The 20-something generation: Private branders decide it's time to offer 20-inch and above passenger tires; 'We have to be a participant'
It's no secret to anyone who follows the high performance passenger tire market that 18-, 19- and 20-inch tires are growing in popularity.
In 2004, they comprised 13% of independent tire dealers' total high performance tire sales, according to Modern Tire Dealer's 2005 High Performance Tire Survey.
That's 3% more than the previous year and 6% more than in 2002. The 20-inch segment in particular is growing so quickly that private brand tire marketers are developing their own 20-inch tires.
"We're excited about the ultra-high performance market," says Pat McLaughlin, president of SURE Tire Co. "It's the one piece of business that's continuing to grow at a very good rate within the marketplace.
"We feel we have to be a participant in that arena if we're going to continue to grow our business."
Development of the 20-inch segment is being driven in part by original equipment auto manufacturers, says Lyle Symonds, senior vice president of private brands for Treadways Corp.
"You're seeing more (cars) coming with (20-inch tires) as original equipment." Here's a look at how four of the major private brand tire companies are approaching the 20-inch passenger tire segment:
* Treadways Corp. (private brands: Jetzon, Laramie, Telstar, Eldorado; 4% combined replacement passenger tire market share, including Sumitomo, Doral and Sumic brands). Treadways does not have a 20-inch private brand tire yet, says Symonds, but "it's something we're exploring."
Treadways currently offers 20- and 22-inch passenger tires in the Sumitomo brand. (It owns the marketing rights for Sumitomo in the United States.)
Some of the company's private brand customers have access to Sumitomo products in those sizes, he explains, though "we don't have carte blanch to sell every one of our private brand customers the Sumitomo brand."
Symonds says it makes more sense to offer 20-inch and above passenger tires as part of Treadways' Doral line, which is shared by Treadways' distributors.
"The volumes you'd have in each of the four private brands for these rather exotic sizes... you need to have different molds, you need the equipment. It's more easily accomplished in a brand that's shared among all the different labels.
"We could use (a 20-inch Doral) right now, but it's not available to us. We're pushing hard for it."
* Hercules Tire & Rubber Co. (private brands: Hercules, Merit, Signet, Elektra; 2.5% combined replacement passenger tire market share). Hercules has two 20-inch ultra-high performance tires on the way in the Hercules brand, says Kevin Breen, vice president of private brands for the company's Hercules USA division. Sizes are 245/35R20 and 255/35R20. The tires will be made in China.
"We will have (the same sizes) in the Merit brand as well."
The tires will be Hercules' first foray into the 20-inch passenger segment. However, the Findlay, Ohio-based private brander offers 20- through 24-inch tires in a variety of "branded suppliers" like Kumho, Nexen, Falken, Yokohama and Federal, notes Breen.
Hercules decided to enter the 20-inch private brand segment a year-and-a-half ago. "We rely a lot on controlled distribution like our TDW (regional wholesalers). When they see something that's hot, we look at it as a potential for a controlled brand" like Hercules and Merit. (Signet is a generic brand that Hercules and Merit distributors both share.)
"Our primary distribution in the U.S. is still the bread and butter passenger/light truck/medium truck tire marketers. But if we have a customer that needs a 20-inch passenger tire or a 20-inch program, we'll have a product to offer them. When we see there is a size to justify an investment in molds, that's when we dive into it."
I's more expensive to build a 20-inch high or ultra-high performance tire than a broad-line tire. "The molds are different," he says. "The time it takes to produce it is longer. But as it becomes more popular, we intend to be a leader in it.
"For example, right now we're looking at what our Merit product line should look like in December 2007. If the need includes 20-inch products, then we'll have it."
* Del-Nat Tire Corp. (private brands: Delta, National, Akuret; 1.5% combined replacement passenger tire share). "The discussion of (20-inch) ultra-high performance tires for Del-Nat has been on the table for years," says Ken Coltrane, Del-Nat's vice president of marketing.
"We tried some programs with some manufacturers, starting off with 17- and 18-inch sizes. Then we started getting some suggestions that we should start looking at more 18-inch sizes and maybe some 20-inch sizes."
However, some of Del-Nat's suppliers weren't willing to develop those sizes for Del-Nat at the time. As a result, the Memphis, Tenn.-based company does not offer 20-inch passenger products in any of its private brands.
But to fill the void, it offers members three Z-rated, 20-inch Nexen brand tires in sizes 225/35R20, 245/35R20 and 255/35R20. They are the first 20-inch car tires that Del-Nat has ever offered on a regular basis.
"We added the Nexen program to our offering last year. Our customers were asking for them.
