Curve Ball – Is Football a Better Sponsorship Investment Than Motorsport?
While Michelin, Pirelli, Cooper, Kumho and – apparently – two other firms were battling it out to win the 2011 Formula 1 tyre supply deal, Continental AG was busy adding another championship to its football sponsorship portfolio. Conti’s decision to become a ‘premium’ sponsor of the DFB (German Football Association) Cup in its home market in addition to the firm’s global sponsorship of this year’s World Cup and the 2014 event in Brazil, demonstrates some typically Teutonic pragmatism. Rather than get involved in a bidding war that presents the winner with a logistic nightmare and a huge multi-million pound/euro/dollar bill, their thinking is that investing in a variety of top level football sponsorship deals reaches just as many potential customers. And this is without the associated hassle of having to develop, custom build, test and deliver some of the most expensive tyres in the world. True there is all the associated automotive excitement that comes with F1 support, but this way there’s no chance of your tyres making an equally public spectacle of themselves either, leaving the marketing department (and the R&D department) free to concentrate on other things.
Continue ReadingE-Tailers and Autocentres are on the Up
What will the tyre retail business look like in five years time? Who knows. As I have learnt to my peril in this column, prognostication is a dangerous business. Let’s not recall how last year I wrote “unless there is an unlikely stay of execution” regarding the implementation of s-marking regulations (see T&A’s August 2009 issue for more on this). But I digress. The news at the end of February that Halfords bought Nationwide Autocentres for £73.2 million (see page 14 for complete coverage) says something about how tyre retail is evolving. Along with the purchase announcement came plans to rebrand the chain and the affirmation of existing plans to double the number of branches to 424. When you consider that the second largest tyre retail chain in the country, ATS Euromaster, reported that it was “reviewing” up to 80 of its 456 branches last September, it is clear that size gap between chains at the top of the two sectors is narrowing. True, Autocentres don’t focus on tyre sales like the traditional outlets do, but there are signs they are considering how to increase their focus in this area.
Continue ReadingBigger is Dumber
In a recent speech given to the Professional Contractors Group (PCG), legendary tyre retail mogul Sir Tom Farmer warned would-be entrepreneurs against having simplistic, size orientated goals for their businesses. The Kwik-Fit Founder may have sold a 700-branch strong tyre retail chain to Ford for £1 billion in 2001, but for him size isn’t everything. He might not be Warren Buffet yet, but Scotland’s own oracle of Edinburgh had this sage advice: “bigger is dumber.” PCG is apparently the biggest organisation representing freelancers in Europe, so it sounds like Sir Tom was preaching to the choir with his message of the importance of building businesses on a core group of key employees, and then outsourcing the rest. However, as virtually all the global tyre manufacturers are now demonstrating in their collective quest to make an increasing amount of high-performance tyres in low-cost countries with less human intervention, full-time employees are expensive and an inevitably long-term investment. And, as most national tyre retail chains will concede, running large networks such as theirs is a similarly complicated business.
Continue ReadingEU-Korea Free Trade Agreement Will Aid Tyre Sales
On 15 October EU Trade Commissioner Catherine Ashton and Korean Trade Minister Kim Jong-hoon initialled a free trade agreement (FTA), which the EU calls “the most important ever negotiated between the European Union and a third country.” Estimated to be worth a total of 19 billion euros in new trade for EU exporters, the agreement is designed to remove virtually all tariffs between the two economies. However, it is a bilateral deal. And European carmakers, apparently fearful of being swamped by imports of more economically priced Korean cars in an already depressed market, were the first to call for a rethink through industry body ACEA. However this appears to have been too little too late and according to the commission, the initialling signals the end of negotiations. The current “stable legal text” will be formally presented to EU Member States in early 2010. So what does this mean for the European tyre (and associated product) markets?
Continue ReadingTyre s-marking statutory instrument delayed
I had to say it, didn’t I? I should have known better than to put proverbial pen to paper and write “unless there is an unlikely 11th hour stay of execution at the European parliament.” I should have known better because no sooner had these words gone to print then exactly this happened. I am, of course, referring to the wonderful s-mark legislation (also known as regulation 2001/43), which has become the subject of so much coverage in Tyres & Accessories recently. Apparently, tyres won’t necessarily need an s-mark to comply with regulation 2001/43 and, er, be s-marked. However, it doesn’t end there. The latest from the Department for Transport is that there has been a “delay in putting into place the statutory instrument which is required for the new s-marking regulations to become law.” In short, there won’t be any means of enforcing the new law in the UK until March 2010. This fact doesn’t affect the other European markets, which will all have to comply by the original 1 October 2009 deadline.
Continue ReadingSpending Their Way Out of Recession
Spend or save, that is the question. Watching newly inaugurated US President Barack Obama fight to push his trillion-dollar public spending plans through congress, exemplifies the divide between the two opposing schools of thought on how to deal with the current financial crisis. Conservative politicians holding opposition office (both here and in the US) appear to advocate lowering taxes and argue against the high levels of borrowing Gordon Brown and Obama are embarking on. But in practice the majority of both left and right governments around the world are doing similar things to Brown and Obama and advocating economic stimulus plans – albeit to a greater or lesser extent. But how do tyre businesses get out of slump? Can this market spend its way out of recession?
Continue ReadingSchaeffler/Conti Saga – ‘Over By Christmas’?
The announcement had a phenomenal response at the stock market where, following publication of Schaeffler’s statement on EU approval, tendered shares in Continental grew by as much as 50 per cent before levelling off at around 36 per cent up, in response. Why? Because up to this point investors had become decidedly nervous about Schaeffler’s ability to complete the deal and the EU announcement was seen as a sign that the deal as a whole is on track. Due to the well-documented contraction in credit markets bankers had been scratching their heads about where the necessary financing would come from and whether the supporting banks would be able to come up with cash.
Continue ReadingAge Old Question
Peter Gaster confronted the issue of tyre ageing head-on in what is likely to be his last NTDA dinner as association chairman. The headline news is that, following negotiations between NTDA director Richard Edy and the RAC Foundation, the respected motoring organisation has pledged its full support for to an industry-wide tyre age check campaign.
Continue ReadingWho Wears the Trousers?
The subject of grey marketing raises the hackles of wholesalers and manufacturers alike, with each blaming the other for its existence. So imagine my surprise when Kumho UK managing director, Steve Tidmarsh tackled the subject head-on, telling delegates at November’s Tyre Wholesaler’s Group (TWG) lunch that it is “the manufacturers who drive the grey market.”
Continue ReadingAn Untapped Resource? Nokian’s Kazakhstan factory bid
With news of Chinese product recalls and revised tax rules, some people are looking elsewhere to source their tyres. But if a tyre manufacturing colleague said they were about to expand capacity by entering into an off-take agreement in Kazakhstan, they would probably be met with either a blank “where-exactly-is-that face?” or a stream of Borat-related quips. Joking aside, Nokian Tyres, a company that has made a real success of its niche market approach, has reportedly taken the plunge and broken ground on $200 million-worth of production capacity in Astana, the former Soviet country’s capital city. Although Nokian staff have not immediately confirmed their involvement in the deal, it would see Nokian gain another low-cost production base to supplement its very successful St Petersburg, Russia operation and - just as importantly - a strong and growing market in which to sell its high quality winter tyres. The winter conditions in Ukraine and Kazakhstan are harsh, making studded tyres popular.
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