Last year was challenging for Don Nebelsick, co-owner of Don’s Tire & Supply, a two-outlet farm tire dealership in Abilene, Kan.
For the first time in many years, his farm tire sales took a step backward, and the negative momentum carried over into 2010.
For a dealer who derives nearly 30% of his overall revenue from farm tires, it wasn’t the best of times.
Fortunately, things have improved since then as Nebelsick’s ag tire sales have rebounded. In fact, they’re up 15% vs. 12 months ago. How did Nebelsick’s small but thriving dealership get from there to here? Through salesmanship and good, old-fashioned service, he says.
Pricing: up, up and away?
A number of factors contributed to Nebelsick’s sales decline last year. For one, the ag tire shortage that marked most of 2008 continued well into 2009.
On the end user side, no-till farming — by which tractors chisel the soil’s surface rather than plow deeply — has become more prevalent in his area.
No-till farming “takes hours off of tractors and equipment, which translates into less wear for tires,” he says.
Crop prices were “as good as they’d ever been” in 2008, according to Nebelsick. However, they took a dip in 2009. “That hurts available cash for someone who needs to replace their tires.”
At the same time, ag tire manufacturers have implemented price increases. Nebelsick says the prices for his ag tires have risen 30% to 35% over the last three years. This was not totally unexpected, he adds.
“Prices stayed so level for so long, and manufacturers didn’t raise any prices. Then all of a sudden it was, ‘Guys, we have to do something. We can’t keep doing this. We have investments to make. We can’t sit here and not make a profit.’”
As a businessman, he says he understands why manufacturers had to raise prices. However, some of his customers haven’t been quite as understanding.
Several customers expect to pay prices that haven’t been seen in a number of years, he adds. “Prices stayed the same for so long that it became imbedded in their minds. Some of them think you’re trying to get rich off of them. We have to explain to them that our costs have increased.”
After he explains the situation to them, most customers come around.
It’s a matter of making sure they understand that costs have risen throughout the entire supply chain, says Nebelsick.
He stresses to them that the “tire manufacturer needs to make a profit to stay in business and Don’s Tire needs to make a profit.
The majority of farmers today are pretty good businessmen, and they have to wear a lot of hats, too.”
As it always has been, the key is to ensure that farmers are satisfied with their tires. “The farmer doesn’t want downtime. They want a good product. When they get something that doesn’t work, the first thing they want to do is get rid of it.”
Service builds loyalty
Internally, Don’s Tire has been working on some initiatives to shore up its bottom line. “We’re branching out in our wholesale business,” says Nebelsick.
“There are fewer and fewer distributors and the little guys can’t afford to buy the quantities they need from the manufacturers.”
Nebelsick’s in-the-field service business has been robust, as well. His company operates four dedicated ag tire service trucks, plus a dedicated repair staff in-shop.
“That can create an extremely loyal customer. People don’t realize how many tires the average farmer has on the ground. It can be 100 to 200.”
Farmers are looking for quick, thorough tire service at a fair price, he says.
“It’s the same with the farmer’s crop analysis people and his feed supplier — once he learns he can trust you, he will do what you tell him to do. Price is still important, but it becomes less of an issue.”
Nebelsick believes his ag tire sales will continue on their present upward trajectory. And possible expansion next year is not out of the question for the dealership, though “we won’t do it on a whim.”
He also realizes the market will continue to present challenges.
“The cost of our inventory will increase,” he says matter-of-factly. “When prices go up 30%, it costs us 30% more to keep inventory on hand.
“Plus with the expansion of tire sizes for sprayers and the big horsepower tractors, the cost of inventory has already multiplied over the last four years. It just takes more money to operate.”
Challenges, both present and future -- Farm tire execs cite pricing, inventory as big issues
What are the major challenges facing farm tire manufacturers and dealers today? What will the farm tire market look like in 2011? Commercial Tire Dealer recently posed these questions to several top farm tire manufacturer executives.
Tom Rodgers, director of marketing, Agricultural Tire, U.S. & Canada Commercial Tire Sales Division, Bridgestone Americas Tire Operations LLC, says raw material prices pose the biggest problem right now.
“The industry looks like it will again be impacted by volatile raw material costs similar to 2008.”
Neil Rayson, president of CGS Tires U.S. Inc., also cites raw material costs as a major concern. Inventory is another issue facing tire manufacturers, according to Rayson. And it is an important issue for dealers, as well.
“For the dealer, if the short-term trend continues, his dilemma will be how much inventory to commit to, and when, to try to secure sufficient spring supply and mitigate the impending price increases.”
Michael Burroughes, director of marketing, Ag Tires, Michelin North America Inc., cites the growing number of farm tire SKUs as a pressing issue.
“New machines are getting consistently bigger, heavier and more powerful, thus requiring an ever-expanding range of new tire sizes. Another challenge is addressing the anxieties of the end users who are experiencing fluctuations in commodity prices.”
Looking ahead, Jeff Vasichek, vice president of sales and marketing for Titan International Inc., says business for North American farm tire dealers should be healthy.
“Farming has become a global market. With conditions... affecting the demand and prices of wheat and other crops worldwide, the more prominent the role of farming in North America — to feed the world — will become.”
Bill Haney, sales manager for Balkrishna Industries Inc., echoes that sentiment. “The U.S. farm tire market appears strong headed into the first half of 2011,” he says. “Farm income appears to be leading other sectors and farm machinery sales are strong. Despite overall uneasiness about the U.S. economy, our BKT distributors are ordering very heavily for early and late spring.”
“I believe we’ll see a healthy increase in farm tire sales in the U.S. in 2011 — not a return to 2009 levels, but a solid boost without some of the craziness of the pre-recession market,” says Manny Cicero, president of Alliance Tire Group. “Farmers are investing in products that deliver value and efficiency, which is a great sign.”