Another in a series of byte-sized one-on-one visits with construction industry insiders. We sought out Rodier, who served as Toro’s point man during the recent unveiling of its first ride-on trenchers and HDDs, to discuss entry into the underground market.
1. Why get into this market?
I think there’s two ways to look at that. I think number one is we believe we have the core competency to get there and even though outwardly some people might say boy that’s a pretty big stretch for Toro—it’s not. And if we felt it was too big a stretch, we wouldn’t have done it. If we felt like we had to do some things different internally or make investments internally that we wouldn’t have necessarily already had in place, or that would have been just for this business that couldn’t have been leveraged across a lot of other businesses, we may have thought twice about it. But we felt like we could get where we wanted to get fairly efficiently because of our internal investments that we’ve made already, for either this business or other businesses.
And number two, certainly we had been looking at this market for a number of years, and obviously the recession derailed some of this industry along with many others, but it doesn’t escape the fact that the underground industry has been strong and will continue to be strong. Our view is this is going to be a healthy market for a number of years and in terms of the opportunity both in ride trenchers and in drills, and with the rest of the complementary products we bring to the table, we see a lot of upside over the next number of years. So timing, for us, is very good in terms of the market opportunity.
2. Everyone knows the underground business already has two very well established companies in Ditch Witch and Vermeer; what’s the challenge of entering a market from scratch versus two veteran competitors?
We’d remind people that it’s not exactly completely from scratch. We’re the leaders in compact [utility] loader business today. We’re not the leaders in the walk or pedestrian trencher category, but we’ve gained market share in that arena over the last three to four years, to the point that we’re a major player in the walk trencher line. Both of these product categories that we’ve been out with for a number of years are ground-engaging equipment. So we have a number of customers already who are familiar with Toro based on those existing product lines, and now we go into ride trenchers and horizontal directional drills. We are certainly not naïve—there are going to be a number of customers, especially if they do most of their work around drills, who will say “Oh Toro’s very new,” and even some ride trencher customers, potentially some large utility customers, would say “I don’t do walk, or I don’t have any small loaders, so I don’t have much experience with Toro.” We get that there will be some new folks [to reach]. But we feel right away that we’re not exactly brand new. We’ve been competing against some of the name players in this industry for 15 years and doing it very, very well.
We are who we are; there’s no magic potion here. Our brand is a brand that’s recognizable and people have perceptions of our brand. We did a lot of research to determine how our brand would play in this industry and we got very good feedback that the industry wanted another name brand, especially a brand like Toro that has stood for product innovation, good solid customer service and parts, and a good channel behind it.
3. Are these new products going to existing dealers or are you signing up new dealers for the channel?
Of the number of Toro dealers today for our Siteworks division that are carrying the current, established products, we feel that very few of those dealers have the capability to step up to the larger categories that we’re bringing to the table. So we’re setting up another exclusive channel for those large products. They will be Toro dealers for those larger HDDs and riding trenchers but they will also be dealers for the existing line. These will be larger dealers than we’ve typically had in the past; they’ll be multistate, multifacility operations, very similar to what we do in Toro’s commercial division.
It’s a very comprehensive process to set up these dealers; we want to make sure that they know as much about us as they possibly can and we know as much about them. Right now I think we’re further along in this journey in setting up the channel than I would have thought. We’re getting great response from the marketplace and we’re getting a number of requests from dealers who would like to be part of this. We’re obviously going about vetting and so forth. I would say we’re right on track or ahead of where we thought we’d be at this point. I don’t think it will be very long that, certainly in North America, we’ll be able to say we have full, wall-to-wall coverage.