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Big O Tires Exec. Interview: Nationwide Expansion on Horizon

TBC Big O Tires Bourrut-Maciak-Bull-

Do you realize how hard it is to win three straight championships in a row in professional sports? The last time it was done was all the way back in 2002. The Los Angeles Lakers – stacked with Kobe Bryant and Shaq in their prime and Hall of Fame coach Phil Jackson – won three straight NBA Championships from 2000-2002.

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Despite how tough three-peats can be to achieve in professional sports, it is possible with a strong nucleus. Big O Tires executives say its strong core of dealers allowed them to pull off a three-peat in the tire industry with three straight years of sales and profit records from 2019-2021 – last year was Big O’s best ever – as they became one of four TBC Corporation brands to reach $1 billion dollars in sales.

Despite a record-breaking year, Big O Tires executives are still looking ahead to the future, as they detailed during Big O’s 2022 Dealer Conference in late June in Dallas, Texas. Jim Bull, vice president and general manager of Big O Tires, proclaimed at the start of the conference, “This is only the beginning for Big O Tires, and the ‘O’ stands for opportunity.”

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Big O Tire executives say that, for this growth to continue, they need to win over the customer of the future. To do that, you must collaborate. Just as you don’t win in the NBA title with one single person – even the best players like Michael Jordan and LeBron James know that – Big O knows it needs to collaborate with its dealer franchisees to grow to reach one of its main goals: expanding from its heavy West-coast presence to more Eastern markets and becoming a national retailer. From there, the group can expand its franchisee and distribution opportunities, executives say.

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To get an idea of how Big O reached the billion-dollar mark despite ongoing supply chain, employment, and training issues that the industry faces, I spoke with Laurent Bourrut, president and CEO of TBC Corp.; Jim Bull, soon-to-be-retired vice president and general manager for Big O Tires; and his successor Brian Maciak, executive vice president, general counsel and chief compliance officer for TBC. The three discussed the future of TBC Corp. brands like Big O Tires, how the brand is dealing with supply chain and economic issues and how Big O Tires plans to prepare for electrification.

When it comes to TBC Corporation and its Big O Tires brand, how would you like to see both grow in the next five to ten years?

Bourrut: Lots of growth is just ahead of us if we want to become a truly national retailer with Big O. Lots of work [is needed] to cover the whole country. And for Midas, there are also pockets of opportunities everywhere. The vehicle parc is evolving in the right direction, still growing. And within this evolution, there are strong growth avenues with EVs, of course, but also with light trucks based on the booming last-mile delivery sector. [We also want to see] strong growth in the specialty segments.

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Bull: Our first focus is to get positioned to be ready for the EV tire business, which has got certain levels of complexity to it. There are tires that come with foam inside of them, for example. We are really kind of building this first-step playbook for EV tires that’ll build on itself to get ready for the tire business.

But we think by presenting an image of being EV ready, even consumers that are not EV heavy will look at that as a distinguishing factor. It’s, “They must know what they’re doing. Right? [Big O Tires] is ready for EV.”

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Maciak: I do want to focus on our current markets. We do have some holes in some cities and we’ve got an analytics team that’s looking at that. So we want to fill those areas out. We also want to take Big O into other markets. Other customers will be thrilled to have a brand like that in new markets. So we’re going to explore that and we’re going to grow with the new franchisees or existing franchisees. Then, we’re going to try and get some new blood as well and grow with them, but it is poised for monumental growth.

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Big O Tires is largely in the West and Midwest, but again, there are opportunities in the East to take it. It’s just going to require a lot more work. Right? Because we’re going to have to introduce that to a brand new customer base.

How did the pandemic affect TBC brands like Big O Tires?

Bourrut: First of all, safety was our first concern. And we did our very best to protect the health of our employees. We [did] a great job to protect the health of employees.

We leveraged this situation to build a new kind of hybrid working model in our organization. Meaning that we allow our employees to work at home and to work at the office and mix this depending on the departments. And it’s working very well nowadays. It has been implemented in the course of the second semester of 2021. Now, the feedback we receive from our employees is great. So this was the first outcome of the COVID crisis.

