Implement tire market remains robust: Dealers also benefit from smart marketing

Dec. 1, 2001

When it comes to selling implement tires, you can say Paul Weaver has been "on the wagon" since the very start. The president of Princeton, Ind.-based Southern Indiana Tire Inc. started offering them, along with tractor tires, the day he opened for business 30 years ago -- before he added passenger, light truck and commercial truck tires to his line-up.

"That's where we began," says the plainspoken dealer, who oversees 21 outlets and a thriving wholesale operation that encompasses more than 300 customers in four states. And that's where he eyes future growth; Weaver says implement tire sales totaled more than $3 million at his Princeton store alone last year.

Planting seeds

Southern Indiana Tire provides tires for a wide range of farm implements, including combines, sprayers, fertilizers, spreaders, plows and hay wagons. While these devices serve different purposes, they have two things in common: Farmers will always need them, and they will always require tires. Implement tire sales also depend heavily on tractor tire sales, Weaver says. "If a farmer buys rear tractor tires from you, he will buy implement tires from you."

Weaver capitalizes on these built-in advantages with savvy marketing. He advertises implement tires via newspapers and radio -- "We've done some TV in the past" -- and also uses farmer testimonials, which he says have been very successful. "It's a strong word-of-mouth market. They all talk to each other."

Twice a year, his dealership hosts a farmer appreciation day at off-site locations (three in Indiana, one in Illinois). The events are held during the winter, "when farmers can't do a lot outside. We serve them breakfast and show them new products." Manufacturers also send representatives to discuss what's available and what's coming out.

"A lot of farmers will spend hours with us discussing prices, equipment, what their needs will be for the year... we also do a lot of (tire) trading at the event," he says.

Market dynamics

The farm tire implement market is on the upswing, according to Ken Weaver, director of sales and marketing for Firestone Agricultural Tire Co. (FATC). Implement tires comprise 15% of FATC's total farm tire sales. "Normally, you'll see a surge in replacement sales three to four years after a surge in original equipment sales," he says. "In 1996 and 1997, OE sales were huge; we're coming into the peak time to replace those tires." Utilitarian sizes like 11L15, "which you can put on just about anything," and 12.5L15 and 9.5L15, which are primarily used on wagons, are FATC's top sellers.

"The market was down 6% this year," says Jim Bamer, Goodyear Tire & Rubber Co. national sales manager for farm tires. "But it's still very robust." And it remains a big volume market. Nearly two million replacement implement units were shipped in North America during the first nine months of 2001, according to Goodyear statistics.

However, long-term market growth will depend on several factors, according to implement tire manufacturers:

1. Crop prices. Prices are still down despite increased productivity. "The biggest example (this year) was soybeans," FATC's Weaver says. In October, the USDA revised its crop projections for the year to reflect a 73-million bushel increase in soybeans, "which caused prices to drop 60 cents (per bushel)."

"Farmers have had a few years now of really tough times," says Neil Raysen, Continental Tire North America Inc. farm tire specialist. "One decent year isn't going to make them rush out and buy new equipment." But Raysen reports Continental's replacement implement tire sales in the United States are up.

2. More radialization? Some tiremakers expect the radialization of implement tires to increase as equipment manufacturers build larger, heavier machines to handle greater workloads. "Everything about radial is better," Raysen says. "Radials last longer, have better footprints and (achieve an ideal level of) compaction."

But bias implement tires still do the job for most applications, according to Clark Ent, ag product account manager for Specialty Tires of America (STA).

In Europe, Groupe Michelin recently introduced a radial implement tire for grain carts but has no plans to bring it to these shores, according to Tony Koury, Michelin North America Inc.'s director of sales and marketing for agricultural tires in the U.S.

Michelin is not pursuing the North American implement tire market right now. "We provide some tires, but only as a convenience for our dealers," Koury says. "Tractor tires are what drive the (farm tire) business."

All of Goodyear's domestic implement tires are bias, says Bamer. "It's a cost issue. You can't make a radial as inexpensively as a bias tire... but as the technology improves and manufacturers can figure out how to make radial implement tires efficiently, there'll be more."

Ray Evans, Titan Tire Corp.'s executive vice president of engineering, marketing and sales, says radialization will proceed slowly. "Bias tires are good, low-cost alternatives. It will be a long, long time until radials comprise 80% to 90% of the market."

3. Competition from imports. Inexpensive, Asian-made implement tires have been filtering into the U.S. for the past 10 years, according to STA General Sales Manager Gary Brewer. Many of them come from India, "but China lately has been a force."

It's tough to compete with off-shore implement tires, Brewer says, "because they're priced so cheaply. It's a constant battle."

4. Emerging demands. The changing nature of farming will affect the types of implement tires that are sold. Many farmers are cultivating more and bigger parcels of land as the number of small farms continues to dwindle. As a result, "we're seeing things we didn't used to, like row crop sprayers that can spray hundreds of acres a day," FATC's Weaver says.

