“Bellota has been able to live up to market expectations”. We reproduce Agrotécnica magazine’s interview with Eduardo Urrestarazu, CEO of Bellota Agrisolutions in Spain and President of Agrisolutions for Europe, Asia and Africa and Latin America (EAALATAM).
How is the group structured worldwide? Venanpri Group divides its business into two divisions: Tools (Bellota) and Components for Agricultural Machinery (Agrisolutions). Following the organisational change, the group was organised into 4 areas or regions (Tools in North America, Tools in EAALATAM, Agrisolutions in North America and Agrisolutions in EAALATAM), with a board of shareholders, a North American CEO (Tom Welke), and 4 Presidents responsible for the 4 areas. In my case, I am also the CEO of the company in Spain.
What roles do Agrisolutions and Bellota have in the group? Agrisolutions is the world’s leading supplier of components and solutions for soil preparation, sowing and harvesting. In our various factories we produce products with customer brands and our own brands, of which Bellota is the main brand as it covers the entire product catalogue and has a leading presence in the 81 countries in which we operate. In addition, Bellota has been a strategic brand in the creation of Agrisolutions’ culture and identity, as it is produced not only in Spain, but in all the Group’s factories. There are approximately 1,700 of us employed across the Group, of which about 1,000 are in the Agrisolutions business. We have 48,000 product references and I can anticipate that we will end this year with a turnover in the Agrisolutions area of over $ 200 million. Within the Agrisolutions team, the traditional Bellota team is key not only due to its size, but also because it has transmitted values and culture that have forged our group’s vision (quality, innovation, globality, focus on the farmer, service, etc.).
How is the fragmentation carried out in the factories to be able to supply all the products worldwide? In North America, we have a manufacturing facility in Hamilton (Canada), another in Rock Island (USA) and 16 logistics centres to serve our customers’ factories. In the EAALATAM area we have a factory in Brazil (Indaial), two in Spain (Legazpi, Zumárraga), one in Poland (Kutno), one in Germany (Remscheid) and one in India (Nashik). The location and logistics, not only close to the markets, but also to suppliers and raw materials, is fundamental. This, together with “Lean” production systems that enable us to achieve maximum efficiency, in coordination with our customers’ needs, as well as very high flexibility to absorb the strong fluctuations in volume based on the sector’s cycle and a team of people passionate about the business, is critical to achieve growth, like in 2021, of 50% of sales while maintaining our service rates at 95%, like in the current situation.
How do you decide which product to make in each of the factories? It is a process in which several factors come into play, a fundamental one being the geographical location of the factory and the needs of the closest market. To give a simple example, in Brazil we manufacture sowing discs, and since last year we have also been manufacturing harrow discs, as these are the products basically demanded by the domestic market for soil preparation and sowing. We are starting to develop others (harvesting blades), also based on local market demand. When we talk about global products, we aim for our industrial platform to guarantee a competitive strategic position by controlling the cost inputs (steel, exchange rate, energy, transport) so that we can offer our customers the most competitive position at all times, guaranteeing quality. To give an example: from November, we are going to start manufacturing products for US manufacturers in Spain as the price of steel in Europe has not yet reached North American levels. We continuously monitor the evolution of critical business factors to ensure maximum competitiveness, taking into account the strengths of each of the production facilities on our platform. For example, if a factory is highly automated, we will look to move production of long runs there, leaving short runs for the more manual factories. The aim is to manage all this and guarantee that our customer will always have the most competitive product, with the specifications they demand.
You always offer preferential treatment to strong groups like John Deere. Are you exporting that kind of relationship to other industrial groups? It is important to clarify that we value the relationship with each of our customers very highly and act accordingly. However, it is true that we have been developing strategic agreements with virtually all the major global manufacturers, based on our strategic vision. There is no doubt that the pandemic has accelerated many of these strategic agreements, as large groups have seen that, rather than focusing on price, securing strategic suppliers is now the best way to provide value to their customers and their business, from a quality, service and innovation perspective. Price is not important, what matters is being competitive on the basis of added value, which is something that the farmer and the market perceive and reward. During even the most critical moments of the pandemic, Agrisolutions has been serving customers, managing extremely difficult situations, but without closing a single day. It has been very difficult, and it has only been possible thanks to our excellent team, but it has also been very gratifying when we see how grateful our customers have been. In all modesty, we are proud that Bellota has been able to live up to what the market expected and that we have honoured the values and heritage that all those who have formed part of this family have built up over so many years. We have experienced this change in vision by many customers with regard to a greater appreciation of a strategic relationship with customers who have come back to work with us after 15 years, due to the problems they have faced with their local suppliers. Commitment, proximity, reliability and service are fundamental values in today’s market.