"Del-Nat is a co-op; we have a passenger and light truck product committee that gives us a lot of advice. They have the demand. What they don't necessarily have is the ability to buy at the right price level through any other source of supply.
"Del-Nat is able to buy and warehouse these products in Memphis. We're bringing them in by the container load. That makes it easier for our members around the country; if they need 20, 40 or 100 of these tires, (they) get a good price from us and are able to mix these tires with other products in their trailer."
Coltrane says Del-Nat ultimately would love to have enough volume to justify 20-inch car tires for its Delta and National labels, but limiting offerings to a "neutral" brand like Nexen will remain its strategy.
Even though the three Nexen sizes aren't exclusive to Del-Nat, they're "doing pretty well for us."
* SURE Tire Co. (private brands: Summit, Remington, Heritage, and up until recently, Essenza; 1% combined replacement tire passenger share). SURE Tire Co. was going to expand its Essenza line into the 20-inch segment this year. But Goodyear Tire & Rubber Co., which built Essenza for SURE, decided to phase out the line and replace it with Fierce, a completely new brand dedicated to the tuner market that was introduced three months ago.
SURE will distribute Fierce "and with that, we'll have Fierce in 20 inches and eventually 22 inches," according to SURE's McLaughlin.
The private brand group, which is headquartered in St. Peters, Mo., had wanted to add a 20-inch product to its Essenza line-up for a couple of years, but a green tire was not available.
"With Fierce, that's been taken care of. The technology is in place. We wanted to have a tire that had the reputation that we established with our high performance product line, and we felt it was worth the wait to have the right tire at the right price."
SURE also wanted to stick with Goodyear. "There is a lot of disparity in offshore products as far as wear and performance characteristics of tires. We wanted to be plugged into something that was world class. There are a lot of opportunities in the marketplace to become an importer of record. We made the decision to stay away from that."
Goodyear has promised to heavily promote Fierce. Meanwhile, SURE is providing members with point-of-sale materials. "We have the ability to produce our own pieces based on our members' needs."
When asked if SURE has plans to extend 20-inch passenger tires to its Summit, Remington or Heritage brands, McLaughlin said the company is always "looking at opportunities to improve our performance platform. Right now, Fierce is brand new. We've had very good success with it."
Billy Potter, president of Area Wholesale Tire in Baton Rouge, La., is a SURE member. He says the private brander needed to get into 20-inch passenger tires. "Everybody does if you're going to survive in the marketplace." Area Wholesale has 10 distribution centers throughout Louisiana and Texas. It sells to many small retailers. "If you don't have 20-inch tires, you can't get in the door."
Twenty-inch replacement tire sales are growing in Area Wholesale's markets. Car manufacturers are setting the pace by mounting more 20-inch tires at the factory, Potter explains. "Not only are they doing 20s -- they're going to 22s."
Potter would like to see SURE expand its passenger tire sizing to 22 inches and even beyond. He believes his company would profit handsomely by selling larger sizes.
"There are so many 20-inch tires out there, and you have so many dealers and distributors who settle (for less) on their gross profit. We don't give our tires away. We're making good money."
Ron Fakler, owner of Fakler Tire Service Inc. in Provo, Utah, says 20-inch and above passenger tires are the wave of the future.
"Companies who are making cars are putting them on," says the veteran dealer, who is affiliated with Del-Nat.
"Whatever the car dealers are going to lead with in size, the rubber companies are going to make."
Fakler believes that tire manufacturers don't necessarily want to build 20-inch passenger tires for private brand companies.
If a tiremaker decides to make the necessary investments to produce a 20-inch tire, it's probably going to do so for a house brand that it can completely control -- not a private label product that a dealer controls, he explains. But that isn't stopping him from stocking and selling what his customers want. "We buy 20-inch tires from Michelin, Toyo, Yokohama -- anyone we can get the tires from."
Going shopping: It takes time and planning to add products
What happens when a private brand marketer decides it wants a 20-inch ultra-high performance tire, or another product, for that matter? Here's how the process works for Hercules Tire & Rubber Co., according to Kevin Breen, vice president of private brands for the company's Hercules USA division.
"We have several manufacturers that we deal with -- predominantly in the U.S., Cooper, and then several factories in China," he says.
Hercules' first step is to put together a "shopping list, and (we will) have periodic meetings as a product group. Often we'll include our distributors as well. We'll review our list on either what we have or what we feel we're going to need within the next two to three years.
"We take the list to our various manufacturers and start looking at how we can source the product, what it will look like, what tread patterns are (popular) in the market, and what price points we need to acquire it at so we can successfully market it."
Once those decisions are made, production typically begins. "In medium truck, we have four different manufacturers. In broad-line, we have four manufacturers. When we get into UHP, we have a few (manufacturers) that we're comfortable with."