FRANKFURT, Germany-Competition by the major tire makers for tire dealer allegiance across Europe is escalating to a feverish pitch. Add in the efforts by importers, private brand marketers, and pan-European marketing organizations to gain replacement market exposure, and it amounts to a feeding frenzy.
The emphasis by tire makers a few years back on building equity-controlled European retail networks has been eclipsed by their efforts now to enhance aftermarket clout through dealer incentive programs, which can be tailored to fit the particular needs of individual national marketplaces.
Goodyear is leading the charge in this respect, creating ``trade marketing initiatives'' in the United Kingdom, Germany and Italy, known as ``Hi-Q,'' ``Premio,'' and ``Super Service,'' respectively. Such programs offer support in marketing, advertising, business management and other service incentives, in return for guarantees that the participating dealer devote a certain percentage of his stock to Goodyear corporate brands.
In Germany, the Premio program will be offered to Goodyear franchisees and to dealers already part of the ``HMI'' incentive team. A key aspect of the project will be the creation of a common image, with its own Premio storefront identification that takes precedence over the Goodyear.
Groupe Michelin recently launched its own similar concept, known in Germany as ``MFP,'' or ``Market Furtherance Program.'' The company also is involved in a second dealer promotion concept, a purchasing cooperative operating under the moniker ``EFR,'' or independent tire dealers' purchasing company.
After a year's experience with its ``1st Stop'' dealer incentive program in the U.K., which has grown to 75 dealers, Bridgestone/Firestone Europe plans to triple this number in 1996 and broaden the concept to include truck tire dealers, as well as introduce similar schemes across Europe this year, starting in Germany and Italy. In the latter, a few dealers already are operating as ``Professionali'' affiliates.
Pirelli Tyre Holding started experimenting with a retail identification program in Italy last year, called ``Driver Center,'' which has attracted more than 80 dealers so far, including former Pirelli-owned ``Punto Gomme'' stores. The program also is being tried in Spain, but with a local wholesale distributor acting as the project initiator.
Continental AG, through its Uniroyal-Englebert subsidiary, is experimenting with dealer incentive programs as well. In Italy, for example, Uniroyal is a silent partner in a franchise-type program called ``Pneus Expert,'' which had garnered 270 dealers as of mid-1995, with another 50 expected to join this year.
In terms of retail distribution, Goodyear has adhered to a ``5-P's'' strategy-Product, Promotion, Pricing, People and Place-for the better part of the past decade, according to Silvain Valensi, president of Goodyear Europe. This strategy has led to a wide variety of distribution systems-ranging from wholly owned stores to franchises to dealer initiative programs-and the company is continually fine-tuning its concepts to keep pace with market conditions.
Distribution logistics is one area the company hopes to see double-digit cost savings, Mr. Valensi said. By better utilizing distribution centers, the company anticipates overhead savings of 20 percent or more. In France, for example, implementation of a better distribution system resulted in a 25-percent drop in logistics overhead.
The tire makers haven't turned their backs entirely on their company-owned chains, however.
Goodyear, for example, recently increased its ``captive'' distribution network in Sweden through the purchase of Dackia, a 50-store retail chain and retreader with annual sales of $69 million and an additional 25 affiliated outlets.
Dunlop France, a subsidiary of Sumitomo Rubber Industries Ltd., got into the equity chain business last year, taking over the wholesaler and national chain Vulcopneu Plus, with 187 stores across France and a fledgling organization being set up in Spain.
Both Goodyear and Continental are experimenting with limited-service, budget-segment-oriented retail stores in Germany: Quick Reifen and REIDI, respectively.
Michelin and Continental have the most extensive company-owned retail networks, with 1,200 and 950 outlets, respectively, across the continent. Michelin has nearly completed converting all its company-owned locations to commonly signed ``Euromaster'' outlets, whereas Conti continues to operate its various retail chains under their own, regionally recognized names, such as NTS in the U.K. or Verglst in Germany.
Parallel to this battle, dealers and consumers across Europe are faced with an ever-increasing array of brands and price categories.
The proliferation of private brands and manufacturers' associate brands has been well documented-market observers in Germany now count more than 110 separate new tire brands, with more than half coming from sources outside of Europe.
Recent developments among the major players include:
Michelin assigning marketing rights across Europe for its BFGoodrich and Riken tire brands, the first step towards a broader-based multi-brand marketing strategy involving its four flag brands-Michelin, Klber, BFGoodrich and Riken-along with the Tyremaster brand sold through its Euromaster stores.
In addition, Michelin offers retreads produced by its Pneu Laurent network in France, and Sterling brand retreads (produced by Tyre Technic P.L.C.) through Euromaster.
Bridgestone/Firestone Europe launching the budget-market Dayton, Europa, and First Stop brands, initially on a country-by-country basis, but eventually Europe-wide. First Stop also is the identification for a dealer marketing initiative in the U.K. that may be used elsewhere if it proves effective there.
Sumitomo Rubber Europe strengthening the marketing clout behind the Pneumant brand it took over in late 1994. The brand is that of the former East German tire maker Pneumant, and has a measurable market identity in Germany and the U.K., but not significantly elsewhere.
Continental securing European rights to its Uniroyal brand-worth more than $650 million in annual sales-beyond 2004, when they were due to revert to Michelin, which had gained control of the brand through its 1989 purchase of Uniroyal Goodrich Tire Co. Conti intended to replace Uniroyal with General had it not been able to extend the agreement.
Now a second wave of lower-cost alternatives, albeit manufacturer name-branded lines, has begun appearing in selected markets. Michelin's Classic can be seen as the initiator of this market segment, but it now has been joined by Dunlop's ``modular design principle'' SP70 and Goodyear's ``Club'' line of S- and T-rated tires, for example.
In Germany, the growth in aftermarket demand for H/V/Z-rated performance tires appears to have peaked. This development has prompted competitors there to re-evaluate their product ranges and refocus attention on the ``bread-and-butter'' S/T segment, which accounts for nearly half the market.
In the other major markets across the continent, S/T type tires still account for more than three-fourths of the 125 million replacement sales, various studies indicate.
Kwik-Fit Holdings P.L.C., considered Europe's largest independent tire retailer for most of the past decade, expanded its reach late last year with the purchase of the 43-outlet U.K. chain, Tyre Sales Birmingham, giving the Edinburgh, Scotland-based company 635 outlets in the British Isles and 135 more throughout Belgium, the Netherlands and Luxembourg.
Multinational marketing cooperatives also are on the rise, with networks operating as ``Point S'' , ``Tecar,'' ``Vulcopneu'' etc. attracting growing numbers of dealers in France, Germany, Italy and Spain, with advantageous purchasing conditions and the prospect of regional marketing clout.
Such cooperatives are a driving force behind the growth of private brands, as well as leading outlets for offshore-manufactured tires-i.e., primarily those coming from the Far East.
In Germany, the dealer groups Point S, ``Team'' and ``VRG''-representing more than 1,000 points of sale and combined purchasing power of approximately $1.73 billion-recently concluded a cooperation agreement covering a wide range of activities, including joint purchasing of auto service equipment and vehicles, common waste disposal/recovery strategy, a nationwide 24-hour breakdown service, independent collection and analysis of market data etc.
The cooperation won't involve common purchasing of tires, however, the principals emphasized.