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‘Only efficiency will save tyre distributors’ – Top 5 European tyre wholesaler Fintyre : Tyrepress

‘Only efficiency will save tyre distributors’ – Top 5 European tyre wholesaler Fintyre

Thursday 2nd February 2017 | 0 Comments
Fintyre’s HQ relocated north to Seriate, Bergamo
Fintyre’s HQ relocated north to Seriate, Bergamo

CEO Mauro Pessi shows how the Italian distributor has consolidated its position in recent years, including a quarter of domestic market share

In response to a contracting market in 2013 and 2014, Italian wholesale giant Fintyre underwent a reorganisation, involving relocation north from Empoli to Seriate, Bergamo and a staff reduction of 60 employees. The overhaul of the company structure did not end there; it started a process in 2015, completed in late 2016, which has changed the face of Fintyre. This, it states, has consolidated its position as the leader of the Italian market with a share of around 25 per cent. In 2015, British investment firm BlueGem Capital Partners, which at that point held a 90 per cent share in Fintyre after its original 2009 investment, was recapitalised following a major financing agreement with GSO Capital Partners. The company then made two major acquisitions – Pneusmarket and Franco Gomme – which have helped to increase turnover from 255 million in 2014 to an estimate of more than 400 million euros in 2016.

The management team behind these changes is led by CEO Mauro Pessi, formerly of Pirelli and Brembo. Pessi recently spoke exclusively with Tyres & Accessories’ sister website in Italy, PneusNews, explaining Fintyre’s recent restructuring, and how it was able to enact in three years the business plan set by BluGem, beginning with achieving revenues of 400 million euros in 2016.

Pessi stated: “Increasing revenues is one of the key objectives of Fintyre’s three-year development plan. The acquisition of Pneusmarket from the Marangoni Group in late 2015 and Franco Gomme in May of this year have allowed us to make a significant leap in growth.”

T&A: Is big beautiful? In a country of small and medium-sized enterprises that focus on flexibility, Fintyre has instead decided to rely on size and synergies of scale to optimise the costs of being competitive. Are new acquisitions being planned in Italy, or can the consolidation of national leadership be considered complete? Will a phase of expansion into European markets now begin?

Mauro Pessi, CEO of Fintyre

Mauro Pessi, CEO of Fintyre

Pessi: Enterprises in the tyre distribution business in Italy are of a medium size that is insufficient to deal with pressure on margins and to make the investments necessary to offer the service that customers demand nowadays. When, in 2015, the BlueGem fund decided to increase its shareholding in Fintyre, reaching 90 per cent of capital, it acted with these considerations in mind: an overly fragmented and inefficient market that necessarily had to go through consolidation. This is what happened.

The shareholder’s strength and operating speed made it possible for Fintyre to lead this process in Italy. Fintyre is now clearly the national market leader (four times larger than its closest competitor in Italy) and one of the top five in Europe. This does not mean that our expansion phase should be considered over. If opportunities arise in Italy to grow and diversify our offer, we will certainly attempt to seize them. We are also looking outside Italy with interest: this is normal if we consider the shareholder’s international profile and our current size.

Will the agreement with Cub Elecparts to distribute TPMS remain an isolated phenomenon, or is there a desire to expand the offer with new light mechanical products?

Our strategy does not include entering into the distribution of automotive steer parts, but this does not preclude the possibility of developing complementary products for the tyre world.

Over recent years the tyre industry has transformed drastically (acquisitions, online sales, all season). How will the market change (manufacturers, distributors, tyre dealers) over the next 5-10 years?

Trends in tyres are generally similar to those in other economic sectors. The same principles always rule: pursuit of maximum efficiency, in both production and organization, in order to offer customers competitive conditions and high service standards. You may object that this is the history of the market economy, and this is true. Only over recent years have certain structural trends become more marked, including through the opening of markets. Will it continue to be this way over the next decade? Let’s put it this way: I doubt that the trend will reverse itself, but it’s difficult to say whether the pace will be as fast as it is today. The ever-increasing search for contact and intimacy with consumers through new channels and new technological solutions will affect the future structure of distribution channels and the operating model and geography of operators on the market today.

