Special Report: John Deere & Stihl Form Alliance

Qualifying John Deere servicing dealers will now be permitted to sell Stihl branded handheld products in the U.S. and Canada. Joint marketing efforts between the companies are also anticipated as details of this new alliance begin to materialize.

Under the agreement, John Deere has designated Stihl as the preferred handheld product for its dealers. There are more than 500 John Deere dealers that are already selling Stihl in the U.S. and Canada. Servicing Deere dealers wishing to carry the line will have to qualify just as any other potential Stihl dealer would.

“All the terms and conditions to become a local Stihl dealer are in play, so there are no special deals or pricing,” says Fred Whyte, president of Stihl Inc. In those instances where a Stihl dealer already exists in a market area, a John Deere dealer could also be awarded the Stihl line—if that John Deere dealer meets the criteria set forth by the Stihl branch or distributor covering their area.

“The real nexus for us is that, under this agreement with John Deere, we do not violate our servicing dealer mantra,” Whyte points out. “That was paramount for Stihl, and is one of the reasons why this agreement does not include John Deere Landscape outlets or LESCO stores. John Deere servicing dealers are very sophisticated business people, and we’ve had great success with those we’ve already been doing business with. What this agreement allows us to do is broaden our base of quality servicing dealers—without selling through the box stores. And we still prohibit mail-order sales through catalogs and the Internet. In short, we can remain true to our school.”

A YEAR IN THE MAKING

Confidential discussions between John Deere and Stihl had been taking place for roughly a year before the agreement was solidified and made public on July 29. As one would expect, the news took some—especially dealers—by surprise.

“My fear is that joint marketing will force us into a role as a secondary Stihl outlet as opposed to being the primary outlet in our area, which we are now,” says a dealer in the Midwest. “But as for right now, we are in a holding pattern. Yes, I’m a little bitter. But if I attempt to remove my personal feelings, I see this as a wise move for both companies. John Deere will rule this industry one day.”

John Deere has been working to consolidate its dealer network for the past several years. The concept of “product line purity” has also been raised, meaning that John Deere dealers would only sell John Deere-branded product.

“We pride ourselves on being a full line provider,” says Bob Barbour, Group Director, Marketing Operations and Customer Support for the Worldwide Commercial & Consumer Equipment Division of John Deere. “Many manufacturers in this business are niche players, so you’d expect us to work on a full product strategy.”

Whyte says one of the factors John Deere expressed as a reason for approaching Stihl was the fact that Deere was looking to focus on strategic growth areas other than handheld, but wanted to continue to make a full line available to customers, which the relationship with Stihl enables them to do. The primary catalyst, though, had to do with increasing brand awareness and supporting growth strategies for both companies. “These two brands are iconic from both the end-customer and dealer standpoints,” Barbour says. “Together they will be even stronger.”

THE ROAD AHEAD

In time, joint marketing efforts will take place between John Deere and Stihl to further increase awareness of both brands’ product offerings. “Right now we’re in the crawl before you walk stage,” Whyte reminds. “But down the road, we’ve been talking about possibly collaborating on other initiatives that would benefit both companies.” “We will surely find opportunities in advertising and other promotional efforts,” Barbour adds.

The outdoor power equipment industry has undergone considerable change and consolidation over the course of the past 10 years. Soaring raw materials and energy costs, among others, are placing intensified pressure on manufacturers, distributors and dealers alike—making it all the more difficult for smaller companies to compete while remaining profitable.

“When business is good, a rising tide raises all ships,” Whyte says. “But when the tide starts to go out to sea a little, it causes people to look over their shoulders and start to rethink some things. Now, that doesn’t mean this agreement with Deere is some sort of knee jerk reaction from Stihl. It’s not at all. We’ve had sales growth for 17 consecutive years. But we were looking for a successful, financially sound partner who’s focused on this market—with a good track record to prove it.

“It wasn’t done out of economic necessity on our part,” Whyte goes on to say. “We’re looking out on the horizon. The real advantages of this alliance probably won’t be accrued for another five to 10 years … But it’s a big deal, no doubt. This is the first time John Deere has ever endorsed anything ‘not green’ to be in their dealers’ stores.”

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