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January 28, 2000 01:00 AM

TBC still on prowl for acquisitions

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    PALM DESERT, Calif. (January 28, 2000) — Although the subject of acquisitions was not mentioned directly in any speech at TBC Corp.´s recent annual marketing meeting, the company hasn´t bowed out of that horse race.

    It just prefers to quietly scan the racing form before picking a potential winner.

    In a wide-ranging interview with Tire Business, Barry Robbins, executive vice president, sales and marketing, said although TBC isn´t talking up the subject, it´s "constantly screening acquisitions and evaluating potentials.

    "Nothing is imminent, but we´re looking at several."

    At the previous year´s meeting, TBC officials called the Memphis, Tenn.-based private brand tire marketer a "consolidator in a consolidating industry" and said they´d be on the prowl for companies able to fit in with TBC´s programs.

    That focus hasn´t changed, though this time around the company talked more about reaching targeted sales goals and getting enough tires to do that.

    "One key element of our overall strategy is to grow the corporate business," Mr. Robbins said. A way to do that is by purchasing a retailer or wholesaler, though he admitted there are a limited number of the latter available.

    The company has been successful in a number of the partnerships it has established over the past several years. It has an active joint venture (JV) in Mexico and another JV on the import/export side.

    A 1998 deal with Mountain View Tire & Service Inc. of Rancho Cucamonga, Calif., gave TBC a stake in the Las Vegas-based Superior Tire retail chain.

    That same year TBC bought its largest distributor, Carroll´s Inc., and entered a JV with the Missouri Farm Association (MFA), one of TBC´s wholesale customers. Through it, MFA is operating some franchise outlets that fly the flag of Big O Tires Inc. — another company TBC purchased several years ago. Mr. Robbins said TBC also is looking at "other possibilities in Missouri."

    Because it operates a lean organization that doesn´t have the manpower to run acquisitions, he said TBC seeks strong partners able to manage the day-to-day operations.

    As for Big O, he said TBC, not the chain itself, would make any future retail buyouts, which might then be integrated into Big O.

    While there are only a handful of company-owned Big O stores now, TBC would like to see more of those, Mr. Robbins said, but is being careful to avoid areas of expansion that would conflict with current TBC customers.

    Earlier, TBC President Larry Day told trade press journalists that, compared with other retail chains, "Big O has the newest, freshest passenger and light truck tire lines in the industry, barring none, and we´re proud of that.

    "When TBC bought Big O, we had a commitment signed in blood that there would never be any merging of Big O into our operations because they compete (with some TBC customers).

    "We invite them to our convention because they´re part of our family. But there will never, ever, as long as I´m around, be Big O product in TBC channels, and there won´t be any TBC product in Big O´s family distribution system."

    Getting tires to its customers has been a leading concern for TBC, which is shooting for a 95-percent fill rate this year. Mr. Robbins said its two principal, longtime suppliers—Goodyear and Cooper Tire & Rubber Co. — have "done a good job investing in technology to drive their manufacturing cost structures down."

    TBC is "constantly evaluating suppliers," he said. "One thing that´s important to us is consistency of supply. If we want to start a program, we want price — or product — that´s not here today and gone tomorrow.

    "We make sure suppliers have a long-term ability to serve us."

    TBC´s overall fill rate of 90 percent in 1999 came thanks to multiple supply sources. "Compared with others in the industry, that´s very good, but not as good as we´d like it to be," Mr. Robbins said. "The industry struggled this year and we weren´t immune from it. But our suppliers worked closely with us. We weren´t satisfied and neither were they. ...

    "Our customers complain to us about fill rates, but tell us that compared to other suppliers, we´ve done a hell of a job."

    Meanwhile, the industry´s number of SKUs continue to skyrocket.

    With 1,700 SKUs in its lineup, TBC realizes its customers constantly juggle a complex inventory.

    Thus, it offers investment advice and works individually with customers to suggest a product lineup as well as show them what industry demand patterns are for SKUs by sizes, and what the growth rates are for them, Mr. Robbins said.

    "And the best way we can do that is with our own line planning by making sure we have the appropriate product and discontinuing stuff that´s inappropriate."

    Last year TBC dropped a couple hundred SKUs. "That´s the best service we can provide—by telling customers, `We don´t need that in our product lineup and you don´t need to carry it,´ " he said.

    With the explosion of so-called Internet "e-commerce," TBC may not quite be on the vanguard yet, but Mr. Robbins said "we see business-to-business e-commerce as a big opportunity for us."

    TBC offers custom web page design to customers, and is "trying to make it easier for our customers to do business with us and help consumers locate our customers. We have their store locations on our Web site and we´re working on having mapping and photos available."

    He acknowledged "one complication with e-commerce for tires is that it´s an installed product."

    Over the next couple of years "growth" will be a key word for TBC. "We have objectives to grow this company significantly," Mr. Robbins said.

    In 1990, TBC had sales of about $500 million. At the close of last year it was expected to hit nearly $745 million in sales.

    "We see much more accelerated growth in the next 10 years," he said, through growing the existing business and via acquisitions. "We´ve got a great balance sheet. We´re just looking for the right opportunities."

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