Offering the agricultural equivalent of a Magimix and customer service that leaves no stone unturned, an Irish family firm is slowly freeing farmers from the traditional stranglehold of the feedstuffs giants.
Gerard Keenan sells £20 million worth of feed mixers a year. Scarcely sufficient, it might seem, to threaten the Goliaths of Britain's £2.5 billion-a-year animal feed industry - corporations such as Associated British Foods (Bibby), Harrisons & Crosfield (BOCM Pauls), and Dalgety - who between them control more than half the UK animal feed market. Yet, over the past decade, the Irish family company has quietly carved itself a profitable niche from previously fallow ground. The Keenan combination of revamped technology and no-stone-unturned service culture is giving the big boys a run for their money.
Richard Keenan and Co Ltd's feed-mixer wagon is the agricultural equivalent of a Magimix. Irish rugby-shirt green and somewhat larger than the usual kitchen appliance, the Keenan mixer frees farmers from their dependence on the pelleted compounds offered by the animal feed combines. The mixer-equipped farmer adopts a DIY approach to livestock diet by mixing his own compounds using natural feeds - cereal crops, linseed, oilseed rape, molasses, fishmeal and silage - which he either grows or buys in.
Since the launch of the prototype mixer in 1983, an increasing number of farmers have come to rely on the mixer and its system of TMR (total mixed ration) feeding in preference to manufactured compound feeds. TMR has now spread beyond Britain and the Irish Republic to Germany, Denmark, Sweden, Holland, Belgium, Australia, New Zealand, Argentina and Chile. Other potentially lucrative markets now beckon. By the end of the year some 5,000 Keenan mixer wagons will be operational around the world. Two years hence Keenan believes the number will approach 9,000.
The Keenan mixer's original success, says Gerard Keenan, could be attributed more to luck than design. Strong customer focus, however, has ensured the transformation of one lucky break into long-lasting success. In 1983, the Keenan family engineering business (begun by Gerard's father Richard in 1979 after he sold out from Keenan Brothers, one of Ireland's best known general engineering companies) faced bankruptcy. None of its innovative products - including an electronic weighbridge for farmers to monitor livestock weight gains for themselves - had proved viable.
Viability, however, followed fast on an inspired early-1980s decision to revamp an imported US feed-mixer. Keenan, then a 24-year-old marketing director fresh out of University College Dublin, recalls: 'We were just thinking of a better machine than the one we had imported from America to run on our own farm. I cannot say I had any great expectations for it because it was an expensive product. Our experience with the weighbridge suggested expensive products did not sell well in a recession.' But the Keenan mixer struck a chord with other farmers in Britain and Ireland who, like Richard Keenan himself, had already bought mixer machines. They, too, believed in relying more on home-grown rather than bought-in manufactured compound feeds but they had found their machines unreliable or ineffective. Keenan sold just 30 mixers - at about £17,000 each - in the first year and 70 in the following year. Small beer, as Gerard Keenan concedes, but it was the lifeline the company needed.
'What I had not realised at the time was the potential the machine had both for saving the farmer money and for increasing his profits,' he says. 'The machine became critical to the farmer's future. If it broke down they were in trouble and we were in trouble.' A strong customer-service culture quickly emerged at Keenans, and it has underpinned its progress ever since. 'Fear motivated us,' Keenan admits. 'We had come pretty close to going out of business, so if a machine broke down we would move heaven and earth to get it fixed. It is easy now to look back and say that was a smart strategy.' Over time the company built up tremendous goodwill with its customers. 'Eventually we realised that although we had a hugely reliable machine, when it broke down that represented a real opportunity for us.' Keenan now likens the company's 'very servile attitude' to its customers as similar to the breakdown service offered by the motoring organisations - a network of service engineers 'available pronto seven days a week and at Christmas as well.' In time, an innovative view of good service became the cornerstone of Keenan strategy. When, within a couple of years it began to look as though the company would run out of steam, Keenan discovered an edge. 'Some of our customers were increasing their profits dramatically,' Keenan recalls, 'so we hit upon the idea of having seminars to let the good guys show the not-so-good guys how to do it. We began to evolve a strategy of promoting the product as a profit enhancing system.' Having opened up a wider market the next stage was to build on the nutritional best practice of the 'leading edge' farm customers. Instead of letting the farmer work it out, 'by the end of the '80s', says Keenan, 'we were holding the farmers' hands and advising them on what they should feed.' In 1990 the company took on its first full-time nutritionist, Hugh Kerr, who now has a team of 20 working for him. This year Keenan plans to spend £1.5 million on nutrition services run from its new nutritional advice centre at the National Agricultural Centre at Stoneleigh in Warwickshire. This remains a cost, not a profit source. 'We obviously thought about charging for the service,' Keenan admits, 'but we felt that if the farmers could not work out the potential for the machines, they were probably not going to pay an adviser to tell them how to do so.' The move into advising farmers on nutrition has brought Keenan into closer competition with the animal feed giants who regard such advice as their province.