Almost a year after the acquisition of Pneusmarket, what are the results? What synergies have been developed? Is the intention to keep investing in retail distribution, perhaps also in related sectors (light mechanics)?

The acquisition of Pneusmarket was very important because it marked Fintyre’s entry into retail distribution, allowing it to diversify revenues. With about forty points of sale and sales of over 40 million euros in 2016, Pneusmarket is now the largest chain of stores in Italy, with a brand wellpositioned in consumer and industrial segments.

We expected the integration to create synergy in sales and distribution and in inventory and product management. We are working in this direction: much has been done, but there is still work to do.

Pneusmarket could represent the first pillar of potential future growth in the retail world.

What results led to the distribution agreement for the Vredestein brand? What developments will there be in CSVs?

Collaboration with Vredestein is confirmation of Fintyre’s potential and, equally, of the extreme interest that manufacturers have for us. With Vredestein we have created an innovative model of brand presence in Italy.

Do you anticipate that Franco Gomme will be integrated into Fintyre, or is the strategy to maintain the autonomy and independence of the Padua company?

The agreement signed this year at the time of acquisition provides that Franco Gomme will continue to operate under its own brand, under the guidance of Franco De Marchi, because the company’s distribution and business model is distinct from and complementary to Fintyre’s.

Franco Gomme is thus continuing along its path of commercial growth with total autonomy and operating independence, and we intend to safeguard its professionalism and position on the market. In this case as well, we are working to generate synergy, in particular in purchasing, product management, and finance.

What does diversification of revenues look like in Fintyre today?

Diversification of revenues, along with increasing revenues, is another objective in our development plan. The two acquisitions had this in mind: with Pneusmarket, we entered retail distribution, while with Franco Gomme we occupied new demand segments and supplemented territorial coverage. So today, the process of diversification, considered by channel, products, and territory, is well along. Of course there is always room for improvement. And we can always find new opportunities.

The company also invests in services to resellers, with the B2B platform, networks, training, and much more. In your opinion, how will retail sales of tyres evolve over the years to come? What role will online sales have? How will the traditional channel evolve or change? New protagonists?

Traditional retail, that is tyre dealers, will certainly change. It’s already changing, as market fragmentation is increasing: new operators, such as mechanics and service stations, have entered the retail and tyre world. This dynamic was also prompted by the B2C world. So traditional tyre dealers must add new services and light mechanics and clearly must always keep a window open to B2C.

What are the most important characteristics that a distributor must have, from the perspective of the reseller: a wide range of products, logistical capability, or marketing support? How important is it today to make direct contact with consumers through advertising campaigns and/or online direct sales? What are the results of Fintyre’s B2C portal cambiogomme.it? Are developments anticipated?

The three points you mentioned are all equally important. Flexibility in products offered, having an extensive and well-served distribution network, and providing continuous assistance are now indispensable prerequisites for creating customer loyalty. High standards can be met only if you have the ability to make the necessary investments. The consolidation of our market began from here: at a certain point it became clear that less equipped distributors would not be able to endure in the face of changing demand from tyre dealers.

We estimate that the total of the B2C market accounts for about five per cent of the total sell-out. Past experience in more developed markets shows us that potential may reach 10 per cent of the market total. It is also true that the operating costs for this type of channel are quite high, which in fact makes the margins for this type of sales channel less attractive.

In addition, contrary to other products, the sale does not conclude with delivery of the product, but is finalised by the tyre dealer upon installation: thus, the role of this category fundamentally remains in the B2C world as well.

What does the BlueGem industrial plan anticipate for 2017? Do you expect it to be listed on the stock market over the next few years? Once we reach the objectives of the three year plan, Fintyre will become an interesting company for many market players – what are BlueGem’s intentions?

The mission of private equity funds is to optimise one’s investments. BlueGem acquired a stake in Fintyre in 2009, and in 2015 it increased its shareholding to 90 per cent, with the decision to support a three year development plan. That’s what’s happened so far. It would be premature to talk about what might happen at the end of the three year plan. In any case, it would be up to the fund manager to make that assessment. As to me, the task is clear: to proceed with the plan and achieve the industrial objectives that we have established. So far it’s gone well. lucia.tonini@pneusnews.it/akb

The original Italian version of this interview is available here on our sister site, PneusNews

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