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Private brand Q&A: TBC's Olsen discusses pricing pressures

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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.

TBC Corp. is the largest private brand tire marketer in the United States. Its TBC Private Brands division offers the Multi-Mile, Cordovan, Vanderbilt and Sigma lines, while its Treadways unit markets the Eldorado, Jetzon, Telstar and Laramie brands.

When one of TBC's main suppliers, Goodyear Tire & Rubber Co., withdrew from certain segments of the private brand business several years ago, the Memphis, Tenn.-based company was forced to "aggressively source a lot of product," says Erik Olsen, CEO and president of TBC Wholesale Corp.

"It took us a while to bring the type of stability to our product screen that we wanted to have, but we now have it."

In this exclusive, Olsen discusses TBC's long-term strategy, plus the effect of the recession on tire buying preferences and the various pressures that are impacting  private brand profitability.

"We believe TBC is very well positioned for the future and in the current environment, we couldn’t be any happier with what we’re doing."

MTD: Are customers more open to private brands during a recession?

Olsen: I think customers are always open to purchasing a product which they believe delivers the most value. The feedback we’ve gotten from some customers is that there are customers who may have been loyal to the original equipment fitment on the vehicle but are making other choices now. I think in this environment, people are looking for the best value they can get, and maybe their ears are a little bit wider open than in the past.

MTD: Major manufacturers have claimed that the replacement market is moving toward a flag or major brand model. Do you see that happening? Is this market becoming a major brand market?

Olsen: No. I think some of the manufacturers have chosen to take some of their brands that they have over decades invested a lot of money in and re-price them to a level that’s at the same level as value priced products.

I don’t believe people are flocking to major brands. What they’re doing is saying "Hey, this is the price range that I’m going to gravitate toward." Some manufacturers have taken some of their brands and moved them down to pricing levels that they historically were not at.  You can probably in short order tick off some brands that have been around for a while, and certain manufacturers have chosen to push pricing down on them. Long-term they’re just destroying the brand.

MTD: Has this trend had a negative impact on TBC's private brand offerings?

Olsen: We have continued to grow the sales of our passenger and light truck products. It may have had an effect on some of our competitors, but not us. I can tell you that when the industry was growing, we were out-performing industry growth.

MTD: More low-cost, entry-level tires are entering the U.S. market every year. What kind of impact, if any, is this having on the private brand market and your business in general?

Olsen: There has always been some of that product floating in. We historically have aligned ourselves with top flight customers who understand the overall value proposition of having a supplier that warrants its products and covers the appropriate level of protection for them, should there be an issue. Those customers really don’t switch for a couple of dollars here and there. There are certainly a lot of customers that are just deal buyers, but they’ve always been like that. A lot of those customers have not been TBC customers.

MTD: What is the future of private brand tires in North America? What will the market be like three, four or even five years from now?

Olsen: We think it’s going to continue to be robust for us. We spend a lot of time sourcing products and looking at five-year plans for our product screens to ensure we’re bringing in new SKUs that the market demands and developing new tires that will meet future consumer demand.

Combined, TBC Private Brands and Treadways have about 500 customers "Some are all retail, some are all wholesale, some are all commercial -- some are a combination," says Olsen.

Stay tuned to throughout the month of May for more exclusive private brand executive interviews!

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