Overload is a key concern, according to Titan's Evans. "It's not uncommon to see 70% to 80% overload on sprayers, and combines have been found to have 40% to 50% overload on tires." Titan has been strengthening its tires for these applications with extra plies.

Farmers also spend more time on the road driving from field to field than in the past, which has created the need for "road-worthy" implement tires. FATC's speed-rated implement tire, the Highway Special, is DOT-approved up to 55 mph, as is the Titan F1. STA's year-old American Farmer brand highway-ready implement tire can reach 50 mph.

Goodyear's version, the Farm Highway Service, even contains a light truck tire carcass for extra durability. Continental hopes to introduce its own highway-ready implement tire to the domestic market within a year, according to Raysen. "They'll be steel radial implement tires with a large footprint and low ground pressure -- the qualities you need in the field -- with high-speed capabilities for the road."

Highway-ready implement tires can be a tough sell, according to Don Nebelsick, president of Don's Tire & Supply in Abilene, Kan. Nebelsick has been offering the items for two years. "It's hard to convince a guy to switch to them because they're more expensive (than regular implement tires)" -- up to 30% in some cases, he says. "You have to instill in them how much longer these tires last."

Unfortunately, that pitch "shoots us in the foot because we sell fewer units," he admits. "But we're doing our customers a favor."

Stock and load

Implement tires and their uses have changed significantly over the past five years, Nebelsick says. Farmers are relying on thinner, taller tires to navigate narrowing rows and are running them at lower pressures to minimize soil compaction. And the rise of hybrid crops with thicker, stronger stalks and conservation tilling, which leaves hazardous stalk residue on field surfaces, have forced tiremakers to strengthen farm tire compounds to minimize stubble piercing. "Downtime is more important than it was 10 years ago. One day down with a combine can cost these farmers thousands of dollars."

That's why having the right tires in stock is critical, says Mike Thompson, president of Thompson's OK Tire Inc. in Beloit, Kan. Thompson keeps 4,000 to 5,000 Goodyear, Firestone and Titan brand implement units on-hand -- "all types, from small (implement) tires up through big combine tires. When the season hits, farmers need to be in the field. If we don't have what they need, they'll go somewhere else."

Thompson says implement tire sales in his market have been soft over the past few years due to low crop prices, and 2001 is no exception. "We haven't had good moisture this year. It was dry enough that we didn't get the yields we had hoped for." Fortunately, his 25-year-old side business of selling mounted implement tire and wheel assemblies to local farm implement manufacturers Krause Corp., Sunflower Manufacturing and Great Plains Manufacturing has helped off-set retail losses.

As implement tire quality improves across the board, more buying decisions are boiling down to price, according to Thompson, who says he has managed to maintain solid profit margins.

Take it or leave it

Many end users see implement tires as commodity items, according to John Acheson, president of Acheson Tire Inc. in Grand Rapids, Minn. As a third-generation farm tire dealer, Acheson knows better, but try telling that to the average consumer, he jokes. "People in our market are looking for price. They want the least expensive tire." And many of them already know what sort of tire they want when they enter his single-location store. That's why Acheson limits his implement tire selection to the Firestone brand. "If we can't get a certain Firestone tire, we'll grab something from another brand... like Titan or STA's American Farmer line," he says. Otherwise, the options are clear-cut. "There's no need to give them too many choices."

Internal benefits also make sticking with one implement tire brand worthwhile, he says. "If you get good terms, it's easier to pay your bills."

Acheson has noticed implement tire customers care more about service speed than brand selection. "If you can pull an old tire off, replace it and get them back on the road... they'll come from miles away. I do business in communities 30, 40, even 50 miles from here that have bigger tire dealerships with multiple stores. It sure beats waiting around for two days!"

Purchase factors

FATC's Weaver doesn't expect the habits of farm implement buyers to change. "Farmers typically run them until they fail," he says. Most will have small injuries repaired, "but if there's significant damage, they'll normally replace the tire."

Modern farmers realize the importance of investing in new equipment, including implement tires, according to Nebelsick. "The farmer is more sophisticated than ever," he says. "They've had to become good businessmen in order to survive. And if you give them good service, it makes them loyal customers."

The trick for dealers is to establish their shops as the places to go for tractor tires first, says Michelin's Koury. "If a dealer has the tractor tire business in his area sewn up, he can sell implement tires at a fair margin. Of course, it depends on how competitive their marketplace is. But in some communities, certain tire dealers are the only game in town."

Goodyear's Bamer expects the implement tire market to remain "very, very competitive. With the exception of over-the-highway tires, it's a commodity market; 50 cents can make a difference! But to be a full-service farm tire dealer, you've got to have them."