Senior Vice President of AGCO: We set to win 20% of Ukraine's market of Western-made tractors within three years
Exclusive interview with Senior Vice President and General Manager of AGCO in Europe and the Middle East Rob Smith to Interfax-Ukraine
- What major trends do you see on the market of imported agricultural equipment in Ukraine? How, in your opinion, can this market grow? What are the main factors that have an impact on the growth?
- During 2016-2017, the market of agricultural equipment in Ukraine tripled. Last year was a record for the supply of imported equipment during the country's independence: over 3,500 tractors were brought in. According to our forecasts and expectations, the market for tractors of Western brands in Ukraine will increase to 4,000 units in the coming years. 2018 still has slower sales and demonstrates market stabilization after the peak in 2017, but there are all chances for it to become the second best year in the history of modern Ukraine.
We recorded a trend towards growth in the segment of tractors 100-150 HP. In the four months of 2018, this segment grew to 48%, while it was 36% in 2017. This happened, among other things, due to a decrease in the share of tractors 300 HP and more to 25% in the four months this year from 34% in 2017.
Currently, the ratio of imported and domestic machinery in Ukraine is 30% by 70%, respectively, but we see a prospect for an increase in the share of foreign equipment due to its innovation and better performance. Perhaps this ratio will be 40% by 60% in 2018, and one day it will change to 50% by 50%.
Key factors that influence the increase in global demand for agricultural machinery is the growth of the world's population. This leads to an increase in demand for agricultural products, from Ukraine as well. Your country is one of the leading exporters of cereals and oilseeds. Reforms and EU integration are facilitating an increase in exports. Agrarian enterprises are developing very rapidly here: they use latest technologies, adopting international experience and eventually increasing their yields. Accordingly, the need for technical modernization of the farm equipment is also growing.
- Have you implemented any plans to bring the Finnish-made tractor brand Valtra onto the Ukrainian market?
- Yes, we have launched sales of the Valtra T series tractors in Ukraine together with our distribution partners and plan to present the A series before the end of this year. Ukrainian farmers were originally presented with the T series of Valtra 150-250 HP tractors, such machines are already working in Ukrainian fields. This is not the only new tractor in our product portfolio in Ukraine. This year, we have already presented our Massey Ferguson MF 6713 tractor.
Currently, AGCO in Ukraine is represented by all major brands – Fendt, GSI, Massey Ferguson and Valtra.
- Do you plan to release new machinery on the world market this year? If yes, which of these new models will be available in Ukraine?
- This year we are showcasing the Ideal combine harvester in some international markets. The presentation of this model in Ukraine is planned for 2019. And by the end of 2018, the Fendt 1100 MT track tractor to be presented – it is most likely to be showcased at the InterAgro exhibition this fall. In addition, we organized a road show tour throughout Ukraine to demonstrate the latest precision farming solutions of the Precision Planting company, which we acquired in 2017. Thus, we give impetus to new developments for precision farming in Ukraine and show Ukrainian farmers new opportunities.
- What is the distribution structure of AGCO in Ukraine? How many official dealers do you have?
- Our company has been successfully developing in the market of Ukraine for the last three or four years, and this year our strategic decision was the reorganization of the Ukrainian distribution structure in a European format, based on the same principles as for instance in Germany, France, Great Britain and other European markets. With the help of the reorganization, we plan to make a breakthrough and increase our share in the Ukrainian market of foreign agricultural machinery by 50%. We have seen from the experience of other multi-brand companies: a distributor is more successful when it focuses exclusively on the brands of one company, then it has more chances to achieve a high level of sales. Therefore, since the beginning of this year, we are working to introduce a consistent European distribution structure in Ukraine.
Today, we have four distributors of Fendt, Valtra (Astra, Agrostructure, Zeppelin Ukraine and Agrospace) and Massey Ferguson (Amako, Volyn Stock Company, Bizon Tech and MineTech). By the end of 2018, our distributors will have branches in all regions of Ukraine. With our eight exclusive partners, we are now covering 70% of the territory of Ukraine. We expect to cover all Ukraine by the end of this year.
- Are there plans to increase supplies of agricultural machinery and equipment to Ukraine this year? What are AGCO's strategic plans for the next three years?
- After two years of growth, the Ukrainian agricultural machinery market is now entering a period of normalization. In 2017, we supplied more than 300 tractors to this market. Last year we finished with the 9% share of the Ukrainian market of foreign agricultural machinery, and by 2018 we are planning to reach the market share that will have a double-digit number. And with favorable business conditions we plan to reach close to 15% of the market by the end of this year. And in three years we are going to have 20%, and this will be an excellent result.
- Do you consider any possibility of localizing production of machinery and equipment in Ukraine? Could you please tell us about your investment plans in Ukraine?
- It is important to us that our customers could have access to latest technologies. This is the priority in terms of investment. AGCO Corporation is a multi-brand company, one of the few in the world that specialize exclusively in agricultural machinery and equipment. The company's annual turnover in 2017 was $ 8.3 billion. Every year we invest $ 350 million in innovation, research and development centers, and design work, and this is about 4% of our sales. The company also invests in the development of distribution channels. All together – this is about $400 million in investment per year. Our investment plans are aimed primarily at increasing distribution and developing efficient solutions involving the full range of our brands, to ensure high level of service and support the growing needs of Ukrainian agricultural producers.
- What is the company's price policy? Who are major customers?
- We individually approach each category of customers, taking into account their needs – from the farmer to agro holdings. We position Massey Ferguson, Fendt and Valtra machinery in accordance with technical requirements and financial expectations for different segments of agricultural producers. In addition, our distribution partners cooperate with the large financial institutions (such as OTP Bank, KredoBank and RaiffeisenBank) and are able to provide customers with various financial solutions.