Flight or Fancy?
Private Branders Say Quality is There – and So Are The Customers
Go to any tire company dealer meeting these days and you’ll hear discussions on how safety-concerned consumers are turning to major brand tires – names they know and trust. And how flag brand shares have grown in recent years, obviously at the expense of other brands.
Well, some of those "other" brands don’t quite see it that way. Private branders – marketers of products made by the majors that often have higher UTQG ratings than familiar brand names – say they aren’t seeing any "flight to quality," and, in fact, are more than holding their own in today’s safety-conscious market.
"We haven’t seen any evidence in the marketplace of erosion in private brand demand," said Larry Day, president and CEO of TBC Corp., which markets the Cordovan, Multi-Mile and Sigma lines, as well as the recently acquired Vanderbilt/Turbo-Tech brand.
"But we’ve 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’s commonly advertised."
Day feels any noted share shifts away from private brands has been the "result of the departure of weaker distributors and programs. But it hardly makes sense that Firestone’s problems would lead to a strengthening of flag brands."
Treadways President Dan Wire sees it the same way. "We haven’t seen any apparent rush of consumers to flag brand products. Our customers are well aware that we’re supplied by top-quality manufacturers, and they have complete confidence in the quality. I believe that, when the facts are fully analyzed, you’ll find very little overall movement in the marketshare of flag brands vs. private or associate brands."
While he said sales of its Regul and Winston private brands remain strong, Heafner Tire Group President and CEO Dick Johnson said he’s seen some erosion of private brand marketshare in recent years, well prior to last August’s Bridgestone/Firestone recall. "But this erosion was more of the result of the pricing and program strategies of the major manufacturers than any change in consumer confidence with the private brand product.
"In a situation like this, where the quality of a particular product is called into question, consumers will tend to gravitate toward nationally recognized brands that are ‘comfortable, secure and trusted’," he said. "And these nationally recognized brands are reaching out to consumers with increased advertising and promotional activities centered around the quality theme.
"But it’s unclear how significant any shift to flag brands has been or how long lasting any shift will be. Do we have sufficient data to know if it’s more of a consumer move from one flag brand to another, or of private brand consumers moving to flag brands?" he asked. "No."
Johnson also suggested that Ford’s push on major brands helps skew the share "mix between flag and private brand replacement sales. This doesn’t mean that consumers don’t have trust or confidence in other brands, including private brands."
Fill Rates Keep Pace
Sudden production shifts to meet last year’s recall push hurt private brander fill rates in 2000. But none of the marketers Tire Review talked to expect this year’s recall to leave them short.
"If anything, what we’ve seen from our suppliers is that their commitment to private brand production seems to have intensified," said Day. "The resources they are dedicating to our accounts are extraordinary, and our fill rates are currently in the low 90% range."
"At this point, our fill rates haven’t been adversely affected and, actually, we were offered additional production on the recall sizes, if required," said Treadways’ Wire, who oversees the Laramie, Eldorado, Centennial, Jetzon and Telstar lines, as well as Sumitomo’s North American distribution.
"I realize, however, that it’s still early in the game and things could change. But I don’t believe that this new recall will result in the supply problems we experienced during the first one, because it appears that Ford is attempting to spread the replacements out over a longer timeframe."
"The entire industry was caught by surprise with the recall, and as manufacturers scrambled to ramp up production, private brand production was disrupted," admitted Johnson, who recently took the reins of the Regul, DynaTrac and Winston brand marketer. "As a result, fill rates suffered."
But he noted that "while this new recall was another surprise event, the manufactures have been able to utilize the infrastructure put in place in 2000 to help meet the increased demand. As a result fill rates haven’t been as negatively impacted this year."
All three feel comfortable that they will have more than adequate supplies to meet customer needs.
With consumer tire attention at its highest level in decades, what have private branders done to improve their products? Really, nothing more than normal upgrades and adjustments, according to those we spoke with.
"We have always offered our customers the highest quality products," said TBC’s Day. "Our premium touring tire, for example, has a UTQG of 700AB, and we back it with a 100,000-mile mileage warranty. The best private brand programs offer the dealer tires he can sell for higher gross margins than the flag brands, while giving his customer comparable values at lower prices."
Wire said his firm has "always placed a strong emphasis on high quality products produced by manufacturers that will not compromise their standards. We’re always interested in improving the overall performance of our products, but we don’t have any reason to make changes just because of the recalls.
"We’re no different than anyone else in this industry," said Wire. "We would certainly like to sell more premium products, and we’ve been expanding our premium offerings and increasing UTQG’s for many of our lines over the past few years as part of our overall marketing plan."
"As a standard process, we regularly review with our manufacturers the UTQG ratings and speed ratings of our products in comparison to other private brands and flag brands," said Johnson. "We certainly want to be sure our products are competitive in these areas, and that those ratings properly convey the quality and performance capabilities of our tires."
How to Compete
Given today’s increased emphasis on performance and safety, what aspects or benefits of a private brand line should dealers emphasize to stay competitive with private brands?
"I would emphasize warranty," Day suggested. "Our tires come with a workmanship and materials warranty, and several have TBC-backed mileage warranties. We also provide the dealer materials to use for his own mileage or road hazard warranties. Taken together these warranties indicate how confident the dealer is in the quality and dependability of his private brand selection."
"Certainly, consumers want to know more about the manufacturer of the tires that they are considering to buy," Wire said. "Private branders have to continue to emphasize not only the features and benefits of our products, but, I feel, we’re going to have to put more emphasis on the technology features that our suppliers bring to the party.
"But, I really don’t believe that these recalls are going to change the one fact that is most important to the consumer, and that is the trust that they have in their local dealer," he continued.
"Tire are not a maintenance-free product, and they shouldn’t be sold as such," said Johnson, who also stressed the contribution of tire companies.
"Our brands are manufactured by some of the industry’s leading manufacturers, and have a solid reputation for delivering outstanding consumer value.
But Johnson said consumer tire satisfaction is not just about a particular brand or manufacturer. "Achieving performance that produces the highest levels of consumer satisfaction is more about correct application – the right tire for the load and use of vehicle, as well as tire and vehicle manufacturer recommendations – proper mounting and balancing, and on-going tire maintenance by the consumer, than it is about the brand or manufacturer."