November 26, 2011 Reaping the Harvest

Volume 14 | Issue 3

Based in southern Brazil, Montana has grown into a leading manufacturer of agricultural equipment by launching revolutionary products.

In the lives of some companies, just like the lives of some people, there is a “before” and an “after” separated by a watershed moment. In the case of Montana, a manufacturer of agricultural equipment located in the southern Brazilian state of Paraná, the watershed moment occurred in 2000 when the company rolled out a self-propelled sprayer known as the Parruda. Prior to this event, the small company, founded in 1996, had been producing tractors, harvesters, and sprayers, all of which relied upon human labor. However, the launch of the Parruda revolutionized not only Brazil’s agricultural equipment segment, but its agriculture industry as well. It also revolutionized Montana itself, which overnight went from being a small, local manufacturer to a pioneering force on the national – and international – stage.

REVOLUTIONARY IMPACT
“Before the Parruda, there was no such thing as a self-propelled sprayer in Brazil, but when we introduced it to the market, the impact was enormous” recalls Carlos Magno, Montana’s commercial director. “Just think: one self-propelled machine could do the work of four tractors, four pull-type sprayers, and four human operators. Aside from gains in productivity and efficiency, farmers could reduce expenditures on machine upgrades, repairs, and diesel and cut labor costs. Moreover, the Parruda was ideally suited to Brazil’s large-scale farms and high production levels.”

The fact that the Parruda was in such great demand – and that Montana had the field to itself – resulted in massive, and sustained, growth for the company. “The year we launched the Parruda we grew by 35 percent,” says Magno. “And since then, we’ve been enjoying similar rates of growth every year.” While Montana expanded the Parruda line, introducing new sizes, features and utilities, propelled by its success, it also applied its creativity and commitment to technology to developing other products that could have the same revolutionary impact.

In 2006, for example, the company entered into a joint-venture with the Italian tractor manufacturer, Landini, whereby Montana began exclusive production and commercialization of their high-tech tractors throughout Brazil. In doing so, the company widened its own product portfolio – as well as that of its resellers – and was able to generate more revenues. The following year, Montana was at the forefront of another agricultural revolution when it launched a new cotton harvester that was specially developed to meet the requirements of a new system of cotton cultivation. Known as UNR (ultra-narrow-row) production, this practice consisted of planting cotton close together instead of in wide rows.

In 2006, the price of cotton had fallen and Brazilian producers – whose output, at the time, hovered around 1.3 million hectares of cotton – took a beating since the costs of planting and harvesting were actually higher than their revenues. As a result, overall production fell to 700,000 hectares. At the time, researchers were touting UNR cotton as a means of cutting costs and increasing yield. However, while the UNR system enabled farmers to expand production, it made traditional harvesters obsolete. Montana quickly came up with a pioneering product that was the answer to producers’ needs.

Brazilian cotton grower responded not only by purchasing the machines, but by planting more cotton as well. As a consequence, today’s production levels have rebounded back to 1.3 million hectares, 100,000 of which are devoted to narrow-row cultivation. Due to soil and climate conditions not all producers will be able to switch over from conventional cotton, but Magno estimates that eventually 300,000 hectares will convert to UNR cotton, creating significant opportunities for future growth both domestically and abroad.

SHIFTING MARKETS
Exports are nothing new for the company. Although, like all Brazilian manufacturers, Montana has suffered the effects of an unfavorable exchange rate, international sales remain an import focus. “Currently we export all of our product lines to over 40 countries and, despite currency exchange difficulties, our goal is to export more” says Magno. “When the exchange rate was better, international sales represented 22 percent of our business. Last year, we purposely held back and that figure decreased to 12 percent. But the market demand is there – especially in Latin America and countries such as South Africa, Russia, and the Ukraine – and we intend to satisfy it by meeting, and even surpassing, our previous sales levels.”

As part of its plan to do this, Montana recently inaugurated a 2,000-square-meter plant in Argentina. Boasting an assembly line for the production of self-propelling sprayers, it also serves as a strategic base for making inroads into other Latin American markets. The Argentinian plant is the third and most recent of Montana’s manufacturing facilities. In addition to a 215,270-square-meter plant in the adjacent state of Santa Catarina, specializing in the production of sprayers for fruit cultivation, the company’s principal facility, measuring 270,000 square feet, is located in São José dos Pinhais, which lies near Paraná’s state capital of Curitiba. At the present, output of self-propelling equipment at all three plants totals 3,200 units, although capacity is such that Montana could increase production by up to 30 percent without further investments. Self-propelling sprayers comprise Montana’s principal product line, representing 60 percent of its business, while tractors, harvesters, and other implements account for the remaining 40 percent.

In terms of market share, Montana ranks third in the self-propelling sprayer segment, an impressive feat viewed that the company no longer has the market all to itself. “For a long while, we only had two other competitors,” explains Magno. “But in the last two years, the falling U.S. dollar and strong real has really facilitated imports. As a result, those two competitors have now increased to 11. Considering we’ve maintained our market position – and the market has expanded a lot – we’ve really done quite well.” Indeed, bolstered by a recuperation of the grains market, which has been on an upswing since 2008, this year the company expects to take in R$210 million (roughly US$132 million).

STAYING IN TOUCH
One of the key aspects that sets Montana apart from its competitors is the quality of its after-sales services. “We take care of the machines we sell better than our competitors do,” says Magno. “With years of experience acquired in agri-business, we really know this equipment and we also know our customers. We’ve built up an extensive distribution network throughout the country so whenever repairs or spare parts are needed, we can get them to our customers in under 24 hours. This commitment is reflected in our philosophy, which emphasizes contact with our final customers. For this reason, we make a lot of direct sales. Personally, I dedicate more than 50 percent of my time in the field interacting with customers. In the end, these close relationships are a big reason for our success.”

Staying in touch with customers is also integral to Montana’s staying abreast of the market’s changing demands. The way it then satisfies these demands is by creating new products with added value. “Much of our growth is due to the fact that we’re always launching new products,” confesses Magno. “We really stay on top of new technology. When we’re not updating old machines, we’re coming out with completely new ones. As a result, none of the products in our catalog has been around for more than five or six years. This is because farmers have to upgrade or replace their equipment every five or six years and their machines are usually financed over a five-to-six-year period. When it comes time to purchase something new, they don’t want to buy the same machine – they want something newer and better.”

A current example of “newer and better” is the new coffee harvester that Montana plans to launch at the end of the year. Although the machine is not radically different from pre-existing ones, Montana’s objective was to complete its line of equipment geared to the coffee segment. “We have a tractor and a sprayer designed for coffee growers, so why not a harvester? That way clients can purchase everything they need from us,” points out Magno. As a bonus, this harvester offers an unprecedented level of added value features. Specifically, it features technology that allows growers to easily adapt the machine to various harvesting conditions such as the height of bushes. “Traditionally, regulating this equipment meant overhauling the machine, a process that could take a day or two. With this new product, you simply press a button. Ultimately, our machine allows for a better quality harvest while saving our clients time and money.”

With the same goals in mind, Montana is investing in electrically-driven machines such as Autopilot sprayers, which are still very new in Brazil. “Such precision machines are the future of the industry and they offer a lot of added value,” declares Magno. Indeed, the company’s sights are clearly set on the horizon. “We have teams out in the field whose job is to find out exactly what products our clients are going to want. We study the market and ask ourselves: ‘How can we make this?’ Whether we ultimately produce it ourselves or with a partner isn’t important. Our interest is in continuing to produce more business for our customers.”

Subscribe to Industry Today