‘You’re in Graham country’

Dec. 1, 2004

Flying into Sioux Falls, S.D., the first things you notice are the brown, green and golden squares of farmland that stretch to the horizon. Each plot contains one, two -- sometimes three -- groups of houses, barns and silos huddled together like plastic buildings on a Monopoly board. In South Dakota, agriculture isn’t part of the economy; it is the economy.

Graham Tire Co. -- a Sioux Falls-based dealership with branches throughout South Dakota, Nebraska, Minnesota and Iowa -- has been catering to farmers since 1952. Last year, farm tires accounted for roughly 25% of Graham Tire’s $64 million in sales.

This year has been highly profitable as well. Graham Tire had its best month ever in October, selling nearly 1,200 front farm units. The dealership’s rear farm tire sales were up nearly 10.5% through the month. “We managed to keep pace with last year,” says Jim Hamilton, Graham Tire’s general manager. “And last year was pretty phenomenal.”

Bumper crop

After several down years, South Dakota’s farm economy is experiencing significant growth. The state’s corn production reached a record 520.7 million bushels this year, a 22% increase over 2003 results, according to the South Dakota Department of Agriculture. Acres harvested for grain totaled four million, another state record.

“Crop yield has been huge,” says Graham Tire co-owner Tom Graham, who runs the company with his brother, Bob. “The price of a bushel of corn is down, but the grain farmers are making money because of the big yields.”

“Another thing that’s very important is, ‘What’s the commodity price on-the-hoof?’ A couple of years ago, hog farmers were getting killed. But the price of hogs is good. The price of beef is good. And the people who are feeding the cattle are making money.

“Generous farm programs” also have helped, according to Graham. “The federal government has spent a lot of money subsidizing agriculture.”

Graham doesn’t expect favorable conditions to last indefinitely. “Everything is cyclical,” he says. “The price of hogs can come down. The price of cattle can come down. Maybe next year we’ll have a draught and yields will be down.

“It’s often a function of weather. Sometimes it’s too wet, sometimes it’s too dry. That varies every year. But right now things are very good.”


Loads of experience

Graham Tire has sold farm tires since Tom and Bob’s father, Bill Graham, founded the company. “He started with one store and sold everything -- farm tires, car tires, truck tires, bus tires. It just grew from there.” Farm tire sales and service have always been “a huge part of our business,” says Graham. “There’s no doubt about it.”

Graham Tire sells farm tires at both the retail and wholesale levels. Wholesale customers include other tire retailers, farm co-ops and even original farm equipment dealers. “If we have a good wholesale customer in an area, we’ll try to support him and not compete with him. On the other hand, if there’s nobody in a certain market that is close to one of our stores, we’ll (sell) directly.” Graham Tire has 22 locations. “The markets are all different.”

“In this area, we do a broad range of farm tires,” says Tim Jensen, assistant manager at Graham Tire’s commercial center in Sioux Falls. The outlet sells to more than 200 retailers within a 10-mile radius, ranging from two-man operations to larger outfits. “A lot of co-ops in the area use us, too.”

Wholesale customers’ wants vary, he says. “A retailer is usually after the name of the tire, the quality of the tire and the service to go with it. Co-ops are after the tire name, supply and the speed in which they receive the tire. Downtime is very expensive.”

Warranties mean a lot to both entities, according to Jensen. “They want to know that they will be taken care of.”

Graham Tire exclusively sells Goodyear and Kelly brand farm tires. The company is Goodyear’s single largest Goodyear brand replacement rear farm tire customer, according to Goodyear farm tire officials. Unlike customers in other market segments, farmers do not want a plethora of brands from which to choose, Graham claims. Brand loyalty is generally high. “If they know you carry Goodyear, for instance, they know that it’s a quality tire. They will pay for quality.”

Sourcing its farm tires from one manufacturer benefits Graham Tire as well. “It would be almost cost-prohibitive to carry more because of the price,” says Tom. “It’s expensive to carry another line.”

