AKRON-Way back in April, with the memory of winter fading fast and the last of the road salt washed away by spring rains, tire manufacturers were trying to figure out production schedules. So they put their dealers on the spot, wanting to know just how many snow tires they'd be needing for the winter of '96.
Let's see...you've checked your crystal ball, the Farmer's Almanac, last year's order forms. About all that's left is an old-fashioned, seat-of-the-pants ``guesstimate'' that may or may not prove correct.
Talk about going out on an icy limb! It's not an easy game to play, considering that most tire makers won't buy back excess snow tire inventory from their customers.
In the first part of this series, published Oct. 14, TIRE BUSINESS looked at the growing winter tire market, including how some dealers educate consumers about proper bad-weather driving techniques and the necessity for snow tires.
This installment considers some reasons why the market is expanding, how some dealers market snows, and several tire makers' winter tire programs for dealers.
Statistics from the Rubber Manufacturers Association show snow tire shipments trending upward: In 1992, they accounted for 3.1 percent of the market; in 1993, they were at 3.7 percent; their numbers rose to 4.5 percent in 1994; last year they hit 5.2 percent.
Meanwhile, all-season tires represented 82.2 percent of the shipments in 1992, rising to 85.4 percent last year.
What accounts for the growth in the snow tire market? Obviously,
Second in a two-part series
the past few severe winters have been a factor.
Last month, for instance, the heaviest October snowfall ever in Anchorage, Alaska, set three records and had tire stores reaping the benefits. The Anchorage Daily News reported customers at some dealerships waited up to four hours to buy studded snow tires.
However, the introduction several years ago of the Bridgestone ``Blizzak'' snow and ice tire, with its patented multicell tread compound, seems to have juiced up the market, as well.
In fact, an executive from a competing tire maker paid Bridgestone/Firestone Inc. the ultimate compliment, saying its strong Blizzak ad campaign has had a ``ripple effect for other manufacturers.''
BFS claims its Blizzak ``rules'' in the U.S., with more than 20 per-cent of all snow tire sales.
It's a little early yet to tell how lucrative the upcoming winter tire season will be. But based on last year's results, Roland Lesieur, owner of Maynard & Lesieur Tire Co. in Nashua, N.H., has his sights set on another good sales run. The retail/wholesale dealership sold 8,500 snow tires last year.
Thanks to memories of the wicked winter of '95, customers bumped up the dealership's snow tire sales last month enough to outpace last October's.
``Last year on Dec. 1, I was 25 percent behind the previous year's sales,'' he said, ``and I was scared because I was overstocked.'' He finished the season 10 percent ahead, thanks to ``extremely good'' sales last December and January.
``I think the trend this year is, (dealers) are bringing in less snows to start the season,'' he said. ``I can't afford to get hung over with a lot of snow tires.''
Still, Mr. Lesieur reiterated a criticism he has voiced often: ``I think it's the tire manufacturer's job to be the supplier to his customers and take the gamble-not the dealer. (Just like) in the wholesale end, it's my job to supply my deal-ers and take the chances.''
To cover himself in the event demand increases, he has split his snow tire orders predominantly among Nokian Tyres (North America) Ltd., Cooper Tire & Rubber Co. and Kelly-Springfield Tire Co.'s Monarch brand. He calls the last two ``bitter enemies'' in the snow tire market, which can work to the buying advantage of a shrewd dealer.
Snow-tire pricing this year ``is still soft,'' Mr. Lesieur believes.
``I think it's going to be a very decent year,'' he said. ``If sales match last year, it's going to be super-good.''
Mr. Lesieur looks at snow tire sales two ways. His figures for last year represented only 8 percent of his total tire sales of 110,000 units, and ``that sounds like a minor amount.'' Yet considering those numbers could represent as much as 15-20 percent of a dealership's sales from October through December, ``they become very important.''
But in the end, there are no real guarantees. Winter can bring feast or famine.
``I'd like to payola the weatherman,'' he joked. ``Maybe we dealers should pool our money and do that-then we'd definitely have a better shot!''
Dennis Gaede, president of Nokian Tyres (North America), the Ontario, Canada-based subsidiary of Finland's Nokian Tyres Ltd., is looking forward to a good winter. Translation: Bad weather equals strong sales. The company's sales of snow tires last year were ``up significantly.''
Like most tire makers, Nokian asks its dealers early in the year how many snow tires they'll require. It has a ``booking and dating'' program offering customers a staggered payment schedule, with a third due on each of the dates of Nov. 15, Dec. 15 and Jan. 15 for U.S. dealers, and in October, November and December for Canadian dealers.
