Marangoni Becoming a “Global Player“ in Brazil
Although Italian firm Marangoni celebrated its 50th anniversary in the new Millennium, the year 2000 primarily represented a significant milestone on its path towards becoming a global operator. Today, ten years later, the Marangoni Group is, aside from Bandag and the new tyre manufacturers’ retreading activities, the industry’s sole genuine “global player”. The company has not only successfully established itself in Europe and North America, it is now slowly gaining a foothold in China. However in the last decade it is the operation in Brazil that has, above all, become the backbone of its global industrial presence.
For Gian Piero Zadra it goes without saying that this claim is more than just a glib statement, that it can be backed up with figures. Brazil’s retreading market has traditionally been one of the largest markets in the world. In 2008 alone 7.9 million truck tyres plus six million passenger car tyres were retreaded there, related the managing director of Marangoni Tread Latino America (known until five years ago as Marangoni do Brazil). Last year, admittedly, Brazil did not remain untouched by the recession: the market lost about ten per cent in terms of volume.
Marangoni – exclusively involved with commercial vehicle tyres in Brazil – claims a market share of approximately 13 per cent, which equals at least one million retreaded truck tyres (2008). This is larger than the entire British market. If the Italian firm can claim to currently take a 13 per cent share of the market, this means the company occupies second place in the industry behind market leader Borrachas Vipal (approximately 35 per cent), a Brazilian company. Thus Marangoni has very recently overtaken Bandag; according to market observers, the US subsidiary of Japan’s Bridgestone Group has clearly suffered losses in Brazil in recent years and today is holding onto a market share of up to 15 per cent there, way less what it enjoyed upon Marangoni’s entry into Latin America; see chart for market conditions.
Now, ten years after entering the world’s second largest retreading market (after the USA), the time is also right for Gian Piero Zadra, who has built up and led the Brazilian operation from day one and also established a family in that country, to look back and reflect. Not only did Marangoni need to fight for a place within the Brazilian market following its official establishment in 1998 (production at the factory in Belo Horizonte began two years later), it wanted to do this with a product that back then was totally new in Brazil, its “Marangoni Ringtread”. Marangoni has, in its own opinion and also that of others, been able to establish itself as a price leader and a premium brand, the managing director notes, and already at least 50 per cent of tread production capacity is dedicated to Ringtread manufacturer – and this proportion continues to grow. Through this production the monthly capacity of around 1,500 tonnes is almost totally consumed, informs technical director Marconi Gambogi Alvarnga during a factory tour. This already very satisfactory share of total production given to Ringtreads has come in part through changes in the market, but is also attributable to an untiring effort to generate sales by the Marangoni team in Latin America, which today is comprised of more than 150 employees (including almost 90 in the factory).
What is meant by ‘changes in the market’? Brazil is counted amongst the so-called emerging markets. In recent years its economic performance has so strongly developed that, significantly, road freight traffic has on average grown by ten per cent each year. As a result, a wave of modernisation has washed over truck fleets in this Latin American country; every year some 30 per cent of the heavy commercial vehicles in the Brazilian market are new vehicles. But these changes in the market are also linked to the professionalisation and growth of transport fleets – while the traditional one-man fleet operation will admittedly continue to dominate the market for years to come (they currently operate more than 60 per cent of all heavy commercial vehicles), the future clearly belongs to larger fleets, some of whom are nationwide operators. And it is these companies who – thanks in part to steadily improving transport infrastructure – demand efficient tyres and appropriate service so they can focus upon looking after their core business.
Through the transformation that is currently taking place in Brazil, the sense of importance placed upon retaining independence is diminishing amongst fleet operators and related transport companies, says Renato Paolillo. “Today they increasingly accept the idea of outsourcing,” continues the Marangoni marketing manager in Brazil. The growing technical complexity of vehicles has also lent a hand in awakening fleets to the need for professional help – and this also applies to tyres. Although in Brazil it still remains the case that independent commercial vehicle tyre dealers frequently have no mounting facilities of their own and mounting and balancing are still largely performed directly on-site by the fleet operator’s own employees, such services are today accounting for an increasing percentage of business for both retreaders and tyre dealers.
At this point a key difference between the Brazilian and, for example, the British or German tyre markets should be highlighted: In Brazil a retreader is a retreader and sells retreaded tyres; a new tyre dealer is a new tyre dealer and deals in new tyres. A business’s involvement in both of these areas together is a very rare occurrence in Brazil. Both products thus only very occasionally together form part of a single sourcing or sales strategy for end users or for wholesalers or manufacturers. Both domains, that of retreads and that of new tyres, more often compete against each other in Brazil. A similar example of this market principle can be observed, incidentally, in that the majority of retreaders and tyre dealers are tied to a particular supplier. Multi-brand strategies are given scant room within a company, and for this reason Brazilians readily talk about a “monogamous relationship” in this context.
