$89 A Special Management Report From 2018 ‘BIG DEALER’ REPORT An Ag Equipment Intelligence Staff Report The “Big Dealer” report is a joint project of Ag Equipment Intelligence and George Russell of the Machinery Advisors Consortium. This report aims to track ownership changes and consolidation trends of North American farm equipment dealers. For the purposes of this report, “Big Dealers” are considered those retail organizations that own and operate 5 or more farm equipment store locations within the U.S. and Canada. This compilation was initiated in 2009, was first published in 2011 and is updated annually in April. Comments, corrections and additions to the “Big Dealer” list should be directed to Dave Kanicki at Ag Equipment Intelligence (dkanicki@les- sitermedia.com) or George Russell at Machinery Advisors Consortium ([email protected]). The contents of this report represent our interpretation and analysis of information generally available to the public or released by responsible individuals in the subject companies, but is not guaranteed as to accuracy or completeness. It does not contain material provided to us in confidence by our clients. Individual companies reported on and analyzed by Lessiter Media, may be clients of this and other Lessiter Media services. This information is not furnished in connection with a sale or offer to sell securities or in connection with the solicitation of an offer to buy securities. Data for this study was collected from various sources and much of it was verified by the dealers and manufacturers. This is an ongoing work. As dealer acquisitions, mergers and sales occur this list will continually change. Anyone wishing to contribute to this project should contact Dave Kanicki at [email protected]. The AG EQUIPMENT INTELLIGENCE newsletter is published monthly for the farm equipment industry by Lessiter Media, P.O. Box 624, Brookfield, WI 53008-0624. © 2018 by Lessiter Media All rights reserved. Reproduction in any form of the newsletter content is strictly forbidden without the prior written consent of the publisher. Ag Equipment Intelligence’s 2018 Big Dealer Report is available to Ag Equipment Intelligence subscribers as part of their paid subscription. U.S., Canada and Mexico print subscriptions are $499 per year. International print subscriptions are $599 per year. Send subscription requests to: Ag Equipment Intelligence, P.O. Box 624, Brookfield, WI 53008-0624. Phone: 262/782-4480 or 800/645-8455 (U.S. only). Fax: 262/782-1252. Email: [email protected]. P.O. Box 624 • Brookfield, Wisconsin • Phone: 262/782-4480 • Fax: 262/782-1252 • www.AgEquipmentIntelligence.com ‘Biggest’ Ag Equipment Dealers Continue to Expand Their Reach If there is one factor that is driving a year ago. For the purposes of this ly happening within the farm machin- the biggest farm equipment dealer- report, “Big Dealers” are defined as ery retail distribution channel. ships in the U.S. and Canada to con- those dealership groups that own and tinue adding locations, it is the need operate 5 or more farm equipment ‘Biggest’ Dealers to scale their businesses to keep up retail locations. Continue Expanding with the demands being placed on Currently, the count is 188 big Overall, the percentage of deal- them. It’s an ongoing trend that isn’t dealers vs. 191 a year ago. Despite ers in each of the 4 different size cat- slowing down or going away. fewer dealership groups overall, egories — 20-plus stores, 15-19 stores, Investopedia defines scalability dealer consolidation is not slowing 10-14 stores and 5-9 stores — held as a “characteristic of a system, model down. In fact, a quick review of the steady during the first 7 years of the or function that describes its capabil- numbers shows that growth of the study, but significant shifting has taken ity to cope and perform under an “biggest” big dealers continues to place particularly in the past year. increased or expanding workload. A escalate, while the number of the Generally, the dealer groups with system that scales well will be able “smallest” big dealers is where the 20 or more stores represented 5-6% to maintain or even increase its level shrinkage is taking place. of the total between 2011-17 but of performance or efficiency when Since 2009, Ag Equipment increased to 8% in 2018. Dealers in the tested by larger operational demands.” Intelligence, in partnership with next category, 15-19 stores, is where Some say dealers need scale to the Machinery Advisors Consortium much of the shifting has taken place. not only keep up with