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Bull: At the beginning of the pandemic, when there were just so many unknowns, we literally had calls every day, every morning. Kind of like a war room approach. Just talking about basic things, you know, certainly about safety protocols at the beginning, how we could help our franchisees with that, you know, what was going on with the consumers, staying open, letting folks know that we were open because, fortunately, we happened to be an industry that was considered essential. Not everybody was that lucky.

Consumers were scared, so we really did a good job of partnering with our franchisees to make sure they got the word out that we were open and ready to do business. In fact, we actually mobilized with some pretty aggressive promotions to help get people. Because after a while people [realized], “Hey, we can get out and drive.”

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Maciak: It certainly opened our eyes and made us realize that we do need to prepare for the unforeseen. And we, Jim and I, daily, will leave our stripes at the door. We could care less about a title. We want to get to the right solution. So what we found out is there’s no arrogance with us. Our franchisees have some of the answers. So we found that we reached a better decision quicker when we collaborate with them. We revamped our governance process.

One of the things we look at is, “What if X were to happen?” Right? What are we going to do? And so we’re planning for that unforeseen circumstance. But also the stuff that is certainly seen and right in front of us. We’re working with those franchisees, they love it. And what we’ve found is there is no magic sauce, but when you roll something out that has the fingerprints of the franchisees in it, it’s going to be widely adopted, and it just is better for the brand. So we found that very early, and we’re [capitalizing] on that.

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How are TBC Corp. and its Big O Tires brand dealing with growing inflation and supply-chain issues?

Bourrut: Well, Big O is not immune from the current situation or future issues. But we did our best in order to protect Big O Tires. Big O Tires is part of the family, the TBC family. So we did our best in order to supply Big O Tires despite the series of disruptions we endured in 2021. We are working hard to put in place a mechanism that will allow the bigger dealers to be delivered one time a day or several times a day in the future.

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We are evolving more and more toward a business model based upon the supply chain as a service. So we do not only deliver tires, but we deliver services and solutions and will deliver connected services and solutions in the future. So. this is the natural evolution of our business models upstream for our distribution branches.

Bull: The big challenge is obviously making sure that our franchisees are kept ahead of the cost changes. We provide our franchisees with a recommended retail price file that includes updated costs every two weeks. And through the pandemic, we absolutely mobilized to make sure they got the price increases, as they came down, were reflected in revised retails, and they obviously updated their retail price or their cost in their system. If you fail to do that during a time of that kind of tumult, your gross profit was going to take a hit. So it’s improved top line, but last year and the two years of the pandemic, we not only increased units but obviously average sell price, because of inflation, has gone up substantially.

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How are TBC Corp. and Big O Tires preparing for electrification?

Bourrut: We have already seen an impact because we have customers coming in with their EVs at our Midas, Big O, Tire Kingdom and NTB stores. So first of all, we are learning. We are also partnering with OEs and suppliers in order to provide a complete package of services for EVs.

Second, we also develop our own product lines, particularly with the TBC brands and the new one is called [Sailun Tires] Erange. This new product line will occupy the tier four segment. We are also dealing with our suppliers and partners to develop products for our Tier One, Tier Two and Tier Three.

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So at the end of the day, we will have complete coverage of the market being able to address those customers capable to pay for a premium tire, those customers capable to pay for a quality tire and for a value tire.

Bull: Obviously down the road, these [electric] vehicles won’t have oil changes, but they still have brakes, and these brakes wear out faster because these vehicles are heavy. So we’re going to have a website dedicated to EV, and we’re going to work to try to become what we call “EV certified.” We don’t have all that built out yet or know what that really means, so that’s something we’re going to try to do from a marketing standpoint and internally in terms of an internal certification. The good news is that Michelin (one of Big O Tires’ main tire brands and partner with TBC parent Sumitomo Corp. in NTW distribution) looks really ready for EV tires.

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Maciak: You know, at the end of the day, [Big O Tires] has this drive to be customer-centric. And as customers are going to go into EVs, we need to be a provider for them. We need to be a service provider for them. So yeah, we’re investing in research, we’re evaluating technology, we’re evaluating equipment. We’re going, as Jim says, we’re going to create that playbook. We’re going to be ready to tackle that challenge. But, you know, it’s a big challenge. One that we haven’t needed to overcome before. So we’re doing that in partnership with those that know more than us. But we’ll be ready.

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