AKRON (June 4, 2001)—In the past few years, private brand marketers have faced increasingly stiff competition from manufacturers' flag and associate brands as pricing among the segments narrowed—a trend that has forced more than a few private label firms to drop out of the business.
Then, as if private branders didn't have enough to worry about, came “The Recall” of last summer, followed by May's sequel, “A Breakup and Another Recall.” Hollywood couldn't have written a more intriguing script for the tire industry than what has played out recently between Bridgestone/Firestone Inc. and Ford Motor Co.
The ripples from both events are being felt industrywide, not the least of which is a consensus among major tire makers that flag brand sales have risen substantially since August as consumers have become more brand and safety conscious. That change in attitude is enough to make anyone wonder if one of the Firestone recalls' lasting effects may be that private brands now must compete even more keenly with flags not only for consumer recognition and loyalty but also on price.
A consumer “Flight to Quality.” That's what Goodyear Chairman Samir Gibara has called recent gains in market share by the Goodyear brand as a result of its competitor's recall.
“Through our marketing research, our tracking studies and sales results, we do have the data to support the chairman's comments about a 'flight to quality,'” said Jim Vogel, vice president of sales and marketing for Goodyear's North American Tire unit. “We have seen a substantial increase in Goodyear brand consumer product sales despite a decrease in the total industry of a little over 6 percent.”
Mr. Vogel said Goodyear retailers have confirmed the results of the company's research on brand loyalty. He said 44 percent of consumers are replacing Goodyear original equipment tires with Goodyear brand tires—up from the 1990s' average of 33 percent.
A “flight to quality,” Mr. Vogel explained, does not mean private or associate brands are not good tires. The phrase, as Goodyear uses it, means consumers are now more likely to consider purchasing premium tires than in the past.
“When we're talking about flight to quality, it's all about perception,” he said. “There's that perceived notion of a higher quality (tire) because OE has said this is what we put on an OE vehicle.”
Both Michelin North America Inc. and Continental Tire North America Inc. (CTNA) told Tire Business their flag brand sales already had been increasing, but the Firestone recall provided an additional bounce. Michelin brand market share has been increasing for the past three years because of various factors, but the recall “absolutely has fueled our business as well,” according to Alison Heiser, vice president of marketing for Michelin Americas Small Tires (MAST).
CTNA attributed what it called the “dramatic” sales growth for Continental and General brands to its launch of three tire lines in the past two months—the Continental Touring all-season passenger radial, and the ContiTrac and General AmeriTrac light truck tires, said Jim Mayfield, CTNA director of marketing. But he thinks a consumer preference for flag brands began prior to last summer.
“The perception out there is that consumers know from a flag who's manufacturing the tire,” Mr. Mayfield said. “So, having confidence in the manufacturer, because the name is on the sidewall, leads to the perception that there is more value to the product.”
Ms. Heiser said MAST has tracked market trends for the past 10 years and has noticed a gradual shift from private and associate brands to flag brands, a movement that the Firestone recall has fueled further. She noted that a heightened interest in flag brands doesn't necessarily mean consumers are losing interest in private brands. It's just that they want a brand that can give them some kind of assurance of quality.
“Consumers don't have a lot of time to make decisions about things like tires, so what they're looking for is the shortcut to confidence,” she said. “Brand names give them that.”
Goodyear's market research over the past decade indicates that price and outlet were the first things that came to consumers' minds regarding their tire-buying experience, and now brands are their first thought, Mr. Vogel said.
Prior to the Firestone recall, flag-brand market share vs. private and associate brand share had not changed substantially, but has since been changing dramatically in favor of flags, Mr. Vogel said.
Cooper Tire & Rubber Co. would not comment for this report. However, the Findlay, Ohio, tire maker released a prepared statement concerning Ford's recall/replacement of 13 million Firestone tires that noted a strong demand for Cooper and Mastercraft brands. Sales for both brands jumped 10 percent in April from 2000 “as consumers appear to be shifting their purchasing patterns to brands they can associate with quality and confidence,” the release stated.
Bridgestone/Firestone, in response to Tire Business' query, said it has not experienced any changes in consumer preference from private label products to flag products, according to Phil Pacsi, director of consumer tires brand marketing. The company recently launched a “Making It Right” advertising campaign to rebuild the Firestone image and has been promoting both Bridgestone and Firestone tires at several “drive-and-learn” events scheduled throughout the year at different locations.
Long before the Aug. 9 recall, BFS also said it had planned to push the Bridgestone brand in North America in 2001.