Private brand Q&A: ACCC's Lewin discusses the private brand 'squeeze'
This interview is the latest installment in a month-long series of question-and-answer sessions with top executives from the tire industry's leading private brand manufacturers and marketers.
With more than 1,000 members, American Car Care Centers Inc. (ACCC) is the largest tire dealer program group in the U.S. and one of the country's preeminent private brand marketers. (ACCC offers the American private brand to its members. Cooper Tire & Rubber Co. is the group's sole private brand tire supplier.)
In this exclusive interview, ACCC CEO and President Len Lewin candidly addresses the state of the private brand market, plus the role that "tire professionals" will continue to play in connecting customers with the right tires.
MTD: What is your assessment of current market conditions for private brand companies like ACCC?
Lewin: As you know, over the past few years there has been a significant shift awat from private brands by a number of major tire manufacturers. This action, coupled with a growing number of low-cost imports, has certainly taken its toll on the private brand market. Nevertheless, an attractive, good quality product -- such as our American brand -- is always attractive to a dealer because of the exclusivity and consequent profit potential. Given the current economic conditions, consumers are more concerned with and search deeper for good value.
MTD: Is this U.S. becoming more of a major brand market?
Lewin: It's no secret that manufacturers do not make as much revenue selling a private brand product as they do one of their flag brands. When capacity became an issue, rather than builing more plants it made more sense for manuafcturers to streamline production to what was more profitable for them. Therefore decisions were made to cut back or eliminate private brands from their offerings. Having an array of products to ofer, they selected a minor-major brand to try fill that void, some more successfully than others. The overall result has been a shift in numbers and by definition, to flag brands.
MTD: What impact is the recession having on private brand tire sales?
Lewin: Although the buying public is much better informed today, they still rely on tire professionals to guide them towards the right purchase for their needs. I have always been a firm believer that the vast majority of sales are controlled by the salesperson at the counter, not the consumer. The sales professional's job is to provide the best value to the consumer while keeping an eye on profitability.
MTD: Are low-cost imports biting into private brand sales and/or profit margins?
Lewin: There is little doubt that these products are having some impact. Due to the current economic climate, they are having an impact on sales in general - not just private brands. Many customers come in to make a purchase with a defined amount to spend. They have decided they cannot or will not spend more than that amount for the tires they need. If they can find a product below that defined amount, they generally will not hesitate to make the purchase. They are not concerned with handling or comfort or even mileage; they just want the tire for the least amount of money. Low-cost, entry-level products fill that need.
MTD: Looking ahead, what does the future hold for private brand tires?
Lewin: It is my opinion that once we get beyond the current recession, the trend towards flag brands will continue. Manufacturers who basically exited that segment of the business will not re-enter it. It also is my opinion that there will always be a place for a quality private brand offering. It may be a smaller segment but should remain an attractive one because of exclusivity and the profit opportunity that follows this exclusivity. The challenge will be for the private brand manufacturers to produce a quality product at a competitive price in order to push back the compression brought on by the minor-major brands.
Stay tuned to www.moderntiredealer.com throughout the month of May for more exclusive private brand executive interviews! Also check out the May 2009 issue of Modern Tire Dealer for a full-length feature story on the future of private brands.