Will the current logistical and price problems lead to the return of the production of key elements from Asia to countries with greater stability, such as Europe and North America? That is certainly something that is already happening. And it is not exclusive to one sector or another. Right now in all the sectors in which Venanpri operates, there has been a shift towards closer supply chains, but they must have capacity and inventories. John Deere and the other major global manufacturers are committed to this and are verbalising it in their strategy and communications. It will be a before and after moment. And if we add to that the problems with steel and the rest of the raw materials that are occurring, not only due to price, but also lack of availability, it is the perfect storm that will accelerate the change. It is hard to identify whether it is a structural change, but at least in the medium term it is not going to be.
Do customers now aim to have more stock than before? Definitely. Product availability and inventories have become the differentiating factor in the market. We are currently running our factories at maximum capacity and we are taking steps to increase capacity and reduce lead times.
And how is this managed with customers? With trust and communication; explaining the situation and asking them to plan their needs to guarantee product availability. Thanks to the maturity and professionalism of our customers, they are handling this situation well. When trust has been built up over the years, everything is easier. Thanks to the faith our customers have in the Bellota brand, in 2021, we are overcoming very complicated situations, which are likely to continue in 2022. We are also concerned about the general inflation that is upon us (energy, transport, labour, etc.). In some cases, such as transport, it is not only unprecedented inflation (e.g. Spain-North America containers that were costing €3000, are now costing double or more 6 months later, €7000), but also the lack of availability. In Europe we are managing to salvage the situation for the time being. In other areas (e.g.: India), the situation is much worse right now as there are no containers to ship goods. No matter what the price, there aren’t any. The hypotheses we are working with for 2022 are terrifying in terms of inflationary impacts and present a very complicated scenario.
With all this going on, do you think we will go from being global markets to autarky? That’s an excellent reflection. It is difficult to know if we are moving towards autarky, but we are certainly moving away from globalisation. The process of cultural homogenisation and homogenisation of habits will continue, but from an economic perspective I think we have moved towards ‘regionalisation’. You can have factories in Europe that more or less serve a European environment, or factories in Latin America that serve a Latin American or US environment, but if you have a factory in Europe, you can forget about supplying sustainably at a global level. It is true that a factory in Europe for a certain type of product can supply America, but if you want to be a key partner in the American market, you need to have a factory in America or your business model will not be sustainable. Not to mention cases like Brazil...
What price increases do you think Agrisolutions could see next year? Right now it is still premature to talk about a specific figure of price increases for 2022, as news is coming in about it every day. I would say that the cumulative average for 2021-22 in our sector in Europe is going to be 50%. The case of Brazil is extreme because by the end of 2021 it will have exceeded 120%. And all this is only based on raw materials, because we are seeing very worrying rises in other inputs and we will have to see how they accelerate the situation.
Is the end customer able to absorb these prices? At the moment, and based on the revenue they are obtaining from the sale of their product (wheat, maize, etc.), they are absorbing it because it is essential to guarantee availability. Now no-one has factory capacity (I’m not talking about stock) because the problems of availability of raw materials are combined with a change of cycle in the sector. For the moment, the farmers do have the capacity to absorb these cost increases, but the situation will have to be closely monitored to see if it continues and for how long.
How are the markets evolving in view of the circumstances experienced over the last two years? In our sector, quality is critical and you can’t risk it because a few microns off in a product’s specification can mean that the tractor, combine harvester or seed drill, will be left standing in the field. I am a great defender of the industrial, innovation and development capacity of the western world, in Europe, North America and Brazil. But that does not mean that we should remain with the industrial capacity and technological development that we had in the 1980s, 1990s or 2000. It is very important to invest and develop. Of course, with the necessary investments and the right technology, the capacity we have to compete with Asian suppliers is huge, because the raw material specification plays an important role in our product. The key is, firstly, the type of raw material, and secondly, having a strategic diversification of raw material suppliers (in the pandemic, it has been shown that if they don’t fail, you won't fail). In addition to this, having Lean teams, factories and processes, with technological and innovation capacity, is essential in order to tackle Asian competitors or those from any other geographical area fearlessly or unashamedly. Our customers’ innovation centres are close to them, and as strategic suppliers like Agrisolutions are a key part of that innovation, I have no doubt that they consider and believe that a supplier like us has to be in Western Europe or North America. We are proud to have our industrial capabilities in the Western world and we continue to strengthen and invest in them.
As a company that supplies other companies, how do you see the evolution of these brands after a year and a half of crisis? Are they recovering, are they restocking? As is always the case when there is a systemic or sectoral crisis, the strong companies, and especially those with a clear strategic vision, are emerging stronger. The large ones are going to come out stronger, with a larger market share. They are investing in factories, in technology, in innovation, in stock, in suppliers, and that’s the secret.
