AKRON—Welcome to this year's episode of "As the Private Brand Tire Turns." So you've stepped away from the tube to grab a brew or some munchies? Well, you may have missed a few intricate plot twists.
Some things are as we last left them—the continued encroachment of tire manufacturers' flag and associate brands continues unrelenting.
Other plot changes may be almost imperceptible except to those of you with an up-to-date guide: This brand switched from that marketer while that other...the associate brand over there? It's now a private brand. And that longtime well-liked actor in our multi-brand soap opera? History. Killed off to advance the plot.
Time for another commercial?
Like any other part of this evolving industry, the private brand landscape is indeed a continuing soap opera of consolidations, bankruptcies, lost-and-found sales and even some new births and re-births. Like any good episodic series, much of what went on last year, and the year before, are still evident to varying degrees.
In the obituary column, perhaps the most surprising name is Dick Cepek Inc., while the small, struggling Roadeo Boots brand and its marketing company went to that big rodeo in the sky. Meanwhile, the four-year-old Parnelli Jones brand slimmed down and changed lanes in the middle of the race.
For some respondents to an annual Tire Business survey of private brand tire marketers, it has been tougher to make a buck. Depending on whom you query about the price spread among flag, associate and private brands, they're likely to laugh and ask, "What price spread?"
Bob Gardner, president of Del-Nat Tire Corp. in Memphis, Tenn., noted it's "impossible to tell. Some types and sizes in brand product are well below private brands."
But ever the optimist, this self-professed "tire guy" added: "Overall, private brands are still a better value."
Nonetheless, typical of a number of survey respondents, Mr. Gardner acknowledged losing some business to associate, flag and import brands. Del-Nat's "staying consistent on pricing, terms, policies and exclusivity," he wrote, but "we are also sourcing more product overseas."
The company has been forced to do that "to maintain a price advantage and be able to purchase product we cannot get in the U.S."
Ah, the overseas connection.
Like a James Bond movie, there's always intrigue there. Can't get what you need domestically? Seek foreign shores—the People's Republic of China, for instance, like many private brand marketers have been doing.
But like one of those gadget-filled spy yarns, some private labelers admit they can't always trust what they're getting. Sometimes the quality isn't what they'd like. Dealing with container loads, then wondering where the shipment actually is, can make some contemplate ordering a container of Maalox on the side.
Heafner Tire Group seems to play its brands like a fine-tuned Stradivarius.
Dan Brown, senior vice president sales and marketing, said the company hasn't lost business to the major brands. But then, he wrote, "our extensive network of owned distribution centers and high levels of service has protected our private brand business and kept it growing.
"We also use our private brands to support the multi-brand strategies of the manufacturers."
But what about the small guys?
Tire maker-led dealer programs is one element some private branders say has hurt sales. As tire manufacturers increasingly push a multi-brand palette, with their inherent quotas—for instance, Michelin North America Inc.'s Alliance dealer program and the TireStarz program from Bridgestone/Firestone Inc.—private labelers are finding the roar of that competition deafening.
With the duel for sales also coming from other private labels, the question remains: How to squeeze more profit from shrinking margins.
Like Del-Nat, Heafner sources private brand production off shore. "Every manufacturer is either in China or trying to get into China with production," Mr. Brown said. "We are there and will continue to look internationally for supply of our private brands.
"The tire business is a global business today and this is not restricted to just the manufacturers."
On the other hand, take a company like Foreign Tire Sales Inc. Its name says it all. The Union, N.J.-based firm gets its supply strictly from off-shore makers.
President Richard Kuskin told Tire Business his business has been a little slow, but normally gets sluggish this time of year. Although several private branders said the inability of some domestic tire makers to maintain adequate fill rates caused consternation last year, Mr. Kuskin said it's "not a problem getting tires—getting orders is the problem because the marketplace is very competitive, and increasingly so."
The company's off-shore manufacturers "have more factories making the kind of tires we sell," he said. "But it's more competitive, more difficult to maintain margins and maintain orders.
"We don't buy domestically. We tend to sell niche products you can't get made here anymore. And if you could, there wouldn't be enough capacity or a decent margin on them."
