‘Manufacturers…Drive the Grey Market’

Almost six years to the day after the Levi versus Tesco ruling (see page three for more on this), Kumho UK managing director, Steve Tidmarsh, used his recent NTDA Tyre Wholesalers Group (TWG) speech to address the subject of grey importing in a refreshingly direct fashion. “The grey market,” he observed, “always seems to increase when supply rates are poor.” He continued: “For some reason this enrages wholesalers, but let us be fair, it is often exploited by them. However, to balance that, it is also right to state that it is the manufacturers who drive the grey market and currently with the weak US dollar products are a-plenty,” he explained.

On the subject of pricing, Tidmarsh referred to Kumho’s recent sponsorship deal with Manchester United: “As an Industry are we getting the message [tyres are a ‘want’ and not a ‘need’ product] across to the consumer?…To put that into context, LA Galaxy shirts with Beckham’s name on the back sold 450,000 pieces in the USA at a price of US$80 each. Currently, the market that will benefit most [from the sponsorship deal] is Asia….where the brand is much bigger than in the UK…In South Korea alone over 650,000 people have a Man. Utd. credit card which returns an income stream of around £2 million annually to the PLC.”

A single trade association “as far apart as Blair and Brown”

Continuing the football theme, Steve Tidmarsh gave his opinions on the development of the Tyre Industry Federation (TIF) and aired his frustrations over the political divisions he sees within the federation: “The politics of the three main associations appear to be as far apart as Blair and Brown were. This is disappointing, as it seemed at the beginning that this was just the refreshing initiative that would move our industry forward. Is it too late? Maybe not, but unless some fairly established paradigms are broken progress will be very slow. By this I mean why should there be the need for BTMA and ITMA?”

“Is it not correct to state that most manufacturers are now importers to the UK market? With production almost non-existent in this Country, why then can there not be one association for manufacturers? I mentioned earlier that the intention for Kumho is to reach number 5 by 2015. We are currently at number 10, who along with the current 7 and 8 are members of IMTA. Is it not time for the Premier league to embrace the Championship and work as one, or is it that UEFA simply do not want this to happen?”

“We have a classic situation where working together would bring clarity to the market, that being the true size of the market…Or is it simply the truth would be too hard to take when it comes to real market share, and for some the current situation suits.

Steve Tidmarsh opened by acknowledging the large, and arguably increasing, role wholesalers play in the UK market: “The relationship between wholesaler and manufacturer has always been an interesting one; one which goes from love to hate, and back to love again, depending on which year it is. But with over 60 per cent of the market supplied by wholesalers the importance is unquestionable.”

Answering the question of whether manufacturers should use direct or indirect distribution, he explained that Kumho works with Micheldever Tyre Services and Bond International in terms of its consumer products, and Kings Road Tyres for commercial vehicle tyres: “I therefore leave the burden of logistics to them. Is this the most cost effective way?”

Tidmarsh continued by questioning the cost:service relationship associated with working with a large logistics company like Christian Salvesen. “How much of their problems are down to costs ‘v’ service?” he asked. “All I know is that 15 years ago the cost of storing and delivering tyres was almost ignored in setting prices. But today this is a very different story. And this along with the ever-increasing raw material prices is putting real pressure on bottom line performance for all sectors of the business. Only time will tell if they are right or not.”

On the subject of other cross industry cooperations he added: “Ashley [Croft] touched on this and it is sad to say, so far we have achieved only moderate success. The one that seems to be working best is the TyreSafe initiative that was only born in 2007. [It] seems to be hitting the rights notes, as its core activity is PR related to our Industry.”