AKRON-Dealers may not be cognizant of the literal differences between a tire maker's associate brand and an independent distributor's private brand. But they probably can distinguish the two when it comes to gross margins and exclusive markets. At least that's what private brand marketers have steadfastly promoted for years-and what the Private Brand Tire Group (PBTG), which represents 23 marketers, plans to put in writing later this year.
When asked, many tire dealers confuse ``associate'' brands with ``private'' brands-and it's really all semantics anyway, according to many in the industry.
``There is no reason for dealers to want to distinguish them,'' said Artie Shields, vice president of sales for Lincolnton, N.C.-based Regul Tire & Rubber Co.
``The general rule is that private brands have an advantage: They seem to have more exclusivity,'' he said. ``We protect territories better than associate brand (marketers).''
PBTG President Skip Viola agreed that ``private brands'' are misunderstood among dealers. So his association will begin using members' brand identities in PBTG promotional materials. The group soon will be distributing a brochure on the value of private brands to be followed up with a promotional videotape this fall.
Since dealers don't know the difference between private and associate brands, Mr. Viola admitted it's difficult to accurately survey the market share of private brands alone. What the group does know is that its members represent 28 percent of the replacement automobile and light truck tire market. He estimated most tire dealers typically carry one to two private brands.
``Private brands (including associate brands) are pretty well saturated at 50 percent of the market,'' said Ray Evans, vice president of sales and marketing for Galaxy Tire Inc. ``The products today are good, consistent and uniform in quality.''
Add to that the residual promotion from health care insurers, which encourage the purchase of generic drug prescriptions over high-priced branded drugs-and ``people are getting more used to buying non-brands,'' Mr. Evans added.
Besides being lower priced than manufacturers' brands, private brands provide better profits for dealers. ``Ninety percent of tire purchases can be steered by the dealer,'' said Mr. Evans. ``If the dealer is making more money on a private brand, that's the thing he's going to push.''
But private brand marketers can't just sit back and enjoy their current status.
Private brands are threatened as manufacturers develop new strategies to maintain or even expand market share in an industry that's not growing, according to Mr. Shields.
``Private branders are going to have to keep up with market enhancements in some way, shape or form. We can't maintain the status quo,'' he said. ``Private branders are going to have to make changes. . . provide more diversity in what they're offering.''
Mr. Evans agreed that private branders will need innovative ways to compete.
``Where private brands excel is that they are faster to respond to trends in the marketplace,'' Mr. Evans said, noting that some marketers already are offering products and services beyond just tires.
Galaxy, for example, boosted its business 38 percent last year by pursuing bias non-highway tire niches in the replacement and original equipment markets that major tire makers seem to be abandoning, Mr. Evans said.
John Fitzgerald, vice president of marketing for Dean Tire & Rubber Co., Louisville, Ky., expects there will be consolidation and shake-outs in the private brand industry.
``Some private branders are not prepared for the expense that they will incur to meet the needs of size proliferation. This will limit their ability to meet the volume requirements requested by their manufacturer. The profitability they afford to the manufacturer at this point is greatly reduced,'' he said.
And while prices of private and associate brands are somewhat comparable now, Mr. Evans expects that to change as tire makers in such areas as China and Malaysia update plants, enabling them to produce tires at lower cost to private branders. ``This will help increase the spread again to the normal 15 to 20 percent difference,'' he predicted.