“Arriving” in Europe a Top Priority for Vipal

For a company like Borrachas Vipal S/A the European market is becoming more and more interesting. On the domestic Brazilian market, a market with a size of about 8.5 million retreads per year (90 per cent pre-cured treads), Vipal is a clear market leader with a 45 per cent share, and the company is well established, with 25 successful years already under its belt. In Europe, on the other hand, Vipal started business with its newly found subsidiary only two years ago. However, according to international business director Maria Locatelli, this is one of Vipal’s major advantages, as the market thus offers the retreading and tyre repair material supplier an immense scope for developing its business. Based upon this conviction Vipal appears to be strongly self-confident. Nevertheless, there is no need to hurry, Mrs Locatelli asserts; it is better to approach the European market thoroughly rather than rapidly: “We must first understand the market,” says the director, summing up Vipal’s European strategy for the time being.

Only very recently Brazil’s Vipal caught the European retreading community’s attention when it published its short-term goal of achieving up to ten per cent of the European retreading market by the end of 2008. This announcement was understood and meant as a clear bid towards the other players that currently dominate the European market. “To Vipal, the market is ripe for such an action.” Whether or not Vipal will be able to gain a tenth of the European retreading market within such a short period of time certainly remains to be seen. But undoubtedly the announcement signifies that Vipal is aiming at double-digit annual growth rates in Europe, a point confirmed by Maria Locatelli in an interview with Tyres & Accessories. Although Europe will be a strongly developing market for the Brazilian material supplier, development won’t take place uniformly across all of Europe. Thus, for example, as far as Vipal is concerned Eastern Europe and the CIS states are considered as emerging states with regards to retreading. But these markets lack the maturity of Western European tyre markets or even the Brazilian tyre market. Customers in these Eastern European countries often make a tyre purchase because they consider the price is right, not the quality, the director says. For market as diverse as Europe, with a strong West and a fairly weak East in terms of retreading and the development of the truck tyre market, a potential market leader such as Vipal, who has a monthly production of about 13,000 tonnes of rubber, would need to have “the right approach.” Ideally, the company would need to adapt its approach to each country it focuses on.
The Brazilian company wants to first of all focus on the (Western) European retreading market, a market that represents at least 85 per cent of the entire European retreading market. Already Vipal can report a measure of success; for example, the company has gained a market share of about five per cent on the Spanish retreading market and another three per cent of the Portuguese market. This has occurred within a timeframe of little more than two years.
Borrachas Vipal clearly sees itself a quality supplier and certainly highlights this with its dominating presence on the Brazilian home market, where other companies like Marangoni and Bandag also operate production sites. However, it is not possible to appear and behave like a market leader on a market that is led by others – being ahead of the others with product initiatives and the setting of benchmark prices, as Vipal does in Southern America, is not as yet the right approach for Europe. And Vipal hasn’t been willing to fight for market share by means of offering cut-rate prices, Mrs Locatelli points out, even though the European retreading market is one where cut-throat competition is already present. Instead of selling retreading material on the merits of its price Vipal prefers to emphasise the high quality of its products and the additional services that come together with these products, she continues. “First we want to arrive on the market” – that’s the objective target for the coming years with regards to the European retreading market.
It can be seen from the domestic Brazilian market that Borrachas Vipal is not just spouting hot air when it speaks of providing services together with its retreading and tyre repair materials. In Brazil the company offers a whole range of different services to retreaders and to end consumers such as fleet operators. For example, in Brazil – as it began in Europe this year – Vipal offers training for retreading technicians. Since 1987 more than 3,000 experts have attended the practical and theoretical courses offered by the “Vicencio Paludo Technical Center“ (CTV), a venue known throughout the whole of South America as “the retreading school.” Furthermore, fleet business is also part of the unique service provided by Vipal in South America under the “Protrans” brand name. In addition to this, the domesitic market leader also offers software solutions for retreading shops. “No doubt about it, Vipal has the capacity to implant this into Europe in a quick way,” Maria Locatelli says, emphasising that Vipal is strongly commited to the European retreading market and maintains the goal of becoming a fully-fledged supplier of various retreading and tyre repair materials as well as all the services that typically come with them. Something that Vipal does not offer at all, although this too is under consideration, is retreading machinery and equipment.
Although Borrachas Vipal does not consider itself to be a “system supplier” in the purest sense of the word, it leads a similar network of about 300 independent retreaders across South America – the so-called “Authorized Network.” Nevertheless, (licence) system suppliers such as Bandag or even Galgo in Latin America offer a valuable contribution to any retreading market, the director points out. This is because, due to the relationship between the system supplier and its partners, such a system is inclined to increase the reliability and fidelity between retreader and its fleet customers simply because prices and quality are controlled and guaranteed; thus they remain identical beyond local limits and thus they remain calculable.
The international business director is also of the opinion that the (current) second-row material suppliers in Europe – a position Vipal today still holds – are advancing at a strong pace. This development has been to the detriment of well-established material (and system) suppliers, among them Bandag, a company that has dominated the European retreading market for so long. However, it is much too early to proclaim the end for system suppliers, Mrs Locatelli continues. It is in particular this special sense for quality as well as the services usually provided (all this has to be calculated into their prices per kilogram) that have the ability to strengthen the relationship between a system provider and its licensees – and regular relationships generate partnerships. These relationships are less likely to develop between a material supplier that can be exchanged at any time and its customers.
“First we want to arrive on the market” – that was the objective target for entering the European retreading market as stated above. After this has been achieved, points out the ambitious director also responsible for Europe, the Brazilian market leader Borrachas Vipal will continue to develop in just a single direction, and that is forward to the top of the European retreading market. “What we can agree is that our operations in Europe are still small, but not the company. In comparison with our competitors we have the same or even better agility to develop new products and we have the financial support to do this.”