FRANKFURT, Germany-The proliferation of brands and market ``micro-segmentation'' have been the overriding influences on Europe's markets for passenger and light truck tires of late. Whether it's new brands coming in from the Far East and Eastern Europe, private brands from a host of sources, or associate/affiliated brands of the majors, European tire dealers and consumers have a choice of products unprecedented in recent history.
The trade show floor at this year's ``Reifen'' tire industry trade show in Essen, Germany, was a snapshot of what's happening in Europe. The number of new exhibitors, primarily from the Far East, reflected the growth of non-European-sourced products in Europe.
A quick rundown of brands available in Germany, the largest market in Europe, reveals close to 100 brands of passenger car tires on sale.
Private brand tires, on the verge of extinction in Europe only a few years ago, are flourishing in the difficult European economic climate.
Even the ``Big Six'' European tire makers-Groupe Michelin, Goodyear, Continental A.G., Pirelli Tyre Holding N.V., Bridgestone/Firestone Europe S.A. and Sumitomo/Dunlop-offer more than 20 brands other than their primary brands, mostly to fill demand for lower-priced products.
These moves come at a time when, in Europe, industrywide utilization of capacity is below 80 percent, growth prospects foresee a flat market at best, aftermarket pricing is in a period of instability, and the original equipment business is a money loser.
The resurgence of private brands and the emergence of associate brands is traced to 1990-91, when the major tire makers instituted price increases across Europe of 10 to 12 percent on their main lines, creating a market opportunity for lower-priced products.
House and private brand tires account for only about 10 percent of the market, but sales of non-European brands have been climbing steadily and represent between 20 and 30 percent of the S- and T-rated segments of major passenger tire markets.
Goodyear and Pirelli have been the most aggressive in courting private brand business, although Conti recently joined the fray with its first private brand account.
These developments have led to increased market segmentation and further price pressures. The introduction of so many new products into the lower-end, price-conscious segment raises fears that prices across the spectrum of goods will be dragged down, and the difference between standard and premium products will be blurred.
The European passenger tire replacement market is estimated at between 118 million and 128 million units, depending on the definition of Europe and the distinction between passenger car and light truck.
Obtaining reliable statistics can be a problem. For example, Pirelli and Michelin place the European car tire market last year between 170.4 million and 172.7 million units, while the Economist Intelligence Unit estimates the market to be about 9 percent larger-187 million units.
The difference can be accounted for in the definition of ``Western'' Europe and which of the non-European Union and emerging Eastern European nations are included.
What's more important are the growth forecasts. The EIU anticipates a very slight decline this year, whereas Pirelli expects slight growth. Beyond 1994, the EIU forecasts annual growth of about 1.2 percent, both for the OE and replacement markets.
Pirelli and Michelin agree that European demand for passenger tires was down last year by about 7 percent, with original equipment sales down about 12 percent. The OE sales slump hits European makers harder than their U.S. counterparts because OE shipments make up a larger share of the overall business-31.5 percent vs. 20 percent, based on 1993 data supplied by Pirelli.
Demand for truck tires was down 12.5 to 14 percent, depending on the forecast, with only a slight rebound anticipated this year.
From a manufacturing point of view, Europe's major tire-producing countries all suffered significant drops last year, with only the United Kingdom showing some sign of life with an increase in truck tire output.
The slump of the past 18 months also led to the closure or scaling down of four tire plants in the past year. Conti and Pirelli closed one plant each, while Michelin shuttered two facilities.
For 1993, Michelin maintained its clear-cut edge in market share leadership at roughly one-third of sales, although it suffered sales declines on par with the general market slumps. Continental Group held on to second, barely ahead of a charging Goodyear.
Pirelli, Bridgestone/Firestone and Sumitomo/Dunlop are close enough in sales revenue to be considered tied for the No. 4 spot. After the Big Six, the ranking drops off significantly in revenue to importers Yokohama Rubber Co. Ltd. and Toyo Tire & Rubber Co. Ltd., and local niche players Vredestein Banden B.V. and Nokia Tyres Ltd. Emerging Eastern European players include Matador A.S. and Sava Semperit, from Slovakia and Slovenia, respectively.
While Goodyear has been relatively open about its market initiatives in Europe, Michelin still is formulating a strategy as how to best use its house brands and whether to get involved in private brands.