A global leader in the design and production of agricultural equipment is looking to establish a firm foothold in SA for its premium German-manufactured line.
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AGCO invites strategic partners for its local Fendt dealer network
The Moneyweb interview transcript – with Ryk van Niekerk
RYK VAN NIEKERK: The American group AGCO is one of the leading designers and manufacturers of agricultural machinery in the world. The group has been doing business in South Africa for nearly a decade, and now intends to expand further through a new dealer network, focused on its high tech brand Fendt. AGCO is now looking for companies to become part of this dealer network.
Felix Seitz is the head of sales of AGCO in South Africa, he’s with me in studio. Felix, thank you so much for joining me. Tell us about AGCO and Fendt?
FELIX SEITZ: Ryk, thank you, a big thank you. Thanks for the welcome. I’m very glad to do this, because we, as AGCO and our premium brand Fendt, are very proud to be in this market. As you certainly know, we brought the brand into South Africa in 2017, selling it ever since through a third party, and are now thinking of changing this because we think it’s necessary. We do think that our brand has a lot of potential in this market, especially. So that’s why we are changing our distribution set-up in this market.
RYK VAN NIEKERK: But this is at the very high end of agricultural machinery. What type of machines do you specialise in?
FELIX SEITZ: It is indeed. The Fendt brand addresses the premium segment. It addresses the commercial farmer, the professional farmer, the farmer who sees the advantage of investing in high-value equipment. Why [do they] do so? Because, in the end, it’s about profitability and, if they can use technology to their advantage, to be more productive and save money in the end, then it’s quite an easy decision to turn to high technology. And this is exactly where Fendt comes into play.
RYK VAN NIEKERK: I’ve seen some of the machines on the website and they are truly beautiful and definitely something you can see comes from Germany. But let’s talk about the market in South Africa. How big is the market for these top-end machines?
FELIX SEITZ: It’s not that easy to say. South Africa at the moment has approximately 35 000 farmers, which is quite a bit less than we had many years ago. So I would say that out of those, 2 000 will possibly be able to afford a Fendt. It’s the premium equipment, and high-end technology equipment obviously has its price.
But if we look at the number of 2 000, and we can capture 5% of that market, then I’d be a happy man.
RYK VAN NIEKERK: Well, you are looking for a new dealer network. Tell us about your plans with this network.
FELIX SEITZ: Well, our plan is very simple. In the past, Fendt was distributed without a dealer network in place. That proved to be challenging. So we decided to take matters in our own hands and look for strong partners to establish the very much needed Fendt dealer network. Why are we doing this? We want to give comfort to the customers. We want to give trust to the customers that, if they buy high-value, high-technology equipment, they can be serviced according to their needs. I think this was lacking in the past. Without a dealer network we very often got the question, “But where do I turn to? What must I do? Where’s my dealer?” So that we definitely need to change, and that’s why we’re doing this.
RYK VAN NIEKERK: How many dealerships are you looking for in this network?
FELIX SEITZ: Well, we are intending to go in two phases. Phase one will be until the end of this year, and we hope to have four to five dealers on board. It’s not an easy process. There’s firstly an application assessment. We really have to evaluate whether that potential partner does fit our company and also the Fendt brand and whether the finances are in place, and so on.
So after these first four or five, when we have secured, let’s say, the basic service capabilities in the market, then next year we’re looking at possibly another six to eight. So the less the better. We are thinking South Africa is quite a big market with many different areas, so up to 12 most possibly.
RYK VAN NIEKERK: I would imagine it would be these nice buildings where you actually showcase the machines you have, that it’s a nice experience to go there, and there’s a service centre with highly trained technicians.
FELIX SEITZ: Completely right, simply fitting to the brand. It should be obviously state-of-the-art premises. We’re looking for these shiny dealerships, but not only from the outside; the inside is the most important. So we are looking obviously at the service capabilities of each dealer and we are there to help. We are there to support. So we want to make sure that, especially from a technical point of view, the dealers will be up to scratch with the different levels of training that we offer, which any dealer or any company that wants to become a dealer has to go through so the technicians are up to scratch, there will be dedicated salespeople for Fendt in the field, and so on. So the best case is going to be a full-blown Fendt dealership. That would be our ideal situation.
