Ag independent sees no changes - just growth - after Elders deal

Elders-AIRR merger will balance Landmark's ag market power

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Australian Independent Rural Retailers says a commitment to competitive pricing and service won't change when Elders its sole owner.

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The farm supplies group due to be absorbed into the Elders camp is assuring customers it will stay a competitive and independent-focused alternative to Australia's big agribusiness corporates.

Regardless of the takeover, Australian Independent Rural Retailers boss, Peter Law, said his network members were well aware of his fiercely competitive focus on servicing the farm sector's independent merchants.

That commitment would not change, even with Elders as the group's sole shareholder.

Elders' $187 million acquisition of AIRR, proposed in mid-July, is on track to be completed in November.

The 180-year-old Elders is in the throes of a $137m capital raising to help buy the wholesale business supplying a network of 240 rural merchandise stores plus 100 urban-based Tuckers Pet and Produce sites around Australia.

AIRR owns eight warehouses and five of the retail businesses in its buyer group.

Elders' current agency and farm services footprint spans about 220 business sites Australia-wide.

We won't change the way we operate, and I intend to keep doing what I've been doing for another 10 years - Peter Law, Australian Independent Rural Retailers

Unlike the other big $469m agribusiness merger also currently underway between Landmark and Ruralco, Elders wants AIRR's wholesaling business and supply group to stay a stand-alone entity.

The only obvious change will be Elders managing director, Mark Allison, joining AIRR's board of directors and a couple of Elders staff joining the company's "back office" at its Shepparton headquarters.

AIRR's market model, accounting and software systems will remain unchanged.

"We'll continue to market ourselves as an independent business group and I'm expecting we will continue to grow," said managing director Mr Law, who founded AIRR's wholesale supplies group in 2006 after a 30-year career with Landmark and predecessor companies, Dalgety and Gippsland and Northern.

Peter Law

Peter Law

"I'm 100 per cent confident our business will do well by aligning with Elders, and will be in a good position to take advantage of any businesses drifting away from Landmark.

"We won't change the way we operate, and I intend to keep doing what I've been doing for another 10 years."

Mr Law believed farm merchandise producers and suppliers were strongly supportive of the Elders-AIRR plan, and feedback from customers was encouraging, too.

He said something had to happen.

Landmark's Canadian parent company, Nutrien was on track to become a "massively powerful player".

With Nutrien gaining a particularly big stake in the marketplace we need to be in a good position to meet that challenge - Peter Law

The merged Landmark-Ruralco group is expected to control up to 45 per cent of Australia's rural store merchandise footprint.

"The game is changing every day and with Nutrien gaining a particularly big stake in the marketplace we need to be in a good position to meet that challenge," Mr Law said.

A useful ally

"We felt it was a good idea to align with Elders, a respected, iconic industry brand and a significant operator.

"It was not a must-do thing, but after considering the offer for some time our board identified a lot of advantages - for both businesses.

"Elders is not into wholesaling and we have a strength in this area, and in animal health products."

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Elders' Mr Allison agreed partnering with an established wholesaler made a lot of sense for his company which dabbled with building its own wholesale arm three years ago, finding the start-up effort too costly to follow through.

Quite a number see our decision as very important in balancing the market in the wake of Nutrien's move - Mark Allison, Elders

"To be strong in wholesaling you need warehouses - our capital-light model didn't fit with warehousing," he said.

A subsequent decision to buy its way in through AIRR had been welcomed by ag market suppliers.

"Quite a number see our decision as very important in balancing the market in the wake of Nutrien's move," Mr Allison said.

He is also relaxed about any competition regulatory investigations into Elders' plans.

Mark Allison

Mark Allison

Elders shareholders have also applauded the takeover which propelled the company's share price to $7.40 last week - up from drought-induced June lows of $5.36 a share. .

While drought in eastern Australia was inconvenient for the AIRR network and hard on its customers, the big dry had not forced the company's hand.

Trading results for 2018-19 were down just 0.08pc on the previous financial year.

Drought earnings buffer

In fact, livestock produce supplies, including stockfeed and pet foods, provided valuable cash flow in dry seasons, representing a healthy 25pc of last year's $400m turnover.

AIRR has forecast $22m earnings for the year to September 30, up from $21m.

Mr Law attributed AIRR's success as a supply network to its diverse product range and a willingness to supply whatever was needed to meet customer expectations - even single product orders to its members, if necessary.

That was a notable difference to today's wholesaling trend where the expectation was that stores buy a set minimum quantity of product with each order.

"Ours is the best wholesaling model for this industry, in my opinion, and we'll continue making competitive pricing a priority for our customers," Mr Law said.

"We know the rural wholesaling game.

"I love what I do and have every intention of continuing to keep our business model doing what we do best."

Attractive track record

Elders' Mr Allison is also confident AIRR's track record of service to independent retailers will attract more members to its team after Landmark buys rival Ruralco.

"We're expecting a wave of changes and defections or spills from Ruralco business partners in the coming year as the changes start to bed down," he said.

"I've known Peter a long time. He understands merchandise customers and their market.

"Since he left Landmark 15 years ago the number of independents serviced by its wholesale business has halved - quite a few followed him to AIRR.

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