AKRON-Selling nearly a third of North America's replacement passenger tires and sharing more than 60,000 points of sale, the marketers of private brand tires might be expected to be on ``Easy Street.'' Summertime or not, the living is anything but easy for the many firms marketing private label tires to independent dealerships and other wholesale and retail tire outlets.
Officials at these companies are concerned over what they call an ``overt attempt'' by tire makers to gain market share at the expense of private branders by shaving prices on manufacturer-controlled lesser brands, known as ``associate'' or ``house brands.''
This was a major topic of discussion when the the National Tire Dealers & Retreaders Association-sponsored Private Brand Tire Group met recently in St. Petersburg, Fla.
Also at the meeting were representatives of the four primary makers of private brand tires-Cooper Tire & Rubber Co., Kelly-Springfield Tire Co., Bridgestone/Firestone Inc. and Michelin Americas Small Tires.
Private branders say manufacturers have all but eliminated the low-price advantage private labels once enjoyed over manufacturers' brands.
What's more, Cooper, one of the industry's two largest private brand manufacturers, recently added a new label of its own, called Starfire, to the about two dozen associate brands offered in the U.S. and Canada.
This was not especially welcome news to private branders, who view the new brand as one more rival in an already competitive marketplace.
``In a market like this, the only growth you're going to get is what you take away from somebody else,'' said Steven E. Buck, general manager of Hercules Tire & Rubber Co.
The replacement market is expected to increase slightly this year, but ``for the most part,'' he said, ``you've got to get out there and rassle it away (from someone else).''
Private and associate brands compete in the market for commercial truck tires, where they account for a combined total of about 16 percent of replacement units. However, the stiffest competition between the two is occurring in passenger and light truck tires, where both command a more significant market position.
Together, private and associate brands account for half the replacement passenger tire market, according to industry analysts.
Of this, private brands enjoy about 32 percent share while associate labels, including that of Goodyear's Kelly-Springfield subsidiary, have about 18 percent.
The remaining 50 percent is held by manufacturers' ``national'' or ``flag'' brands, such as Goodyear, Bridgestone, Firestone, Michelin, Cooper, etc.
Since 1989, analysts say, the share of the passenger tire market held by private brands dipped about four percentage points, while that held by associate or house brands has increased about the same amount.
Now, faced with increased pricing pressure from the tire makers' brands, private branders are struggling to prevent any further erosion of their market share.
A TIRE BUSINESS' survey of about 40 private branders, undertaken in preparation for the private brand listings in this issue (see pages 16-21), showed the following:
Some 33 of 38 marketers responding to the survey described the quality of private brand tires industrywide as significantly improved over those of five years ago;
Nearly all the group surveyed (36 of 38) said private label tire technology and design were vastly improved over the past five years, and cited the rapidity at which tire makers turn over their newest tire designs and innovations-such as aquachannel-type treads-to private brand accounts;
Yet a large majority (22 of 38) said profitability in today's market is more difficult-thanks in large part to pricing pressure from tire makers' brands.
Price compression-in which the purchase cost of manufacturers primary and house brands have declined to levels almost equal that of private brands-has been gradually taking place for the last 5 years, according to James E. Tyler, president of El Dorado Tire Co. in Troy, Mich.
The situation, he said, has become ``very serious'' during the last 18 months from the private brander's point of view and could result in a falling out among smaller private brand marketers lacking the necessary purchasing clout to compete.
In times past, private branders enjoyed a 10-15 percent edge in price, compared to the makers' brands. ``Today, we're fortunate to have three to five percent,'' he said.
Therefore, El Dorado, like other private branders, is stressing such private brand advantages as protected dealer markets, unique product designs and customer service, rather than price.
A manufacturer selling its brands can make a profit at both the manufacturing and sales levels. But the private brander's profit must come solely at the point of sale. So the manufacturer has a competitive advantage, he pointed out.
Fast-changing technology also has necessitated replacing tire molds every three to five years instead of five to seven years as in the past-this at a time when other operating expenses also continue to rise for private branders, Mr. Tyler said.
Don Dominguez, president of Big O Tires Inc.-owned Tire Marketers Association (TMA) in Clearwater, Fla., believes tire manufacturers prefer their own house brands to private brands because they are able to control their own house brands.
Private branders will drop a manufacturer when they're able to obtain a more favorable deal from another. But the tire maker has no such worries in the case of his own associate brands, Mr. Dominguez observed.
Competition between private and manufacturers' brands is an old story to Robert J. Burns Sr. of Louisville, Ky.-based Dean Tire & Rubber and president of the NTDRA-sponsored Private Brand Group.
It heats up when tire makers get hungry for additional sales, he said, then recedes after they begin to realize they're not making as much money with the house brands as they once earned making private brands.
Over the last 10 years, this cycle has been repeated three or four times, according to Mr. Burns, who believes brandname exclusivity within a given market-not low price-is the private brand's major sales benefit to dealers and other tire retailers.
Market conditions today present ``great profit opportunities'' for private label retailers ``but limited opportunities for wholesalers,'' TMA's Mr. Dominguez observed.
Wholesale buyers know who's making what and can compare price for price in order to buy from whichever manufacturer is offering the best deal.
However, retail tire customers usually know little or nothing about the private brand tire they're buying. This puts the retailer in a much better sales position than the wholesaler, Mr. Dominguez pointed out.
Also, tire dealers are becoming more confident in selling private brands and customers are realizing they ``represent quality as well as a good price,'' said Artie Shields, vice president of sales for Regul Tire & Rubber Co. in Lincolnton, N.C.
The pricing of H-rated private brands is much more competitive than in years past, observed Dennis DeLeonard, general manager for American Car Care Centers Inc. in Memphis, Tenn. Premium-level private brands offer particular profit potential for dealers and distributors, he believes.
``Our dealers tend to sell up and with premium products, they're able to collect more money and make more gross profit.''
They also make use, he said, of the chain's ``Freedom Plan'' warranty, which offers free roadside assistance if a tire change becomes necessary during the first 12 months or 12,000 miles of service.