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Big contribution… and a bigger statement

Industry News, Supplier News, GIS Coverage

John Deere pledges $1 million to First Tee to grow the game of golf. GCI's Pat Jones sits down with Deere's top brass to talk about it's global restructuring, serving the golf and turf market, and its plans for future industry engagement.

| February 11, 2013

Over the past year or so, there have been whispers about Deere’s future in the golf market. Between a global reorganization that aligns the entire company around its booming agriculture business and the death of longtime golf market leader Gregg Breningmeyer, some – including me – were questioning whether Deere really felt the weakened and relatively small golf/turf business was worth pursuing aggressively.

No one doubted that the global reorganization was the right thing to do…after all, the tail can’t wag the dog and Deere is the undisputed big dog in global agriculture. The big question was whether golf/turf customers and dealers would be well-served under the new ag-driven business model and if Deere would continue to be as engaged in the future as they have been the past three decades.

Those questions were largely answered last week when Deere announced a $1 million contribution to The First Tee to fund new youth programs and – almost as importantly – brought their high-level leadership to GIS in an impressive show of support.

Following the announcement on Thursday morning, GCI’s Pat Jones sat down exclusively with the Deere executive team, including Ag & Turf Division President Jim Field, to address the lingering questions and how the company will move forward with a team-oriented management approach.

What led to the decision to make the commitment to First Tee?
Field: I think it was a couple of different things. Deere feels like it has a responsibility that’s bigger than just creating value for our shareholders. We saw (First Tee) as a great organization that was very aligned with our values at Deere. The second thing I would say is we also viewed it as a way to make a very significant investment in an industry that we feel very strongly about. And we feel strongly about it not only because we have the very best equipment in the industry, but we feel strongly about it because we think that there’s a lot of very strong intangibles associated with golf that go well beyond playing the sport.

You’ve realigned around ag and made major changes in terms of reorganizing. How do you make this part of the business fit?
Field: Actually we view it as a space where we can bring a lot of innovation. If you can bring innovation, you can do well in this space. And a lot of innovation that we bring into the golf space sooner or later finds its way into other parts of our business.

We think we have a lot of attributes because of our skill in agriculture that will help us serve the golf industry well. So, one example would be John Deere Finance. One thing that we don’t really do ever at Deere is talk too much about the competition, but I think we’re pretty uniquely positioned to have our own in-house finance operation, which allows us to stay in the game throughout the ups and downs of the cycle.

Tim Merrett (VP A&T Global Platform, Turf & Utility Ag and Turf Division):
I’d say from a revenue standpoint, it may be a smaller piece of Deere, but I think one of the big benefits we have from the golf space is the brand. (It’s a) big brand play in the golf space and it’s a global brand play. In a lot of parts of the world and the U.S., we’re obviously well-known for agriculture. But in a lot of other places in the world, we’re still developing as a company, too. So, golf is another way where we can get the brand out that’s really helped build our space in our core markets but also in emerging markets. Asia is probably the best example of that, I would say. So I think that’s another big benefit of the golf industry from our standpoint.

When you talk about your channels and your dealer relationship that you’ve had within the golf and commercial mowing markets, how did that change as this global reorganization happened?
John Lagemann (SVP Ag & Turf Sales and Marketing): That’s an interesting question that’s been posed a few times. The way I look at it is, what we have done with the recent reorganization is we’ve got this large company with a lot of momentum – momentum from an R&D perspective, momentum from a marketing presence worldwide, etc. So what we’ve been able to do with the reorganization is take that momentum and form synergy with a real focus on golf. We have dedicated people in golf that are a part of a larger organization, and they can grab the synergy and the momentum from the larger organization and apply it in a very focused manner to help our customers. And I think that (dealers) would tell you that because of that when you’re part of a bigger ship you can have more resources, you can have deeper penetration, the innovation that Jim talked about, the brand Tim talked about, the global presence that we have…we think it’s a good fit.

Field: Part of the idea here was to unleash the power of the enterprise to all the big segments we compete in. If you look at the amount of R&D that we spend as an enterprise and the amount of capital that we spend as an enterprise, there’s nobody in the space that can be close to us. But, were we fully unleashing the power of this very large company on the segments that we thought were important? We realized we weren’t. And (the reorganization) was our effort to optimize that whole strategy.

As far as organization – there was always one person in charge of golf or your commercial mowing group and now that’s changing. So the question from a customer’s standpoint is, who do I call if I have a problem? Who’s the boss?
Lagemann: It depends on what the issue is. We try to leverage the broader team to make sure that we penetrate into the organization where the problem is. If it’s a distribution issue, we’ve got a sales organization that will take care of that. If it’s a product issue, we’ve got a product organization that will take care of that. If it’s a service issue, we can leverage dealers. So we think that by having a focused group of people that encompass a broader perspective of the industry, a broader piece of the business, we can have a deeper answer that’s a lot more comprehensive. We have specific people who call on specific golf courses, so if there’s a question, it’ll be sourced through that representative and we’ll get to the right source of information.

It begs the question – how do I know who I should call? How do you educate your customer about how to work through a chain?
Lagemann: If it’s a smaller golf course that has a direct relationship with the dealer, we’d expect the dealer to be the direct source of contact. If it’s a larger network of courses, we have a national account with that specific golf course and they have a specific representative that is their first go-to guy.

When you do analysis of this market and how it fits into Deere overall, is it considered to be small but profitable segment or do you consider it a good business to be in because it has value for your brand and it helps you with innovation?
Field: We don’t really disclose the profitability of the golf side. But I would tell you that any market that we’re in, we have minimum return requirements and it has to meet those minimum return requirements. When we look at golf, I would say there is a broader global growth opportunity when you look at markets like China and Asia overall. As crazy as it is, I remember I was at the Taj Mahal in India and I walked out the front of it and there was a golf course there. So there’s kind of an Asia growth opportunity in play. But this interconnectivity is really very important to all of our businesses. Because every one of these businesses needs to have a reason to exist within the portfolio in a way that not only takes from the portfolio but also gives back to the portfolio. So to answer your question – the interconnectivity is good globally, there is growth opportunity and it meets our return requirements, so that’s the way we think of the golf course business.

Final question. Today’s announcement seems like more than just a corporate gift to a great organization like First Tee. It seems like a statement. What is that statement?
Field: John Deere is committed to golf, we’re committed to this industry, and we’re committed to giving back to the communities that we operate in. And we’re passionate it. Deeply passionate.


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