Known largely for its agricultural and winter tires, a large percentage of Nokian's production is dedicated to snow tires. The company manufactured 3.2 million last year, and will expand that number to 5 million by 1998.
A dealer who educates customers about the benefits of winter tires is presented with a great opportunity to sell two kinds of products, Mr. Gaede believes: a set of all-season tires as well as four snow tires-for optimum traction, the company recommends use of four, rather than two.
Dealers, he noted, should sell safety to their customers.
Although ordering tires so early in the year is a gamble, Steve White, marketing manager for Michelin North America (MNA), who handles touring, performance and snow tires, said the company has received a lot of feedback from dealers and has tried to make the whole process less painful.
While MNA does not buy back dealers' leftover snow tires, and ``naturally, dealers take the risk of stocking up on winter tires,'' Mr. White said MNA instituted a re-bill policy. So customers who place ``early bird'' orders in May receive their winter tires in August and September, but can then defer payments until December, January and February.
If, for example, next Jan. 31, a dealer has winter tires left from that order, MNA will defer payment on up to 25 percent of the remainder, rebilling it to December 1997, Mr. White explained.
``We're trying to help dealers step up to the plate without the capital risk,'' he said, allowing them to order the tires they might need ``or a few extras to hedge their bets.''
The tire maker's early bird program provides special pricing on re-orders, and guarantees prices on Dec. 31 will be the same as when tires were ordered in May.
Michelin's snow tire production for the year has ended, but depending on demand, Mr. White said the company has the ability to start '97 snow tire manufacturing as early as January.
Because size proliferation has been rampant over the last five years, manufacturing tires has become more complex, said Jim Knowles, MNA technical marketing manager.
``It used to be, in snow tires, that 10 to 15 sizes covered 90 percent of the market,'' he said. ``Today, it takes 35 to 40 sizes to do the same thing. That hurts, as far as manufacturing flexibility goes.''
Bridgestone/Firestone, too, has an ``early bird'' special to encourage dealers to order ahead. The company gives dealers an extra 2-percent discount on orders shipped on or before Aug. 31. BFS also allows dealers to mix Bridgestone-and Firestone-brand winter tires when ordering.
Dana E. Foote, owner of Dala Tires Inc., doing business in Loveland, Colo., as Big O Tire, purchases the bulk of his initial snow tire order from a Big O Tires Inc. warehouse, which he said will, in some cases, buy back leftovers.
The Colorado-based tire franchiser offers its dealers several winter tire options, he said, including a ``no frills'' program in which they get a better initial purchase price, but no buyback.
``But if you're stuck with some inventory at the end of winter,'' Mr. Foote observed, ``it's just that much less you have to order the following year, so it's not that big a deal.'' His winter tire sales average 350 to 400 per season.
Not surprisingly, Canada is a different snow tire market from the U.S. From a strictly numerical point of view, snow tires account for approximately 20 percent of the passenger tires sold in Canada, according to Rubber Association of Canada statistics.
That means about one in five tires is rated for mud and snow-``a pretty big piece of the passenger tire business,'' said Greg Sims, director of marketing for Michelin Tires Canada Inc., based in Montreal.
``Unlike the U.S., where the northern part gets cold, we get cold everywhere,'' he said.
As in the U.S., all-season tires still account for the bulk of passenger sales in Canada.
However, winter tires ``are an important part of our business,'' he added, although their significance varies by region: A large percentage of sales occur in the province of Quebec; fewer in the Maritimes and elsewhere.
Michelin Canada sees the snow tire market moving toward 25 percent of overall tire sales, for reasons including:
A greater number of the vehicles being manufactured require lower profile, wider performance-type tires as original equipment, and they don't perform as well in winter conditions; and
Tire manufacturers have been bringing more technologically advanced products to the market, and consumers seem to be recognizing there are distinct benefits to using winter tires.
Michelin's winter tire program for Canadian dealers mimics its U.S. counterpart, with some distinct differences from a consumer standpoint.
Retail customers can, for example, take advantage of a 30-day free trial offer to try Michelin snow tires. The company also has a warranty program that includes a free tow if a motorist using Michelin's Alpin snow tires gets stuck in snow or on ice.
``We know some of the so-called `ice radials' are only good for the first 50 percent of the tread,'' Mr. Sims said. ``So for consumers buying our Alpin tire now, we guarantee it will be a snow tire until the
winter of 2000.''
Promotional efforts for Bridgestone/Firestone's popular Blizzak snow tire have spawned what has become an annual series of events that puts dealers ``on ice.''
In regions that become winter wonderlands-and snowy, driving nightmares-the Nashville, Tenn.-based tire maker has sponsored ride-and-drive opportunities in nearly 50 cities over the past three years. Dealers can try their hand at driving Blizzaks on an ice rink-and then learn how to market them.
