New UK Truck Servicing Network For Continental

It is no secret that the commercial tyre business is one of the most competitive sectors in the UK market, with margins on product slim, to say the least. Continental has developed a new strategy for this market, which was revealed to the press by Brian Smith, managing director of the Continental Tyre Group, in early April. He revealed that he was asked by the Conti main board to come up with a viable strategy for truck tyre business in the UK – nothing was excluded and the solution could be as radical as possible.

The answer was ContiNetwork, a service-based partnership with independent tyre dealers. The objectives were clearly set out, based on advantages for dealers, operators and, of course, Continental. First of these was to provide the independent truck tyre service business with profit opportunities from a contractual partnership with Continental.

The advantage for the operator was to provide a new and effective nationwide service capability, while Conti wanted to create a partner chain of dealers to compete for business at international, national, regional and local tyre service business. Dealers will have exclusive territories and brands and will operate in a competitive environment. Does the provision of exclusive brands work in the truck tyre market? Brian Smith said that it has “been proved to work” and he pointed out that the Continental brand would not be offered on an exclusive basis, as the company was keen to maintain its relationships with other service and tyre suppliers, such as ATS, MotorWay and Hi-Q.

The Network – Where Does It Leave NTS? Conti carried out extensive research on the market and the requirements of customers. This revealed that the optimum number of partners, consistent with offering nationwide coverage, is 55, each working in an exclusive, defined area. Some of these areas are extensive (for example all of Kent), which suggests that a ContiNetwork partner would need a mobile capability to service the area properly.

This is implied in the aim of ContiNetwork, which is “to meet the demands of today’s truck operators with greater flexibility and efficiency”. The new network will be composed of independent businesses, managed by the Continental Tyre Group, so what will be the effect on the Commercial Division of the Conti-owned equity chain, National Tyre Services? This consists of just over 70 depots, so even if the new network is comprised entirely of NTS depots (which it won’t be), there will be a number of people affected. The short answer is that NTS’s Commercial Division will disappear and consultations with employees are currently underway.

Options include transfer to the retail division of NTS, or to another Conti-owned company. Then again, the branch might bid to become an independent ContiNetwork partner, or it could be purchased by an outsider. Brian Smith expects that some of the NTS Commercial staff will join ContiNetwork, but he would not venture a figure.

Whatever happens, it will be fairly swift, as the plan is for ContiNetwork partners to be signed up and the network to be operational by the end of June. Twelve Months’ Research Matt Horscroft, in charge of Commercial Vehicle Tyres Marketing, gave some of the research findings and background to the decision to create ContiNetwork. Any new partnership would have to be service-driven, flexible, mobile, adaptable and entrepreneurial, he said, hence the move towards independent dealers.

Conti’s research revealed that the UK truck tyre market is growing extremely slowly. The figures include retreads and are split into SHS (semi-heavy service) and HHS (heavy-heavy service). This latter category is 19″ tyres and upwards.

Patently, there is little growth to be found in the market, so the way to grow is to provide a better and more efficient service. The research also revealed that over half the truck tyre replacement market is accounted for by retreads, although the growth is slowing down, but more on this subject later. Continental examined the geographic spread of the truck parc, which was fundamental in arriving at the proposed territorial splits.

It looked too at the types of fleet in the market and the different types of truck operation. These place different demands on tyres, which is why Continental offers application-specific products to suit customers’ needs. These will be offered to ContiNetwork partners as part of the service available to customers.

Matt Horscroft summed up the conclusions from the research as follows: service is all-important, service is local, fleets have specific needs, there are competitive pressures to grow and a radical new approach for the future was needed. “Staying as we are is not an option,” he concluded. The Offering In Detail Working from the above conclusions, Continental had a number of options.

The first of these was to offer the service through existing equity NTS. This, said Brian Smith, did not fit the modern, entrepreneurial requirements and was not regarded as a viable strategy. Option two was some kind of partnership between equity and independents, but this was ruled out as there could be conflict between the two components and Continental might be accused of favouring its equity.

By process of elimination, a partnership with independents was chosen as the best way forward. ContiNetwork will be a contractual partnership between dealer and manufacturer, with the dealer committing to provide an agreed level of service and to purchase an (undisclosed) level of product. There are also sell-out targets.

It should be noted that participating dealers are not committed to any kind of exclusive deal with Conti, as the idea of the new network is to provide the customer with what he wants, which may not be Conti group products. On the service side, one aim is to have a maximum drive time of 50 minutes to any breakdown. What does Conti bring to the party? An operations centre at Stockport will take calls, handle central billing if required and provide fleet and tyre management reports.

The company will continue to seek fleet business (both national and local) and will provide promotion and marketing support. Continental will also provide training, a fast track claims management and technical support. Earlier, we mentioned that more than half the UK truck tyre market is accounted for by retreads, so this has obviously figured in Continental’s thinking.

The company has established an exclusive partnership with retreader Bandvulc, who will offer a casing management and collection service in addition to supplying the network with Bandvulc and Conti-Re retreaded tyres. The time scale is ambitious, with discussions taking place with potential partners this month and the network up and running by the end of June. Brian Smith once again emphasised the importance of service to the success of the initiative and revealed that a service operations team will carry out regular audits to ensure that partners comply with requirements.

The accent is on competition, and Brian Smith envisages a situation where partners are kept on their mettle by the realisation that, if they do not shape up, someone else is waiting in the wings. What are the targets of ContiNetwork – has the parent board laid down sales criteria that have to be achieved? Not so, said Brian Smith – the brief was to establish a clear market strategy, and it has the approval of the main board. Of course, the ultimate objective has to be to improve truck tyre sales, and Brian Smith said that he has a three-year business plan.

However, he made the point that Continental is not trying merely to buy market share and, if during the transition period he finds that unit sales are down, then he will not be unduly alarmed. “ContiNetwork is a new partnership, and we are building something for the future” was his comment..