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June 19, 2001 02:00 AM

A 'flight' to pricey tires? (second of two-part series)

Vera Fedchenko, Tire Business staff
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    AKRON (June 19, 2001)—Two major tire recalls only nine months apart undoubtedly have impacted the industry as consumers have become more aware of not only tire maintenance but also of brands.

    Most Ford Explorer owners last summer received tire makers' house brands as replacements for their Firestone tires, and all authorized tires for Ford's recent 13 million tire recall also are flag brands, which puts additional competitive pressures on lesser-known private brands.

    The new consumer awareness of tire brands has prompted what has been called a “flight to quality”—a term coined by Goodyear Chairman Samir Gibara to describe post-recall market share gains by the Goodyear brand. The Akron tire maker said its data shows that tire buyers perceive premium tires as tops in quality.

    Besides Goodyear, all of Bridgestone/Firestone Inc.'s other major competitors—Michelin North America Inc., Continental Tire North America Inc. (CTNA) and Cooper Tire & Rubber Co.—acknowledge that they are enjoying a sales jump in their flag portfolios. They also say their private brand business remains as strong as ever and that they are committed to making it grow.

    Michelin's strategy of selling flag, associate and private labels to key customers will remain unchanged and currently is growing across the board, said Alison Heiser, vice president of Michelin Americas Small Tires. She said MAST looked at its resources and decided to “focus our private and associate business on our customers who are also dominant players in the flag brand business. That has not changed and I do not anticipate that it will change.”

    CTNA's private brand customers are asking for tires having higher UTQG ratings, higher speed ratings, and that are more performance-oriented than traditional entry-level tires, said Jim Mayfield, CTNA's director of marketing.

    Slightly less than 20 percent of the company's sales are in the private brand sector, he said. But CTNA has been modifying its private brand strategy by offering more private labels at different price levels—particularly the premium price points.

    Larry Day, president and CEO of TBC Corp., one of the largest private brand tire marketers in the industry, told Tire Business that the tire makers' commitment to private brand production “seems to have intensified.”

    “The resources that these manufacturers are dedicating to our accounts are extraordinary,” Mr. Day said.

    TBC, which reported a 28-percent surge in first-quarter sales, has not seen any evidence in the marketplace of an erosion in private brand demand, he said. “We have seen a movement to more premium quality, even within the private brands. So it does appear that the consumer is more interested, for example, in a 60,000-mile tire vs. the opening price-point special that is so commonly advertised in this business.”

    Ford's May 22 announcement of a replacement program for 13 million more light truck tires may mean demand for flag brands will increase in the short term, CTNA's Mr. Mayfield said. But that still poses opportunities for private branders to instill in consumers a sense of confidence in the tires they're selling.

    “The level of confidence the consumer has in the distributor of the product, I think, goes a long way toward their purchasing intent and their confidence level in the product,” he said.

    Both Ms. Heiser and Jim Vogel, vice president of sales and marketing for Goodyear's North American tire unit, agreed that whether a dealer carries flag or private brands, now is the best time to sell products at higher prices. Why? Particularly because of the “flight to quality”—and the latest Ford recall.

    “Consumers are definitely willing to pay more for tires than they currently do,” Ms. Heiser said. “They're looking for good advice they can follow on caring for their tires, replacing their tires and on servicing their vehicle.”

    Mr. Vogel noted that a consumer shift to flag brands can be advantageous to dealers who emphasize to buyers the manufacturer who made a private brand and placed the same technology and innovation in that tire as a flag brand.

    “If I were a retailer, I would not be out there with a four-for-$88 or $89 (special). I would be out there talking about quality and putting the best premium products of my brands in the spotlight,” he said.

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