TGI partnering for sizable growth
When Tyres & Accessories last caught up with Tire Group International a year ago, the Miami, Florida-based wholesaler was able to report a highly successful 2010, with revenues up 35 per cent year-on-year and unit sales climbing 26 per cent to around 1,200,000 pieces. Back then company CEO Antonio Gonzalez said he expected continued growth in 2011, and TGI has delivered on this forecast; last year the US wholesaler achieved a 25 per cent increase in unit sales and revenue grew by a third. And while we’re currently less than a quarter of the way through 2012 and the year may yet throw a surprise or two in our direction, recent and current developments at TGI indicate the company will once again report strong annual growth.
The most significant event for TGI during the past 12 months was the firm’s entry into a partnership with Transportation Resource Partners (formerly Penske Capital Partners) and the McLarty Companies. News of the deal was made public in October 2011 and Gonzalez described the two firms as “companies that share the very same ideals as part of their core and also share the vision for the growth of TGI.” He added that “TRP, with its close association with the Penske organisation, and McLarty are leaders in their industries and bring a vast amount of resources to our business.”
Growth requires capital
Explaining the decision to partner with the two investors, the TGI chief executive shares with Tyres & Accessories that “we were looking for opportunities to grow, and growth requires capital.” He elaborates: “We’ve always had capital but the then current ownership had their focus in areas other than the tyre business. We wanted to grow our business a lot more aggressively and quicker than we could with them, and that was the reason why we decided to seek out new partners.” Dollar and cent figures connected with any investment from TRP and McLarty are of course confidential, however Gonazales states that the two companies’ input will be used to help consolidate opportunities in the markets where TGI is present, especially core markets, with other companies that complement its business. “Latin America and the Caribbean is still a focus and we’re continuing to plant seeds there,” he comments.
Latin America and the Caribbean already account for 53.1 per cent of TGI’s total sales, yet Gonzalez anticipates continued growth within the region. To accommodate market demands there, TGI operates what it calls its ‘arterial plan’, with ‘veins’ reaching all its core markets in the Caribbean, Central and South America. “We have opened offices in the Dominican Republic, Peru, Brazil, Venezuela and Mexico,” the CEO shares. “Opening them has paid off for us – through them we have gained great market intelligence and made good contacts that have helped us with many issues, including their knowledge and assistance with import regulations and procedure.”
Moving forward, Gonzalez says the next step for TGI is to partner with key distributors and help them improve their own distribution networks. “We have already reached an agreement with the first distributor and expect to close a deal with them very soon. The second company is already lined up. If all goes to plan we are looking to double our revenue this year.”
Antonio Gonzalez explains that this sort of partnership benefits TGI as it brings with it additional brands, including major brand products, plus the partner’s existing distribution networks and experienced personnel. It also provides strengths in different segments; he comments that while the agricultural and OTR sectors currently account for only 10 per cent of business, TGI is looking to double or triple this during 2012 through its distributor partnerships.
Yet the main focus of such partnerships, Gonzalez explains, is geographic penetration: “Miami is the gateway to Latin America. One of the companies we are in talks to partner with is a Mexico-based distributor we already have a minority stake in, and we intend to take a majority share. Under the agreement we’re in the process of negotiating we will gain access to various distribution centres in Mexico. In short, the emphasis is growth and expansion, growing core markets and our focus on Latin America and the Caribbean. This will be facilitated by our new partnerships and that’s why we’ve gone down this path.”
In addition to growth through partnerships, Gonzalez reports that TGI projects a 17 to 20 per cent budgeted organic growth this year. He also shares that the company successfully avoided the supply issues that threatened many wholesalers in 2011 and he doesn’t foresee supply issues being an impediment to growth this year either.