RYK VAN NIEKERK: And you’re looking for partners. What type of companies are you looking for to become a dealer?
FELIX SEITZ: Most importantly, companies that show an absolute interest in working with the ‘Rolls Royce’ of all agricultural brands – and there are plenty that I’ve got to know already. But we need to ensure that those potential partners do understand what the Fendt brand represents. It’s not just any brand, and I’m not talking down any other brand. It’s just that Fendt finds itself in that absolute high-premium segment, that there is a lot of promise. A lot of promises are coming with this brand.
So the potential candidate must really be able to show us that they understand the brand, that they understand the service promise that stands behind the brand. And, apart from that, obviously, we want strong partners. We want financially strong partners, but the most important is that these companies have to have the passion to represent Fendt properly in the field.
RYK VAN NIEKERK: Do you expect these partners to partner with Fendt exclusively, not to sell other products as well?
FELIX SEITZ: Definitely no competitive products. That’s clear. Exclusivity would be our preferred solution. Maybe in the beginning it could be a little difficult because, as I said earlier, we are coming from a relatively small footprint. There’s a lot of potential growth in the Fendt brand, but we would allow Fendt to be sold together with another brand under certain circumstances. There would need to be a separation in dealerships, in premises, which is depicted in the dealer standards that we have in place. But certainly, we wouldn’t want a potential partner to sell any competitive brands alongside our Fendt brand.
RYK VAN NIEKERK: The dealerships will be, as you’ve said earlier, quite impressive visually, and well equipped. Do you assist such a partner with setting up such a dealership?
FELIX SEITZ: Absolutely. Obviously, we work around the world as AGCO, with more than 4 000 dealers on the Fendt side. That’s hundreds of dealers. So we have blueprints. We have obviously a lot of experience with dealerships. We support our potential new partners, definitely, in visual identity and how to set up the dealership inside and outside. We do have, as I mentioned, the Fendt dealer standards which depict very clearly what we expect from a dealer, and what it looks like, so basically, you can take that and kind of copy it. It’s not that difficult.
RYK VAN NIEKERK: And the financial expectation from a potential partner? Do you have any expectations?
FELIX SEITZ: Not in a way that I could give you an amount or something. But obviously, it is an intensive capital business. We’re talking high-value kit, millions of rands. Obviously, we do expect our future dealers to be able to stock equipment, and that requires obviously some sort of major investment, also in the premises. But we haven’t defined any amount. We are happy to receive applications from interested parties, and then together we’d look at the business plan and what money stands behind it, and how we can master that.
RYK VAN NIEKERK: What are the time frames for a partner first starting to talk to you, and then signing a contract, and actually having this dealership open its doors? Is that a long period of time?
FELIX SEITZ: Not necessarily. Theoretically, it can actually be quite quick if we are under the impression that this specific candidate is absolutely fitting, and fulfils all major requirements. Then the whole process, which goes through our distribution management, can be done in four to six weeks. But obviously, we do want to ensure, as best we can, that we have the strongest partners possible. So I would say the initial phase, those four to five weeks that I’ve mentioned until year-end – that’s going to be quite quick. With the others, I think we’re going to have a little more time. But in principle within one or two months everything can be done.
RYK VAN NIEKERK: Interesting. So if a company or an entrepreneur is quite interested in getting involved, how do they make contact with you?
FELIX SEITZ: We have set up a website, which is www.fendtdealer.co.za. So anybody interested can simply go onto that website and submit [their] interest. And I would very much invite everybody who has the right interest, and comes from the right basis, to apply. This is a very exciting investment opportunity if done correctly, with very good profitability. So we do really invite everybody to apply, and then we’ll get to talk.
RYK VAN NIEKERK: Well, I also think it’s a vote of confidence in the South African economy for a company like Fendt to come and establish a dealer network. It will of course require a substantial investment from the company side as well, and hopefully, it’s a great success.
Felix, thank you so much for joining me today.
FELIX SEITZ: Ryk, thank you very much.
RYK VAN NIEKERK: That was Felix Seitz, the head of sales at AGCO.
Brought to you by Fendt a proud AGCO brand.