But Mr. Kuskin's not worried about overseas quality.
"We have control over production off shore. We specify the construction, the compounds and have qualified people to advise the manufacturers on how we want the products made—not the way they want to make them.
"So we have better control than most. It's not perfect, but then not many people do what we do."
Foreign Tire, which offers industrial, OTR, trailer tires, as well as a selection of private-label passenger, light- and medium-truck tires, saw its business rise in the first four months of this year 15 percent over the same 1999 period. "In a shrinking market," Mr. Kuskin said, "that's pretty good. Of course, it could be better.
"We want to make money. There's a lot of people out there who don't care if they make money. They want market share.
"Market share is secondary. Profit is primary."
One way to grow both is buy distribution or add retail stores as an outlet for a marketer's private labels.
Del-Nat, jointly with one of its members, has begun dabbling in that enterprise with its recent acquisition of two one-store dealerships.
For Big O Tires Inc., which is owned by TBC Corp., pushing out more of its Big O brand means continuing to expand its 457-store franchise operation. However, David Boeke, vice president of franchise development, pointed out that when the economy is as robust as it has been, franchising tends to struggle a bit.
If the stock market is strong, many investors tend to keep their money in what he called those types of "passive investments."
"Franchising is actually healthier when the economy is not doing well," Mr. Boeke said, "because you often have displaced managers looking for opportunities."
Despite the challenges, he said Big O still expects to open between 25 and 33 new stores this year. That would mirror its 1999 results.
Some marketers have continued to find success in the specialty tire aspect of private branding. Fairmount Tire and Rubber Inc. in Los Angeles, a marketer of wide-whitewall tires for classic cars, is also involved in the West Coast "low-rider" tire scene.
Still, Brad Saunders, vice president, considers that a niche market. "We're booming, but this specialty part of the market is not our main focus—just a little sideline for us."
The company has a large retail chain of stores and a wholesale operation, and has been "pumping a lot of tires out of here—we expect to do close to 1.2 million units this year," Mr. Saunders said.
"We're selling everything we can get. I'm just trying to get production. That's my problem. What is tough is trying to find manufacturers, since what we handle is out of the norm," such as bias-ply tires that "nobody really wants to make. If I go off shore, I can't really control it."
"I like to use my main suppliers and leverage those relationships," he continued. "And it's getting more and more difficult, as they have production capacity problems...."
Miami-based Tire Group International (TGI) Inc. also has turned to off-shore production because, said James Eiriz, vice president of sales, "most of our items are of bias construction, which are no longer manufactured in the U.S."
That specialty niche has proved quite lucrative for West Coast-based Greenball Corp., which handles many tire types other marketers may shy away from, such as golf cart, mobile home, boat trailer, baseball pitching machine and bias racing tires.
"Business is extremely good—unbelievable," reported the company's Akron-based aftermarket sales manager, Tom Beasley. "It's somewhat scary because I hear that the passenger and light truck business is slow right now, but our business has been crazy.
"Radial trailer tires have done a hell-of-a-job for us."
Greenball gets the best of both worlds, he said, by selling Goodyear's original equipment trailer tire, the Marathon, to OE accounts and Greenball's private label Towmaster Radial ST, the same Goodyear-made tire, to the aftermarket.
He believes the economy hasn't slowed down enough to affect recreational travel. Consequently, Greenball has had strong sales in those types of tires, as well as in lawn-and-garden and ATV units.
"We're seeing, in some of those niche-type tires, more retailers and distributors getting more involved in it than in the past," he said, "because there's good profit potential there. The gross profits are extremely good.
"In a lot of cases the average retail customer will pay as much at retail for a golf cart or small trailer tire as they would for a low-cost passenger radial."
When all the sales are tallied and the shouting fades, a private brander inevitably must look in the mirror and decide if it makes sense to stick around, expand, or maybe wait for a good offer and gracefully "retire" from the business.
Tire Business asked marketers if they'd consider selling their company to a tire maker.
While some large players—such as Heafner and Del-Nat—ruled that out, apparently some smaller fish may be willing to be swallowed up. But only, as TGI's Mr. Eiriz noted, "for the right value."
Is that the phone ringing?