FRANKFURT, Germany-Aftermarket brand positioning throughout Europe is in upheaval as private brands, house brands and ``off-shore'' non-European brands vie for a share of a relatively stable market. Private brand tires-on the verge of extinction in Europe only a few years ago-are flourishing in the difficult European economic climate.
Parallel to the re-emergence of private brands is growth of house brands by the major manufacturers to defend the lower end of their product spectrum. These moves come at a time when industry-wide utilization of capacity is below 80 percent, prospects for a market rebound are not favorable and aftermarket pricing is in a period of instability.
The private brand revival can be traced to 1990-1991, when major tire makers implemented price hikes averaging 10 to 12 percent on their main lines, creating a market opportunity for lower priced, bargain tires, according to Mike Cartwright, director of the United Kingdom wholesaler Tyreco Trading Ltd.
Tyreco created the ``Southern'' brand two years ago exclusively for export, and is starting up a second line, ``Suburbanite,'' this year for the U.K. market.
Initially, this low-end niche was filled by ``off-shore'' brands from South Korea, Taiwan and other Far East nations. Sales of off-shore imported brands have been climbing steadily and represent between 20 and 30 percent of the S- and T-rated segments of major markets, as well as a growing share of the H segment, industry representatives said. This category includes brands from the Pacific Rim as well as from eastern Europe.
While private and house brands account for half of the North American aftermarket, it is believed the share in Europe is not significantly more than 10 percent, although reliable numbers are not readily available. The European passenger car tire replacement market is estimated at between 118 million and 128 million units, depending on the definition of Europe and passenger car vs. light truck.
More recently, though, European wholesalers and large retailers have taken the initiative to capture a share of this segment for themselves, and this movement has coincided with some manufacturers' aim to increase factory utilization, thereby keeping employment steady, and reclaim market share from non-European producers.
Perhaps most aggressive in this regard is Goodyear, the largest maker of private and house brand tires in North America. The company is in the throes of setting up a ``custom brand' division in Europe similar to that which operates under its Cumberland, Md.-based Kelly-Springfield Tire Co.
``Custom brands represent a big opportunity for us in Europe,'' said William J. Sharp, executive vice president, Europe. ``They give us the chance to get additional value out of the existing assets.''
Goodyear is not alone in this observation, however.
Pirelli Tyre Holding N.V. recently added two private brand accounts representing several hundred thousand units, and Continental A.G. has begun its first out-of-house account, using its Gislaved A.B. unit in Sweden.
In the past few years, Goodyear has stepped up marketing in Europe of its own Kelly and Lee house brands, and raised a few eyebrows in 1992 by agreeing to make up to 1 million units a year for France's Arc-en-Ciel retailing group under its ``Rainbow'' brand.
The company also makes tires for the Swiss ESA buying group, part of the expanding five-nation TECAR buying cooperative. Representatives of ESA are interested in expanding their private brand deal to the entire TECAR group, which consists of 5,500 partners in Germany, Denmark, Italy, Austria and Switzerland.
The other private brand account of note is the Kingstone brand, also being marketed in France. Later this summer Goodyear will start production in the U.K. of the Suburbanite brand for Tyreco. The Fulda brand, representing about 15 percent of Goodyear's European turnover, is distributed through an independent marketing organization, and maintains its own identity and pricing structure.
For now, Goodyear is limiting the production of private brand tires in Europe primarily to S- and T-rated summer and winter passenger car tires, with some H-rated units in development, according to Marco Molinari, director of sales and marketing in Europe, who is overseeing the development of the custom branding business.
Custom branding of performance tires is not currently part of the program, but demand for 4x4 off-road tires will lead to private brand production of such units in the near future, Mr. Molinari said.
While custom brands for now come from European plants, Goodyear takes into account its global resources when considering a private brand account, and currently is evaluating its Latin American plants for such production.
Private branding in Europe for now is a mixed bag of options, ranging from sharing a manufacturer's tread pattern to using an older one.
Another consideration for a manufacturer in opting to make private and/or house brands is the market position of the main brand, according to Helmut Kasner, director of marketing and sales for Pirelli Reifenwerke GmbH in Hoechst, Germany.
``A top-of-the-line brand like Pirelli will never or only seldom be an option for the `price-conscious' consumer,'' he said. ``And we don't particularly want this to happen.
``However, we also don't want to overlook this price-sensitive market segment, leaving it to bargain suppliers.''
As a result, Pirelli has expanded the market reach of its second-line ``Ceat'' and ``Courier'' brands to countries beyond their traditional markets-Italy in Ceat's case and the U.K. for Courier. It also intends to increase use of the Armstrong brand name in Europe, primarily for off-road and other specialty applications, a spokesman said.
Concurrently, Pirelli has taken on two large volume private accounts-the ``Eurostar'' brand for the 450-outlet Point S organization, and ``Axxium'' for the newly established Axxium International.
Conti's first venture into private branding is the ``Tyfoon'' brand for the Dutch wholesaler Inter-Sprint Banden B.V.; this brand previously was made in the Far East, but Conti recently took over its production at its Continental Daeck plant in Gislaved, Sweden.
Conti is European champion of the multi-brand strategy, however, with nine in-house brands-Barum, Continental, General, Gislaved, Mabor, Sava, Semperit, Uniroyal and Viking.
Conti management is reviewing this quiver of options, plus private brand demand, and plans to begin implementing a more concerted strategy for the rest of 1994.
Bridgestone/Firestone Europe S.A., traditionally the most active in this sector, has been shifting more capacity into its mainstream product lines.
With the exception of one private brand account in the U.K., Sumitomo Rubber Europe is sticking to its Dunlop lead line.
Groupe Michelin has yet to finalize its approach in Europe toward private brands, a spokesman said, but management is formulating a strategy for use of the firm's in-house brands-Michelin, KlÃ¸¢eber, Goodrich and Riken.
Up to now, the separate brands within the Michelin group have been given a high degree of autonomy, but management is now leaning toward a more orchestrated use of its brands.
As for private brands, Michelin in Europe is at a stage similar to what Michelin North America went through five years ago with the assimilation of Uniroyal Goodrich Tire Co. and its strong house and private brand business unit.