PALM BEACH GARDENS, Fla.—TBC Corp., North America's largest private-brand tire marketer, is on the acquisition trail again. But the emphasis will be on expanding its retail business rather than its more traditional private-brand marketing operations.
Officials addressing TBC's annual marketing meeting in Palm Beach Gardens, Jan. 11-13, described the Memphis, Tenn., company as a ``consolidator in a consolidating industry.''
``We're going to be looking for compatible acquisitions that add value to our entire system,'' Vice Chairman and CEO Lou DiPasqua told an audience of about 200 attendees, primarily wholesale distributors of the company's Cordovan, Sigma and Multi-Mile brands.
Only deals promising to complement and strengthen TBC and its present distribution system will be considered, he said. ``We're not going to make acquisitions for the sake of making them. Growth is not really our priority in this whole mission.... We'll acquire and build on what already is in place and what is recognized as the best marketer/distributor (network) in North America.''
Much of TBC's growth, Mr. DiPasqua said, will come from its 436-outlet chain of Big O Tires Inc. franchises, which TBC acquired several years ago—and, in some cases, joint-venture partnerships with the company's current customers.
One such venture in 1998 with longtime TBC distributor MFA Oil Co. of Columbia, Mo., has resulted thus far in four new Big O stores in Missouri—new territory for the retail chain. Plans call for as many as 35 Missouri stores, Mr. DiPasqua said.
A similar venture with Mountain View Tire & Service Inc. of Rancho Cucamonga, Calif., last year, also gave TBC an equity stake in the Las Vegas-based 13-store Superior Tire chain. The company is working on more such ventures, he said.
TBC will be increasingly retail-focused in years to come, Mr. DiPasqua said, but ``that doesn't mean we will disregard our core (private brand wholesale) business.
``But our core business, while it's monumentally big and strong, is not going to grow by leaps and bounds. We can look for modest growth there—which is wonderful. But the real growth for TBC, as a corporation, is going to come from retailing.''
Not all of TBC's attention has been devoted to retail of late, however. In 1998, it also purchased Atlanta-based Carroll Tire Co., its largest customer, accounting for 11 percent of TBC's sales. Mr. DiPasqua said TBC will expand on Carroll Tire's distribution system in the southeastern U.S.
He also announced plans for a new Mid-Atlantic distribution center in Fayetteville, N.C.—the company's first such facility outside of its home base.
The 600,000-sq.-ft. facility should be fully operational by mid-year, Mr. DiPasqua said. It will relieve the strain on TBC's Memphis warehouse and result in faster delivery and better fill rates.
TBC President/COO Larry Day said the company's confidence in its ability to grow is well founded. ``We have a strong balance sheet and our capital ratio is better than many Fortune 500 companies. This financial strength will enable us to continue being the strongest private-brand player in the industry.''
Goodyear Chairman and CEO Sam Gibara, a featured speaker along with Cooper Tire & Rubber Co. Chairman and CEO Pat Rooney, likened TBC to DaimlerChrysler A.G. in terms of its importance as a tire customer.
``Lately, it's a tossup whether we sell more tires to Chrysler or TBC,'' Mr. Gibara said. ``But we sell millions to both,...and both are critical and valued customers of our North American tire business.''
Mr. Gibara assured the audience that Goodyear's recently announced decision to fold the Kelly-Springfield Tire division into its own organization will not harm TBC and its customers, saying: ``The private-brand business has been the cornerstone of Kelly's strategy over the years and will continue to be for years to come.''
In progressively integrating Goodyear and Kelly tire plants in recent years, the company has been able to rationalize production and exploit the strength of each facility by narrowing the range of products produced there, Mr. Gibara said. ``Our plants are now more focused and specialized along product lines.''
He predicted tire dealers will continue claiming half of all replacement tire sales in North America, with regional retailers expanding at more than three times the industry rate of 2-3 percent per year.
Cooper's Mr. Rooney urged dealers to take a long-term view in their response to the current buyers' market, in which a dramatic downturn in Asian economies has brought a flood of low-priced foreign imports into North America.
By loading up on cheap imports, dealers can realize a short-term gain. ``But what dealer is really in this business for the short-term gain?'' he asked.
``Do you want to do practically all your business with consumers who look only for the cheapest tires they can find? Or are you looking for customers who want solid value from a dealer they can depend on—a dealer who can recommend other necessary services that offer a higher margin?
``It's your call,'' he told dealers. ``But if you want to maintain customer loyalty..., you have to maintain relations with suppliers you can trust and depend on.''
Mergers and acquisitions are at an all-time high with no end in sight, he said. Nowhere is this more apparent than the tire industry's retail sector.
``It's sort of growth at any cost,'' he said. ``No wonder business failures in the U.S. topped 400,000 in the first half of the 1990s'' and are on track to double that number by the end of the decade.
``The cost of this aggressiveness can sometimes be extremely high,'' he said. ``Hopefully, the philosophy of `bigger is better' will give way to the philosophy that bigger is sometimes appropriate, small can be beautiful and medium size also can work.''
Fortunately, he said, some companies wisely are redesigning themselves to be more time-, cost-and labor-efficient. ``Size isn't necessarily the most important ingredient. Flexibility, I believe, is.''