PALM BEACH GARDENS, Fla. (June 19, 2014)— TBC Corp. is upbeat about the distribution business this year and expects continued growth for at least the next couple of years.
“Our distribution business has gotten off to a solid start this year,” said Erik Olsen, who was named TBC president and CEO at the start of the year. “Our TBC Wholesale business, which is under TBC Brands, experienced good unit sales, especially in our core brands — MultiMile, Eldorado, Sigma, Vanderbilt, Cordovan, Jetzon and Telstar.”
TBC, a subsidiary of Sumitomo Corp. of America, said sales of its entry-level and imported passenger and light truck tire brands, such as Sailun and Hifly, as well as Sumitomo's mid-tier products, have fared well. Medium radial truck, specialty, agricultural and construction tire sales are “also off to a healthy start,” Mr. Olsen told Tire Business.
Its distribution operations — Carroll Tire Co. and National Tire Warehouse (NTW) — have seen growth in entry-level private brands as well as Tier I major brands.
“Our unit sales are strong and we're seeing consumers migrate to the Tier III, Tier IV and Tier I tires. We've seen some softness in Tier II,” he said. “But we've seen robust unit growth in III and IV—and very moderate growth in Tier I.”
Industrywide, consumers seem to be either sticking with the major tire brands or opting for much lower-priced entry-level tires, he added.
“As the quality and performance of these (Tiers III and IV) products continue to improve, the value proposition to the consumer becomes that much more compelling.
“We've seen some of the Tier II products experience volumetric decline as consumers are either willing to trade up or to move a bit further down based on price,” Mr. Olsen said.
However, a surge in unit sales of entry-level brands doesn't always translate to higher profits.
“In the distribution business it costs the same to distribute a tire if it's a Tier I product or a Tier IV product,” Mr. Olsen said.
“As we've seen the significant unit growth in (Tier) III and IV, obviously the dollar revenue there is less.
“Our biggest challenge has been and always is to keep our expense structure in check so that we can offer the greatest value to our customers.”
In January, when Mr. Olsen was promoted to the TBC helm after serving as COO, he stated that his goal was “to leverage the strength of each subsidiary to better serve our customers, franchisees and associates.”
TBC operates more than 900 company-owned Tire Kingdom, National Tire & Battery (NTB) and Merchant's Tire retail stores and franchises more than 2,700 Big O Tires, Midas and SpeeDee locations in various markets.
The company distributes directly to independent tire dealers through its Carroll Tire and NTW distribution network, which includes 47 distribution centers and three mixing warehouses. Mr. Olsen estimated the company distributes to about 20,000 points of sale in North America.
“We're using the experiences from our different businesses and leveraging their strengths to better serve independent tire dealers.
“Then we offer them services and partnership programs to help them operate much more competitively in today's marketplace,” Mr. Olsen said.
“And if we can leverage our relationships either with suppliers or other service providers and make our relationships available to independent tire dealers and service outlets, then that makes them that much more competitive in the marketplace,” Mr. Olsen continued, “and help them control their expenses and also gives them the opportunity to perhaps offer additional services that they might not be able to if they were just a single independent store.
“We have the Carroll Tire/NTW partnership program which makes our contractual relationships with certain service providers available to independent tire dealers and it gives them access to services and products at a level of pricing and service that they could not negotiate on their own.”
In addition to anticipating robust growth in its unit sales through 2017, TBC plans to expand its retail and wholesale network. It expects to add three to five Carroll/NTW facilities annually, open 20 to 35 company-owned stores annually through acquisition and greenfield construction and sign additional Midas and Big O franchisees to its portfolio.