Farming portals consider merger to speed growth

By PETER GRIFFIN

The country's two largest farming web portals are examining the mammoth task of combining their activities as the proposed mega-merger between New Zealand Dairy Group and Kiwi Dairies looks to take place in cyberspace as well.

Management of both websites, Dairy Group's RD1.com and Kiwi's Fencepost.com, have begun tentative discussions about a possible merger, but a range of issues will have to be ironed out before it can go ahead. There is likely to be some rationalisation.

The amalgamation issue looms as existing farming e-tailer, Wrightson, claims online sales have accounted for a disappointing 5 per cent of total sales.

More than $10 million has been invested in the development of fencepost.com and a significantly larger amount is believed to have financed the setup of RD1.com.

A portal merger would add RD1.com's 27 Anchormart stores to Fencepost's network of 22 Town and Country Agricentres, effectively giving the united dairy companies nationwide reach. While all existing stores should remain, a management reshuffle is likely.

"When you bring two businesses together there is the potential for some casualties. There may be some duplication, especially at management level, which is inevitable in a merger," said Neal Murphy, RD1.com's chief executive.

Go-ahead for any merger will also have to come from the web portals' minority shareholders, which include the ASB Bank and New Zealand Post for RD1.com and an Australian farming portal and consultant group, McKinsey and Co for Fencepost.

"As we bring the two businesses together we need to be talking to minority shareholders but I think from their perspective, the prospect of the two businesses getting together is probably quite exciting," said Mr Murphy.

Integrating the activities of the two web portals may pose some problems for site designers as they make use of different software platforms.

RD1.com uses Oracle software and applications such as Oracle iStore while Fencepost.com runs on New Zealand-developed Jade software. Roy Baker, Fencepost's chief executive, said it was too early to tell if this would be a big hindrance to integrating the sites.

While the dairy companies claim their e-tailing activities are attracting significant interest from the farming community, Annabel McCallum, a spokeswoman for Wrightson, which launched its e-tailing site last March, said customers had embraced online real estate and livestock trading but were failing to buy online in significant numbers.

"We were in uncharted territory when we launched and we've had a steep learning curve. Sales have been less than we anticipated but as time went on we tempered our expectations very quickly."

Wrightson.co.nz, which has about 10,000 visitors a week, claimed the speed with which farmers were embracing the internet for business matters might be overrated.

"There's a lack of compelling evidence that online buying of farming supplies is actually what the rural community wants. It's going to require a huge behavioural shift for farmers," said Ms McCallum.

Both dairy-owned web portals have undertaken campaigns to get farmers working on PCs and connected to the internet. RD1.com launched an exclusive programme with Hewlett Packard in December allowing farmers preferential prices for computer equipment and internet access through a deal with ihug.

A similar arrangement exists between computer manufacturer Dell and Fencepost.com.

While RD1.com claims to have sold 120 PCs through its AnchorMart stores in the past six weeks, it is unclear at this stage if the merger would disrupt the computer schemes.

Interest in Fencepost.com and RD1.com has risen sharply as farmers have warmed to receiving industry news online as well as making purchases via the web.

While RD1.com has notched up nearly 5000 users at its members-only site, Fencepost.com has over 6000 registered users. The management of both web portals have labelled a merger of the online operations as inevitable and something that should go ahead independent of the amalgamation of their parent companies.

RD1.com claimed the spread of the two companies' "bricks and mortar" retail outlets would allow a merged operation the nationwide coverage enjoyed by the well-established Wrightson.

Links:

www.RD1.com

www.fencepost.com

www.wrightson.co.nz

www.woolnet.co.nz