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Private-ly Niched: Specialty Private Brands are on the Rise, Filling Niches Nicely

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The perception is that the private brand market hasn’t always gotten the respect within the tire industry it deserves.

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Not because private brand tires are in any way inferior in quality and performance. But merely because they aren’t "major" brands.

As any private brander will tell you, their tires are of the highest quality, at a price both you and the customer can afford, and deliver a very attractive profit margin.

But whether they get any respect or not, private brands are growing – like a weed in some segments. In fact, this growth has extended beyond the expected passenger, performance and light truck/SUV lines to different subsections and specialization.

One of the fastest growing segments of the private brand market right now seems to be specialty tires, which have found their place in the private brand market and have really prospered – much to the delight of all involved.

Doing Just Fine

ATV, off-road tires and many other tire types have become hot niches within the private brand market that can generate a lot of profits. But is the specialty private brand segment bigger than just a niche? And can or will it continue to grow?

"Virtually all of our products are ‘non-people’ tires, other than passenger radials and light truck tires," says Robert Sherkin, president of Dynamic Tire. "We find a strong demand for the continued development of new products – and for the ones that we already have.

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"From the perspective of the major rubber companies, it would seem that some of the segments that we operate in are small niches. I guess when your annual revenue is in the multiple billions of dollars, a particular market segment that has a value of ‘only’ $50 million may not be significant to a major. But from our perspective, we find it very worthwhile.

"So I guess like a lot of things, things can appear very different depending on where you sit when you are looking at them."

One of these growing segments is specialty light truck (SLT), as Pro Comp Tires refers to it. Scott Ward, president of the company, sees the SLT segment as a bit of a hybrid, in that it gives the profits of private brand tires, but there’s isn’t as much competition.

"This is a niche market that moves in and out of private brand markets without competing with traditional tire dealers," says Ward. "It does compete against the major brands with great success, with high margins and very little competition."

Revenue streams and competitors aside, one person who does view specialty private brands as a niche is Dan Wire, president of Treadways Corp. But that doesn’t mean he doesn’t have respect for those who operate in that arena.

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"We view the specialty private brand area as a niche," he says. "I think the guys in that area have developed it, have done a great job and are probably succeeding very well. My feeling is that this niche will continue to be solid, but for right now, we’re not making any plans to enter this particular area."

Specialty Becomes Specific

Specialty private brand tires have really started to develop solid popularity. Consumers are certainly a big reason for this, but increased product availability has also had a great deal to do with it.

"It does seem that there is a continual proliferation in sizes and type of tires for all categories," says Sherkin. "And within these types, more specialized products are being offered, each designed for a more specific purpose.

"For example, in the ATV segment, instead of having a choice of only one pattern that was developed for OE, today you may as many as six or eight patterns to choose from based on the specific application of the vehicle. As the better suppliers pay more attention to the market, we think that this expansion in offerings will continue by the suppliers that are customer-driven.

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"The best companies always want to build a better mousetrap."

Pro Comp Tires sees the trend in Detroit toward pickups and SUVs, as well as consumers who want to personalize their vehicles, as a main reasons for the increased popularity of and specificity in the SLT segment. "One of the main reasons this market has heated up is that, until recently, there were very few players in the market who mainly built bias-ply tires," says Ward. "There were hardly any manufacturers that wanted to invest the money to change over their factory to be able to mass-produce large radial tires for short-run profits.

"At that time, automakers were producing more cars than trucks. Now, the automakers are producing more trucks and SUVs than cars. These vehicles are becoming increasingly sophisticated to the point where bias-ply tires don’t perform well, thus becoming out dated.

"The trend today is to dress up the vehicles that we buy with aftermarket lift kits and accessories to fit our own personalities. This sophistication mandates larger tires and wheels that fit and perform. The major tire manufacturers are now investing large amounts of money in equipment to develop this segment."

Entire Market Sees Growth

Taking a step back from the specialty tire segment, private brands as a whole seem to be fairing very well, according to all involved. And there’s nothing on the horizon that indicates a change.

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"In our view the private brand market is alive and prospering today and we believe that it will continue to grow and develop into the future," says Sherkin. "Notwithstanding the inherent attitude of the major rubber companies to control the market, there is a strong demand for products developed by companies like Dynamic and other non-major brands to meet the needs of the market that are not adequately addressed by the majors."

Treadways’ Wire agrees wholeheartedly that the market is strong and will continue to grow well into the future.

"I believe the state of the market in the future is pretty good for those distributors that have a solid supplier and the ability to invest in new products and/or sizes," he says. "There certainly is still a strong need for private brands in the marketplace and I think that’s evident by the numbers that you see in the market."

Pro Comp Tires’ Ward sees this market as a place where companies can prosper and grow – even if they don’t have the mass and infrastructure of the major tire companies.

"The private brand market is a great market to be in for businesses that don’t consider themselves as a private brander," he says. "At Pro Comp Tires, we think of ourselves as a manufacturer without the factory. We develop new sizes, new tread patterns, and new rubber compounds that compete with the major brands.

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"With that in mind, we are able to choose the factory that has the latest equipment and technologies to support the development we need, as well as the price points we need. A lot of private brand marketers are looking at the market as price-point only, which is why you see more of them going off shore for their products. This is something that we see a need for U.S. manufacturers to address soon."

That seems to indicate change, and a period of transition and transformation is what Treadways’ Wire sees. And perhaps the industry might see the number of private brand players thin a little.

"I think that for a variety of reasons, the private brand market is in a time of change. I think over probably the next 12 to 18 months, we’ll see the players in the private brand arena get a little more clearly defined, in terms of suppliers, customers and distributors," he says.

"The SKU proliferation has put a lot of pressure on private branders because it requires a lot of investment to stay up with the SKUs. The distributors that can do that will continue to do very well."

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When it comes to private brands, the question has always been, ‘How well do they stack up against flag brands in terms of popularity, price and quality?’

Naturally, everyone involved in the market sees the tremendous benefits that private brands offer. But that’s never been the problem. The problem lies in making the consumer believe in the value that private brands offer.

"Certainly in terms of quality, we are very, very competitive," says Wire. "The quality of the good private brand in the marketplace is equal to any of the flag brands. As far as pricing, I think all of us in the market would like to see the spread between the two become greater. The price compression has gotten a little too close, although recently the spread has started to improve.

"But in terms of value, private brands still represent a tremendous value in the marketplace both for consumers and as a profit opportunity for dealers."

So, not only is the private brand market solid, but the different segments and niches that have broken out within it are doing well, also.

Whether you’re a private brand dealer or a "manufacturer without the factory," as Ward says, the market is certainly worth keeping your eye on. The profit margins have always been there, and now range of tires that can be offered is improving to fit the needs of many different types of customers.

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