are in a drought,” he said.

“The coun­try still has its stresses. It's a small coun­try and agriculture is quite in­tense. The NZ dairy in­dus­try has dou­bled its milk pro­duc­tion in the past decade while Aus­tralia has gone back­wards.

“The trou­ble is the con­cen­tra­tion of cows, and the ni­trate lev­els are now in fo­cus be­cause you have too many cows for the land's abil­ity to suck-up the ni­trates. So they have their own set of pres­sures which are not Aus­tralia's pres­sures be­cause of the soil types and the ge­o­graph­i­cal na­ture of NZ.” But is it a harder or eas­ier place for ma­chin­ery companies to op­er­ate?

“There's al­ways com­pe­ti­tion and there are sim­i­lar chal­lenges but they are not cli­mate driven. They're sim­i­lar be­cause all the com­pe­ti­tion is there, the farm­ers are much closer to­gether so geog­ra­phy there would be deal­ers 100 kilo­me­tres apart not 300-500km like in Aus­tralia, so there's less travel.” Mr Ge­orge said the closer prox­im­ity in NZ meant companies like Land­power had greater insight into their com­pe­ti­tion.

“The vis­i­bil­ity of your com­peti­tor's ma­chines is eas­ier be­cause you can see them over your fence as the farms are quite small,” he said.

Mr Ge­orge be­lieves the farm ma­chin­ery busi­ness is very com­pet­i­tive world­wide be­cause the re­turn on rev­enue is very low. The per­for­mance of companies that are buy­ing up deal­er­ships in Aus­trala­sia are work­ing on a re­turn which is down to 1 per cent. “So you've got op­er­ate in a very smart way if you're op­er­at­ing on those tiny mar­gins,” he said.

“That's what we op­er­ate in and that's al­ways been the way. It's a tough busi­ness to be in, it's changing but I don't think it will be any less tough in the fu­ture.

“It's not stay­ing the way it is. I see the TMA num­bers and I look at what they say, no one can say what's ac­tu­ally go­ing to hap­pen for sure, but cer­tainly they'll be fewer farm­ers and fewer deal­ers and there will have to be smarter peo­ple in our busi­ness.”

Mr Ge­orge said the Trac­tor and Ma­chin­ery As­so­ci­a­tion was a real as­set for the in­dus­try in Aus­tralia.

“The TMA do a re­ally good job of help­ing our in­dus­try. The rea­son there's no strong TMA in New Zealand is be­cause shar­ing in­for­ma­tion in tighter mar­kets is dan­ger­ous. For ex­am­ple, if you give me all the mower sales that oc­cur in a par­tic­u­lar small re­gion then all of a sud­den I'll know which deal­er­ship has sold it and then I can go and chase it.”

“New Zealand is a much tighter more closed mar­ket­place.” Mr Ge­orge said that the New Zealand ma­chin­ery mar­ket was over­sup­plied.

“All the trac­tor brands in the world seem to sell in New Zealand, from the Euro­pean and US brands to the Chi­nese, so it is over­sup­plied es­pe­cially con­sid­er­ing the size of the mar­ket,” he said.

“It could quite eas­ily have just two or three sup­pli­ers and they could han­dle the mar­ket with­out dif­fi­culty.” Land­power's dis­tri­bu­tion in New Zealand is 50 per cent pri­vately owned and 50pc owned by Land­power, which Mr Ge­orge be­lieves is a good bal­ance. The com­pany owns less in Aus­tralia, but it is likely to own more in the fu­ture.

“But whether it is Aus­tralia or New Zealand, deal­ers are so busy with their heads down work­ing in the busi­ness of today that they're not see­ing what is hap­pen­ing and work­ing to­wards se­cur­ing their fu­ture,” he said.

• More from Land­power's Merv Ge­orge on p 18-19

Land­power’s Christchurch head­quar­ters in New Zealand.

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