From your point of view, as its supplier, do you think John Deere’s current strategy is the right one? John Deere’s advantage over others is that they are clear on what to do. Having a clear, defined and verbalised strategic vision is 90% of success because they manage to align their teams and their stakeholders. They have made a series of investments that I think are very wise. I think they are on the right track with digitalisation. We also launched a project five years ago, which we are working on with the Complutense University of Madrid, to digitalise our components and make them intelligent and help farmers to increase the productivity of their crops. We have launched a global patent, with an intelligent system. It is difficult to establish a time frame, but it is certainly a path in which we firmly believe, as well as in the extension of the useful life of components. We are aligned with what John Deere is saying about digitalisation because we have to focus on increasing farmer productivity. Size is no longer the main focus; we are now at a time when we need to be much more productive, much more efficient. There are other strategies on which I am also totally aligned with them, in which they talk about making ‘differentiated quality’. And another issue on which we are also aligned is to focus on dominating the aftermarket, not only for the business itself, but also to build farmer loyalty and control the machinery’s life cycle. They talk about a strategy they call ‘Winning the aftermarket’ on which they are focusing great efforts and where we are collaborating with them, both from the product design or industrial planning perspective as well as from the logistics perspective, i.e., to achieve the fastest and most efficient supply chain up to the point of sale. There are other things that perhaps I don’t agree with so much, but, above all, I would like to highlight the importance of the communication exercise they have carried out regarding their strategy. It is important to define yourself in one way or another. It is something that we wanted to do back in 2005. When our current ownership bought our company Bellota, they bought the concept and the way the company works. Indeed, the fact that they kept the Agrisolutions brand as a platform is a good example of how highly they value it.
How has not attending trade fairs over the past year affected the company’s communication policy? In general, before the pandemic, they had lost their meaning and many companies were trapped in an almost senseless dynamic of attendance. In this sense, the situations we have experienced have helped us to reflect. We, in particular, have taken the decision not to exhibit at any trade fair until mid-2022, giving priority to people’s health (employees and customers). This gives us time to reflect on what we want to do in the future. However, I am very sceptical about trade fairs. I do believe that we will be at the big events in the future (Agritechnica, etc.) but only if they add value.
Is EIMA, as a leader in the component sector, an important trade fair for Bellota? It was. For many years the important ones for us were EIMA, Agritechnica and FIMA, but as I said before, we have to evaluate very carefully the added value they provide, especially in view of the war between trade fairs that has arisen in Europe. Things have changed a lot. Now, we have continuous communication with our customers, we don’t need to wait for a trade fair. In recent times they have been more of a social event than a trade fair. In the future, we will have to think about whether it is better to organise an event once a year to invite all our customers or to take them to one of our factories to present a product, for example. I don’t close the door on returning to trade fairs, but I think that trade fairs need to do some fundamental thinking about the value they bring.
What does the acquisition of Andersen bring to Bellota? In recent years we have made a clear commitment to organic growth (investing more than €20 million in our factories in Spain, for example) and inorganic growth (in terms of acquisitions). We acquired Trinity in the US in 2018, Carl Sulberg in Germany and USM (US) in 2019 and Lund Technology in North America in 2021. In July we purchased Andersen in Poland. In all cases we were looking for something we didn’t have, whether it was technology, product, market share, capacity, etc.; with the acquisition in Poland, we bought production capacity. In 2016, we invested in a new tine factory in Spain ($ 6 million), and by mid-2020, it was already at a total standstill at maximum capacity. We have grown exponentially in this type of product in the world market and especially in Europe in recent years. We are the manufacturer with the largest market share, having earned the trust of all manufacturers. This put us in a difficult situation to continue growing: we could either invest in a new factory or buy existing capacity and that is what we decided to do with the purchase of Andersen. It is a new, fully automated factory, opened in 2016. It was the former Kongskilde Group factory. This means that we bought a factory with the best technology and with immediate manufacturing capacity; also gaining proximity to the Polish market with a large product range. Andersen was not a Polish manufacturer. Although the factory is in Poland, it was a Danish manufacturer from the 1920s and was bought by the Kongskilde group in the 1980s to have its own tine factory. Kongskilde is the most reputable brand of tines ever worldwide. By buying Andersen, we now have all the technology and tradition of Scandinavian and Danish tine manufacturing in the group, together with the Kongskilde technology. We are already working on a very ambitious plan to improve the factory even further.
Within Western Europe, which is the principal market for Agrisolutions? Spain, Germany, France and Scandinavia.
And in Latin America? In Brazil this year we are going to double our turnover. Last year we had a turnover of more than $6 million and this year we will end the year with $13 million. The Brazilian factory has already surpassed the factories in India and Germany in terms of turnover. It has become one of the top 4 Agrisolutions factories in terms of production capacity and results. And one thing I am very happy about is that thanks to the platform in Brazil we have finally managed to enter Argentina, after not being able to do so in over 20 years.
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