Five years ago, Kuhn, one of the world’s oldest and leading manufacturers of agricultural equipment, decided to open its first manufacturing plant in the southern hemisphere – in Brazil. Michael Sommers looks at how the company is capitalizing upon its acquired local knowledge and inherited global reputation to expand both domestically and internationally.
The Kuhn Group is the fifth largest manufacturer of agricultural equipment in the world – and if one excludes tractors and harvesters, it’s Number One. However, despite the fact that the global company dates all the way back to 1828, and that the group boasts over 80 distribution points in more than 80 countries around the world, it was only five years ago that Kuhn decided to conquer Latin America, and its largest market, by acquiring a manufacturing plant in Brazil.
ACQUIRING FACILITIES – AND KNOW-HOW
Actually, it wasn’t just any plant that Kuhn decided to buy. When it first began investigating the possibility of expanding into Brazil, the group’s attention was caught by a Brazilian company called Metasa. Although its main specialty is manufacturing metallic structures, Metasa possessed an agricultural division that had made a name for itself nationally by designing and producing direct seeding equipment, specifically precision drilling machines for crops such as soya, cotton, and corn. Upon purchase of the division, whose headquarters and plant are located on a 12-hectare site in Passo Fundo, a town in the southernmost Brazilian state of Rio Grande do Sul, the company originally took the name Kuhn Metasa before becoming Kuhn do Brasil in February of this year.
Kuhn was particularly interested in adding Metasa to its stable – (which, at the moment, consists of four manufacturing units are in France, one in Holland, and one in the United States) – because prior to this acquisition, the group possessed no direct seeding technology. While Kuhn do Brasil produces crop spraying, fertilizing and soil preparation equipment, 70 percent of its production is devoted to direct seeding machinery such as min-till and no-till seed drills. “For us, this was a really interesting opportunity,” says manager Filipe Freitas de Carvalho. “Aside from the fact that Brazil had an enormous domestic market where Metasa was already an important name, we realized that the direct seeding equipment we produced in Brazil could be commercialized globally, supplying markets as diverse as Latin America, South Africa, and Russia.”
CONSOLIDATION AND EXPANSION
For the most part, since it set foot in Brazil, Kuhn has focused ts attentions upon consolidating its presence locally. “In the last five years, we undertook some vast, but important internal modifications,” explains Carvalho. “Our first priority was to restructure the company in order to improve our performance in-house. We spent a lot of time creating a synergy between this Brazilian unit and the group’s other units around the world. Now, we’re working on external changes; promoting the brand name Kuhn do Brasil throughout Brazil and Latin America.”
To this end, the company has completely revamped its commercial sector. Initially, it maintained a single commercial division for all of Brazil, one for all of Latin America, and one for exports to the rest of the world. Now, however, the Brazilian division has been split into a trio of regional subdivisions (representing the South, Southest, and Northeast/Central-West), each of which has seen its number of dealers and reps greatly increase and coverage expand. Additionally, the company created a new sales division that specializes in Kuhn products that are imported from other units to be resold in Brazil as well as to other Latin American markets via Brazil.
Currently, exports account for 25 percent of the company’s business with 15 percent of sales to North America (mostly soil preparation equipment) and another 10 percent to Latin American and African nations. “Globally, some markets are in expansion right now, and they are beginning to incorporate direct seeding,” says Carvalho. “Europe is a difficult market. Due to the small size of their farms, Europeans are not disposed to direct seeding. At the outset, it takes three or four years before you achieve good productivity and European farmers can’t risk losing profits for three to four years. Direct seeding is very advanced for them; only a few dreamers or risk takers will invest in it. But it’s happening in the Americas, Australia, and in Eastern Europe where farms are much larger and growers can experiment. Basically, you can really cut down on machine use and reduce fuel consumption while gaining much more productivity. Depending on factors such as crop variety and type of soil, you can achieve gains in productivity of up to 20 percent.”
In Brazil, direct seeding is already well incorporated due to the country’s vast spaces. At the moment, Kuhn – which produces between 250 and 300 machines a year – controls around 12 percent of the domestic market, although its position fluctuates depending upon the specific product line in question. In some markets – such as in the supply of seeders for winter crops – it is market leader. “Right now we’re introducing a lot of new equipment, so it’s difficult to gage our market position,” confesses Carvalho.
CHALLENGES AND OPPORTUNITIES
Indeed, since it first began operation, Kuhn has been confronted by some extreme ups and downs in terms of the market. In 2004, a mega harvest led to big sales the following year. However, a drought in 2005 was reflected in decreased sales in subsequent years. Then in 2008, the global financial crisis hit, with the result that Kuhn experienced no growth in 2009. “Since we started out, our growth has been variable,” admits Carvalho. “But we’ve consistently met all our predefined financial goals.”
“Although there are still a few lingering results of the crisis, the situation in Brazil is looking very good today,” says Carvalho. “The federal government is investing significantly in small producers with programs that offer increased financing. As a result, small farmers are buying a lot of equipment. This year production of grains will break records. Also experiencing a lot of growth is the animal feed segment (i.e. cattle pastures); we’re currently a leader in seeding equipment for this niche. Meanwhile, in terms of new markets, the cultivation of sugar cane for use as a sustainable biofuel is really taking off. In response to its growth, we’ve developed some machines that are specifically geared towards this market.”
Due its unique origins, Kuhn do Brasil is ideally positioned for expansion. On one hand, the company benefits from its considerable know-how – inherited from Metasa – regarding the design and manufacture of direct seeding equipment. On the other hand, it has access to a wide range of imported products, whose Kuhn brand name – synonymous with decades of experience and solid global reputation – ensures that they are easily (and eagerly) accepted by the Brazilian market. “Ultimately, our goal is to become a multi-specialist,” confesses Carvalho. “We want to be able to meet the demands of various segments in terms of products, service, and performance. But whatever it is we do, the common denominator is quality and the bottom line is productivity – for us and for our clients.”