Strong Competition drives NZ machinery market
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.