And what marketing efforts has Marangoni carried out to promote the establishment of Ringtreads in Brazil, Argentina, Chile and the other Latin American countries? In the ten or so years since the first treads were manufactured in the Belo Horizonte factory, Marangoni has been able to shake off the status of newcomer in Brazil and today supplies a network of 60 Marangoni retreading partners, ten of which are directly owned by the Marangoni Group. These partners – as per the basic rules of the “monogamous relationship” – almost exclusively manufacture Marangoni retreads. A good example of these partners the SL-Group, who in total operates four retreading facilities in Brazil. One of these plants is in Campinas, two hours from São Paulo. It first opened in December 2008 and is today considered a model Marangoni operation and furthermore used for training purposes.
The factory was equipped according to the latest technical standards and accommodates both mould-cure and pre-cure retreading. The maximum monthly capacity of 1,200 tyres is currently around two-thirds utilised, with Ringtreads accounting for more than 60 per cent of this production. This, adds Marangoni managing director Gian Piero Zadra, corresponds to a proportion typical of what is also expected from other partners. The remaining production includes “Unitread” and “Precauch” treads – both recognised Marangoni brands in Brazil. The Profil-Liner and Kontur tread is not offered in Brazil. Along with Marangoni’s own brands, retreading products from new tyre manufacturers are also considered acceptable, especially as Marangoni in part also cooperates with these firms. However it is unthinkable for the Italian supplier that a partner would also offer treads produced by its direct competition from Brazil (see diagram). “Our customers are absolutely aligned with us,” Zadra continues.
The development of such business relationships has, of course, definitely improved Marangoni Tread Latino America’s sales. Furthermore, the technical training of production staff and salesperson education for Marangoni partners has had a very positive impact. As marketing manager Renato Paolillo explains, “a culture of pre-cured treads” dominates in Brazil. “Our greatest challenge today is to change the attitude and mindset of people in the market.” A decisive point here is the approach to quality taken by the retreading partners. Not only was it not until March 2010 that the first rigid standards for the certification of retreading operations (INMETRO; analogous to the European ECE regulations) came into effect, barely half of the present 1,300 to 1,500 known retreaders and 150,000 industry employees in Brazil will be affected by these changes, as the president of the Brazilian retreading association ABR Henrique Teixeira Pena stated to Tyres & Accessories. In addition and unconnected to this, Marangoni is striving, through technical support and extensive training and education, to implement its own high standards of quality within its partners. Marangoni is also adopting high standards in its own production facilities. As a result the company is receiving ISO-9001 and ISO-14001 certification this spring.
One of the many methods Marangoni has used to demonstrate the technical superiority of Ringtreads in comparison with traditional tread is through the use of computer software. One example of this is “Tread Manager”. With this programme, data about all relevant tyre activity can be collected. “This is a comprehensive programme and we are at present the only ones that offer something like this in Brazil,” continues Paolillo. A further, specialised programme is “Ring Control System”. Using this enables the exact analysis of the performance of a retread (or a new tyre) through its working life. “This programme is a strategic tool which can be used to gain an advantage for our customer over the competition.” Importantly, such programmes and other related services are meant “to create a relationship based upon loyalty,” adds managing director Zadra. “The development of consumer confidence requires time, but this is how it is done.”
However, Marangoni doesn’t just see itself as a partner for Brazilian retreaders; it also views itself as a partner for the new tyre industry there. Since 2008 the company has maintained an arrangement with Continental AG that has placed the exclusive licensing rights to the “ContiTread” pre-cure retreading brand in Marangoni’s hands. “ContiTread is therefore fundamentally our fourth brand in Brazil,” continues Gian Piero Zadra. It is hoped that by 2013 this new brand will have secured a two to three per cent market share. Sales should, the managing director hopes, not only take place through the Marangoni partners, but through Continental commercial partners as well. A second new tyre industry partnership that Marangoni has operated since the end of last year is that with Pirelli. While Marangoni has produced “Novateck” brand retreads for Pirelli under an offtake agreement in Europe since 2003, the collaboration to manufacture and distribute Novateck retreads in Brazil is new. Incidentally, Marangoni is not at all active in the new tyre business in Latin America; it however intends to offer its own machinery such as, for example, the “Ringtreader”. Marangoni’s internationalisation there is thus based exclusively upon the business of retreading.
Marangoni management sees that the commercial success of such cooperative ventures will meanwhile require consistent investment been made in the company’s own factory. While two Banbury mixers – one with a 160 litre chamber volume and one with 85 litres – are currently installed there, the second of these will this year be replaced with a 180 litre Banbury mixer. Marangoni are investing around three million euros in this. At present Marangoni cannot justify its own R&D department there. Yet while the basic work will therefore be performed in Rovereto, Italy, products are always tailored to the Latin American market. This of course needs to be the case, as demand there is predominately for completely different products. This begins with sizes: Tyres in sizes 315/80 R22.5 or 19 and 17.5-inch are not at all sold in Brazil; instead 295/80 R22.5, 275/80 R22.5 and 11.00R22 are by far the most popular sizes and alone account for some 90 per cent of the market.