their custom- (MAC), has compiled a ranking of In 2011, this group represented only ers’ demands — farmers who are also farm equipment retailers based on 3% of the total. This grew to 9% in expanding — but to be profitable. the number of ag stores. The first 2017 and then jumped to 15% in 2018. In compiling the 2018 Big Dealer “Big Dealer” report was published in The next tier, dealers with 10-14 report, it was interesting to note that 2011 and has been updated annually store locations, grew steadily over the there are actually fewer “big” North ever since. During the period of 2011- past 7 years. Starting at 17% of the American farm equipment dealer- 18, “big” farm equipment dealerships total in 2011, by 2017 it had increased principals or ownership groups at have grown by more than 11%. But to 21% and stands at about 23% in this point in 2018 than there were this doesn’t totally reflect what’s real- 2018. While dealers in the smallest group, 5-9 locations, held at about 75% of the total through 2013, the follow- ‘Big’ North American Farm Equipment Dealers — 2011-18 ing year its percentage dropped to 2011 about 66%, where it stayed until the Stores Owned 2018 2017 2016 2015 2014 2013 2012 2011 vs. current year. In 2018, the smallest “big” 2018 dealers’ percentage of the total fell to 20+ 15 11 12 11 10 9 8 8 +88% about 55% of all big dealers. Clearly, 15-19 25 18 14 12 14 11 8 5 +420% it has been dealers in the 15-19 store 10-14 43 40 41 42 36 30 30 30 +47% locations’ group that has shown the most continuous growth during the Sub-Total 10+ 83 69 67 65 60 50 46 43 +98% past 7 years. 5-9 105 122 125 123 121 134 141 128 –19% The top tier of big dealers, those Total 188 191 192 188 181 184 187 171 +11% with 20 or more store locations, has grown from 8 in 2011 to 15 in 187 188 192 191 188 2018, a growth rate of about 88%. 184 171 181 200 On the other hand, the lowest tier of 180 the big dealers (5-9 operating loca- 160 tions) have declined by nearly 20%. 140 In 2011, this tier of dealers had 128 120 groups, but their numbers have fall- 100 en to 103 in 2018. 80 The real story, though, is in the 60 second tier of big dealer groups. 40 Dealerships that own and operate 20 15-19 store locations have grown by 0 more than 400% between 2011-18. 2011 2012 2013 2014 2015 2016 2017 2018 Taken together, dealership groups The total number of “Big Dealer” groups that own 5 or more ag stores declined to 188 in with 10 or more stores have grown 2018, but is up 10% since Ag Equipment Intelligence, working with the Machinery Advisors Consortium, published the first Big Dealer report in 2011. from 25% of the total big dealer Source: Ag Equipment Intelligence, Machinery Advisors Consortium group in 2011 to 45% in the past year. 2 Ag Equipment Intelligence — 2018 Biggest Changes North American Big Dealer Groups — 2018 in the Past Year Since the 2017 edition of the Big Avg. Stores Per Owner Group # Avg. Avg. Dealer report was published in May Total # Ag Dealer All Ag of last year, several noticeable shifts Stores Stores Groups Stores Stores have taken place, including how the dealer rankings are tallied. In the past, Dealers with 20 or More Stores 15 653 44 464 31 all of a dealer’s farm equipment loca- Dealers with 15-19 Stores 25 509 20 404 16 tions were included, whether they Dealers with 10-14 Stores 43 538 13 493 12 were in the U.S. and Canada or over- Dealers with 10 Stores or More 83 1,700 21 1,361 16 seas. In the 2018 edition, only North Dealers with 5-9 Stores 105 880 8 691 7 American dealership locations are included when it comes to calcult- Total & Avg. Number of Stores 188 2,580 14 2,052 11 ing the rankings. Dealers with stores The number of dealer groups operating 10 or more store locations increased to 83, up from 70 outside of North America are noted a year earlier. The total number of stores operated by these dealers rose to 2,580 vs. 1,490 in their individual listings in the table last year. Overall, these dealers own 2,052 ag-only locations, an average of 11 stores each. that starts on page 6. Source: Ag Equipment Intelligence, Machinery Advisors Consortium This change only affected two dealership groups. Titan Machinery Dealers with 15 or More Locations — 2011-18 has 20 dealerships in Bulgaria, All Stores & Ag Stores Avg. & Totals Romania, Serbia and Ukraine. Cervus Groups w/15+ Total Ag All Stores Ag Stores Year Equipment has 14 dealerships in Stores Stores Stores Avg. Avg. Australia and New Zealand. 2011 13 428 311 32.9 23.9 As a result of this change, Titan Machinery slipped one spot to No.