Keeping prices competitive can be a juggling act. Graham Tire’s outlets compete directly with other companies that sell farm tires, often within close proximity. “Pricing isn’t the only factor” in the farm tire buying decision. “But it is a factor.”


Service sells

Product is only one part of the equation, according to Jensen. Farm tire service is just as critical. “We have people who strictly do adjustments,” like Bob Stratton, who’s been in the business for more than 30 years. “If we have a problem, we send Bob out to look at it.

“We’ll get an older gentleman who’s been farming for 50 years. He brings in a tire that’s been ruined and asks for a new one. When we tell him that an adjustment can be made, he’s tickled.”

Graham Tire’s commercial tire center runs three farm service trucks. “On average we get six calls a day and at least twice a day we’re doing farm tire work of some kind.” Most puncture repairs are performed in the field. “It’s a bigger hassle for the customer to take the wheel off and bring it to us than us going out there.” Section repairs are done at the center, which also contains a retread shop. More than 80% of the farm tire injuries that Graham Tire fixes are punctures, says Jensen; the rest are section repairs.

“It’s a real inconvenience for a farmer to have a tire problem,” says Graham. “Like truckers, they can’t afford downtime.”


On the hunt

Not content to rest on its laurels, Graham Tire is extremely aggressive in looking for new customers. Each August it sets up a booth at Dakota Fest, a farm show in Mitchell, Neb. The event spans three days and draws up to 30,000 attendees, most of them serious buyers. “Dakota Fest has really enhanced our business,” says Craig Jones, a 31-year Graham Tire veteran who manages the company’s Mitchell location. “Farmers spend money when they have it. Nobody turns money around faster than farmers; they keep it in circulation.”

Graham Tire also makes efficient use of direct mail. Last month, the dealership mailed letters to farmers that offered a free fleet survey by appointment “before they put their equipment away for the winter,” says Scott Jansen, Graham Tire’s farm sales manager. Each letter came with a credit application. “You get a good idea of who wants to do business if you get a credit application back.”

Earlier this year, Graham Tire commissioned a local cable provider to film and produce a farm tire-themed commercial that began airing in October. The spot features images of tractors, crops and smiling farmers, and includes the tag line “You’re in Graham Country.” The project didn’t cost Graham Tire a dime, according to Hamilton. The dealership has done so much business with the cable station over the years that it put the commercial together free of charge.

“TV advertising is mostly (about) building brand image,” says Hamilton. “Farm isn’t a new service for us, but it’s a service that’s new to our advertising.” The commercial airs on ESPN, the Weather Channel, the Discovery Channel and several other stations.


Flexibility means profits

Farms in Graham Tire’s markets are constantly evolving. “Agriculture is a bigger factor in South Dakota than in any other state,” says Graham. Farm consolidation has been rampant. The South Dakota Department of Agriculture estimates the state had 31,600 farms in 2003, an 8% drop from 2001 and a 15% decrease from 20 years before.

“The size of the average farm has doubled. That doesn’t mean there is less land in production; there are just fewer farms.”

The plots that Jones’ customers cover vary from 2,000 acres up to 14,000 acres. “One of my big accounts farms 15,000 acres -- basically all row crops,” he says.

“Quite often, the farms are not contiguous,” says Graham. “You might have half a section here and half a section three miles away. That requires road time, which is tough on tires.”

The business has changed in other ways, too. “When I first got into the business, we were competing with Firestone, BFGoodrich, General. Our competition (in terms of brands) now would be Michelin and Firestone and maybe some offshore (brands).

“Equipment has gotten so much bigger. The size of the farm tires we sell is huge. And the equipment we have and are forced to use to take care of these tires has grown. You just can’t go out there with a pickup truck and change one of these tires.”

Proper application remains a top priority, according to Graham. “Loaded or not loaded, how much a tire can carry, how fast it can go -- there are a lot of things to consider. It’s very complicated.”

If any dealership has deciphered the complex world of farm tires, it’s Graham Tire, which is expecting another banner year in 2005. “I’m enthusiastic about the opportunities ahead of us,” says Hamilton, and the role that farm tires will continue to play in the company’s success.