And while other mixer-wagon makers have gone into partnership with the feed companies Keenan has spurned all approaches for such an alliance, valuing his independence too highly. Since his father's retirement, Gerard has become chairman and chief executive of the company. One of his brothers, Thomas, is responsible for the UK and another, Noel, for the markets in Germany and the Benelux countries. The Keenans control 72% of the company. Some 70 of the 200 staff he employs own 23% and another 5% is owned by the Irish government sponsored by the Industrial Development Agency. Though not keen to take the company public, Gerard Keenan would like to create an informal market in the shares by having 'a pool of investors who think the same way we do'.
However, despite the desirability of going it alone the price of maintaining independence from the feedstuffs big boys may be high. When the full nutrition service was launched in 1991 it posed major problems for the feed companies, argues Keenan. They saw a powerful independent coming onto the farm and control moving from the feed companies to the farmers. Now, alleges Keenan, the feed companies 'aggressively try to persuade farmers to buy any mixer-wagon except ours. A farmer moving our way is lost forever to the feed companies. He does not go back to using their compounds.' The leading animal feeds company, BOCM Pauls, is disinclined to engage in an open conflict with Keenan. However, Simon Mead, the company's head of cattle marketing, is not averse to a little shadow boxing. Keenan's TMR is 'a good system for which the company provides good support', he concedes. Moreover, he denies any conflict between Keenan's approach and that of the feed manufacturers. 'A long time ago I realised the future was about complete diet feeding of dairy cows and we have products which are complementary to that sort of system,' he argues. More sceptically, however, Mead points to independent studies which suggest only marginal improvement in farm profitability using TMR. Also Keenan's overseas expansion may, he feels, have been forced on him because the UK market is saturated.
Is it saturated or has the stranglehold of the animal feed companies prevented Keenan making greater inroads?
At present Keenan isn't concerned. He believes his company's mix of good machinery and customer care will continue to pay off. There are some 40,000 farms in Britain raising beef cattle or producing milk, and less than 10% of them currently use Keenan mixers. 'Our sales in Britain have doubled since 1992,' he points out. 'In any case the operation is developing a global impetus and we are being approached by people in countries such as India and the US who are attracted by the prospect of increased profitability.' David's sling is far from empty yet.
Down on the Farm
Healthy Profits from a healthy diet
Greg and Annette Fletcher bought a Keenan mixer wagon for their 150-acre dairy farm in Leicestershire two-and-a-half years ago. Greg Fletcher admits, however, that when he bought it on a one-year trial basis he was 'highly sceptical' about its potential. 'We were not convinced we were going to make enough money to cover the cost of buying it,' he says.
But the Fletchers were soon converted. TMR feeding is a lot better than concentrates in the way it treats the cow's digestive system, explains Annette Fletcher. And the farm's profitability now looks healthier too. 'Whatever way you measure it profitability has increased,' says Greg Fletcher. 'The profit margin over the cost of bought-in feed and fertiliser has gone up from £3,000 per hectare to around £4,000. The value of the milk produced per cow over the cost of purchased feed has gone up from £1,100 to £1,600 and we believe we can raise it to £1,800 by the end of this year.' At the same time the Fletcher dairy herd of 95 cows is producing more milk. Prior to adopting the Keenan TMR system each cow averaged a yield of 6,500 litres, now they yield around 7,500 litres. With some cows the yield is as high as 8,000 litres. The all important protein content has also risen which adds an extra 1.3p a litre to the ex-farm price. With the farm pumping out around 700,000 litres a year, that adds an extra £9,100 a year to the Fletcher's bottom line.