CLEARWATER, Fla.-If these times are difficult for tire manufacturers and their proprietary brands, imagine how much more challenging they must be for companies marketing lesser-known private brands.
Shrinking margins on tires over the years and a tendency by manufacturers to favor their own brands has left private brand tires with little or no pricing advantage and progressively less market share compared with manufacturer-owned brands.
Comparing figures published by Tire Business a decade ago with those recently compiled by the Rubber Manufacturers Association suggests that the share of the replacement passenger tire market held by private brands has plummeted from 35 percent in 1991 to 24 percent today. Meanwhile, that held by manufacturers flag brands rose to 56.4 percent from 48 percent while tire makers' lesser-known associate or ``house'' brands grew from 17 percent to 19.6 percent during the period.
That private brands have lost ground over the years is hardly a surprise to Donald Dominguez, director of the 37-year-old Private Brand Tire Group, whose 15 distributor members collectively recorded sales of approximately $3 billion last year. Private brands have been under siege on several fronts, he noted.
``Competition from manufacturers' house brands has intensified in recent years-and certainly that has had an impact on private brand sales,'' Mr. Dominguez told Tire Business.
One competitive challenge private brand marketers have faced, he said, is the reduction in minimum order requirements for tire makers' associate brands. While private brand marketers traditionally have required orders in trailer-load quantities, many competitive house brands in recent years have reduced their minimum-order requirements to far less than that.
Meanwhile, the tire makers' house brands have become ``very competitive pricewise'' as well, Mr. Dominguez said. Whereas private brands once enjoyed a 10- to 15-percent pricing advantage over manufacturers' associate brands, that difference has all but evaporated in recent years as manufacturers have shaved the margins on both their flag and house brands.
Lacking a lower-cost advantage over competitive manufacturers' brands, many private brand distributors have responded by stressing their ability to offer retailers product exclusivity within their respective local markets. Being the only local merchant to carry a specific brand makes it possible to price such tires profitably without having to worry about comparison shoppers.
Some retailers also are able to throw in additional customer inducements, such as a treadwear warranty, and still earn a healthier profit than with so-called ``name-brand'' merchandise. Success in such cases obviously is dependent on the salesperson's ability to persuade the customer to accept a comparatively unknown brand.
Industry consolidation is another factor shrinking the market share held by private brands, as organizations such as Sonic are absorbed by tire manufacturers or leave the private branders' ranks due to other reasons.
Meanwhile, the turf once occupied by private brands also has been eroded by marketing initiatives, such as Bridgestone/Firestone Inc.'s Associated Dealer Program and Michelin North America Inc.'s ``Alliance'' program. Both offer independent dealers lower pricing and other marketing benefits in return for pledging the majority of their tire purchases to the manufacturer.
One bright spot on the horizon for private brands is the upsurge in tire demand likely to result from Ford Motor Co.'s plans to recall up to 13 million Firestone Wilderness AT tires in months to come. Some private brands saw their sales increase during last summer's Bridgestone/Firestone recall of 6.5 million Firestone ATX, ATX II and Wilderness ATs.
This could occur again, Mr. Dominguez predicts. Although Ford's published list of approved replacements for the recalled Firestone Wilderness ATs doesn't include any private brand tires at present, he believes there simply won't be enough of the Ford-approved Goodyear-, Michelin- and Continental Tire North America Inc.-brand replacements to go around.
As happened last year, motorists again will have to turn to other brands-and many will end up purchasing private brand tires at the recommendation of the tire dealer. That, of course, will depend on whether private brand tire dealers have something to sell-and that could turn out to be a big ``if.''
There is little doubt that tire makers will choose to turn out their own brands before those of private brand marketers, Mr. Dominguez acknowledged. ``Manufacturers' priorities have been-and always will be-their own major brands,'' he said. But at least while supplies last, private branders' sales should benefit from the pending recall, he believes.
What can private brand marketers do to better their lot in an increasingly competitive marketplace? That's a question Mr. Dominguez and his group ponder in meeting after meeting.
Besides voting at its most recent gathering to extend the term of group President William Hirst of Treadways Corp. and electing Del-Nat Tire Corp.'s Dennis Cates as its vice president, members reviewed several premium incentive marketing programs designed to increase sales and profits on private brand tires. The programs are capable of being tailored to the needs of each of the group's member companies-no two of which are exactly alike in their requirements.
Among the options under consideration are programs allowing dealership employees to earn points toward premium rewards, such as travel or merchandise, in return for not only recommending and selling more private brand tires-but also more premium level tires.
Mr. Domiguez said such programs not only are important from the standpoint of each member's profitability-but also in assuring that the participating private brand marketer will not be dropped by his tire supplier during difficult times.
Some private branders, he said, tend to buy only low-end merchandise-which can become a significant factor if the manufacturer decides to get rid of some private brand business. ``If he (the private brand marketer) is not hitting the volume the manufacturer wants, but still has a good mix of premium as opposed to low-end tires, the manufacturer will think twice about dropping him,'' Mr. Dominguez said.