Speaking at a recent ``winter driving safety demonstration'' at a skating pavilion in Rocky River, Ohio, Phil Pacsi, BFS' manager of product marketing, told dealers and store managers that ``education is the key'' not only to how they sell winter tires, but how consumers drive on them.
He noted the increasing number of sport-utility vehicles boasting enhanced traction-on roadways. That has lulled many SUV drivers into a false sense of safety and even bravado, thinking their vehicle can plow through anything.
``So they push it a little more than they should,'' Mr. Pasci said. Consequently, after the season's first big snow, it is often those vehicles that are seen in ditches by the side of the road.
For 14 years, BFS has operated the ``Bridgestone Winter Driving School'' in Steamboat Springs, Colo. It enlists the expertise of specialists such as Peter Cunningham, a three-time national ice driving champion who tours the U.S. in conjunction with the school and the Blizzak ice rink events.
The school's clients include Federal Express, United Parcel Service, Ford Motor Co. and General Motors Corp.
BFS estimates that, although winter tires dwindled to only 2 percent of the overall U.S. replacement passenger tire market in the early '90s, they've made a comeback and now represent 5 percent.
Goodyear increased snow tire production this year to keep up with strong market demand. Although they're urged to place snow tire orders in the spring, Goodyear dealers can still order those tires into the fall.
Ordering early locks them into a price valid throughout the winter season, according to Steve True, Goodyear marketing manager, auto tires. The company does have a ``buyback'' policy, allowing dealers to return some portion of their early order in return for additional orders on other products.
Snow tire sales growth is, in part, a result of OE use of lower aspect ratio tires that don't offer much winter traction, he said. Mr. True estimates the market is snowballing by 7 to 10 percent annually.
Adequate snow removal in the U.S. has tipped the scales to use of all-season tires in many regions, but Mr. True said Goodyear reaps its biggest Canadian snow tire sales in that country's eastern and mountain regions. Saleswise, one of its best U.S. cities is Pittsburgh, he said, because of its hills.
RMA statistics show winter tires account for some 8 million replacement passenger tire units. ``It's hard to tell whether the market can sustain that kind of growth,'' Mr. True said, ``but I don't think it will go down.''
Goodyear, he said, supports dealers' winter tire promotional efforts with advertising and point-of-sale materials. And the company's regional marketing managers often work with groups of dealers to fashion joint promotions such as radio campaigns. ``We try to do everything we can,'' Mr. True said, ``to help dealers get that segment of the market.''
``The way I figure it,'' he mused, ``since we've had such a great fall (in Ohio), (motorists) are going to get punished when winter arrives!''
Unlike competitors that halt snow tire production by August, Cooper Tire & Rubber Co. typically continues to crank them out at least through Nov. 15-and beyond that if necessary.
John F. Pecoraro, manager of product marketing, said the company usually has snow tire inventory on hand at all times. Its dealers can order them anytime throughout the year, though traditionally they order in June or July, tied to a special promotion.
The Findlay, Ohio-based company has no buyback program on snow tires, and does not comment on its dealer programs, he said.
However, Larry Lesieur, operations manager of Maynard & Lesieur Tire, a big Cooper customer, explained that for Cooper-made snows delivered in October, ``If we pay in full by the due date of Jan. 10, we can deduct 2 percent from the total.''
Cooper also offers an ``anticipation'' bonus, he said, whereby dealers receive an additional 1-percent discount for every 30 days they pay off their winter tire orders before Jan. 10.
Winter tire sales have trended upward for Cooper since 1992, and the company ``usually sells out'' its stock, Mr. Pecoraro said, due in part to all-season tire performance being ``marginal, at best, in terms of snow and ice capabilities.
``More people seem to be converting to snows today because the tires are quieter, ride very well and are available in a full complement of sizes to fit the new 16-inch applications.''
Just how a dealer peddles snow tires probably varies widely.
There are astute dealers who push the extra safety and performance features of snows, such as Robert L. Rochefort, president of Vermont Tire & Service Inc. in Montpelier. His winter tire advertising in newspapers and on radio and TV stresses the combination of traction and stopping power the tires offer.
Dealer Roland Lesieur tries to educate motorists about the less-aggressive tread patterns of today's all-season tires. The lesson has helped turn some New England motorists to snow tires when the weather gets bad.
The bottom line: Know your customers and their needs.
After four years in Loveland, Colo., Big O dealer Dana Foote is confident he has come to know what his customers demand: a snow tire that's ``economically priced, but is still effective.
``In my market, people don't want that high-dollar tire,'' and Mr. Foote said he gives them what they want.