Deldo ready for the coming year

We’ve just emerged from a season that saw winter tyre sales go through the roof, and the word from many within the wholesale and retail industry is that if you couldn’t make a profit selling tyres during the winter of 2010/11, you really should find yourself a new vocation. Belgium based wholesaler Deldo Autobanden N.V. needn’t worry; it says that the winter season and 2010 in general was “very good” for the company – and not just because of its strong winter tyre sales. When speaking with Tyres & Accessories, Deldo international sales and marketing manager Rutger Veerman shared that last year the wholesaler built upon a recent pattern of growth, and is continuing to do so.

“Over the last two and a half years, since the start of the financial crisis, the demand for cheaper, acceptable products has grown,” Veerman explains. “People began using budget products during the crisis and were positively surprised by their quality. Now they are continuing to use them.” Most of this growing business is occurring within Deldo’s primary market of Europe, which accounts for 90 per cent of all sales. Within this region the main markets are Germany, France, the UK and the Benelux countries, while two markets where Deldo currently enjoys a good level of growth are Spain, Italy, Baltic States and Scandinavia, the last of these particularly for winter tyres.

The remaining ten per cent of sales are mainly generated in Asia and the Middle East: “We are getting more and more requests from there as we can offer everything under the one roof, including premium brands,” the sales and marketing manager states. “They are interested in buying from us as European pricing and availability are better than in Asia. Customers also have the advantage that they can order a mixed container of, say, a thousand pieces from us.” Another market, Turkey, right on the fringe of Europe, may also hold growth potential for Deldo, as Rutger Veerman explains. “Turkey is a rapidly developing country and a new market for us. Late last year we started selling there. In August 2010 the country’s government removed its 60 per cent anti-dumping duty on PCR and LTR tyres.” Veerman notes that acceptance of Chinese products poses the main hurdle Deldo must overcome in making successful inroads within Turkey; the wholesaler intends to accomplish this as it has done so in Europe. “It takes time and patience,” he adds.

Cooperation in place of competition

A sizable portion of Deldo’s sales are name brand and premium tyres. These are purchased through a worldwide sourcing network and not necessarily through the manufacturer’s local outlet. This has been the case since the Belgian company was founded and in the past this global purchasing was frowned upon by manufacturers who considered their local pricing structures undermined. Of late, however, the advantages of working together with a company like Deldo have been better understood. “We have been entering into more and more co-operations with European manufacturers, especially in the last five years,” explains Veerman. “These manufacturers work with us as they see Deldo as an extra sales channel. In former times they saw us as a competitor, but now they view us as a sales partner that can reach markets and customers they cannot reach. We don’t purchase all our premium stock directly through the manufacturer but they have stock we can take. This is a good development, a highlight of 2010.”

Last year Deldo sold some four million premium tyres in total, plus a further four or so million budget tyres. This makes 2010, Rutger Veerman shares, a record year for the wholesaler. The company is in a strong financial position, he adds, and the two million tyres held in its Antwerp warehouse are already paid for. A quarter of all Deldo’s sales were made online through the Deldo website, a percentage that is expected to grow in 2011. As for tyre sales, the largest increases were witnessed in the cheaper end of the product spectrum and in winter tyres, which accounted for around 2.5 million units.

Winter 2011/12 pre-orders already underway

“We have a focus on winter tyres and have been a specialist in this sector for many years,” the sales and marketing manager comments. “Last year we placed our winter tyre orders early in the season; in September 2010 we placed an extra order for 250,000 winter tyres from China, which arrived in November. We took a risk with this and were lucky. We sold them all easily so it turned out to be a super move. We were the only ones to have sufficient tyres, which led to us having a fantastic final quarter.” Rutger Veerman also notes that the winter of 2010/11 was “the first year of good winter tyre sales in the UK.” Previously the United Kingdom was never a market that pre-ordered winter tyres, yet Veerman says the larger players are already pre-ordering for next winter: “There is a growing awareness in the UK that winter tyres are a good thing.”

As already mentioned, the other growth area for Deldo was in the budget market, and the portfolio of fitments offered here has been extended to meet this rising demand. During the past winter, for example, Deldo was able to offer its customers newly-introduced winter sizes for its Minerva and Rockstone private label ranges. “We have entered into an exclusive deal with a European manufacturer for the production of winter tyres and from 2011 this will be extended to cover summer tyres as well. The Minerva and Rockstone ranges we offer are now a mix of European and other products, and this represents a significant upgrade for dealers. Our recently introduced winter range sold extremely well and we have received good feedback, especially from our customers in Germany.”

Acceptance of Chinese brands increasing

The broad portfolio of private and exclusive labels carried by Deldo now includes the above-mentioned Minerva and Rockstone plus Wanli, Sailun, Fortuna and Roadstone. Most of these brands are sourced from China (including the only Chinese-produced run-flat tyre, made by Wanli) and Rutger Veerman reflects that in terms of quality, Chinese tyres have developed rapidly in the last five or six years. Today’s improved Chinese products admittedly cost more than their qualitatively inferior predecessors, however Veerman notes “in some markets it is acceptable to pay a higher price for a better product.” In fact, even though prices are higher, he adds that acceptance of Chinese products within Europe continues to increase. “We have told our dealers ‘try selling them’ as they bring in new, extra business. For example, last year we made an exclusive deal with a 120-outlet Scandinavian company that previously only sold premium products. They introduced Chinese products in 2010 and were very successful; in the first year they sold 30,000 units. Now the company has placed a much larger pre-order.”

A point frequently discussed in relation to Chinese budget tyres is the European tyre label. Its introduction is now only less than two years away and Deldo began preparations for November 2012 even before the regulation’s parliamentary approval. “We are happy with the upcoming labelling as we believe we already cooperate with the best factories,” says Veerman. “We have agreements with five factories and we believe them all to be amongst the top twenty Chinese manufacturers, including Wanli, who we have worked with for more than ten years.” He adds that the label’s introduction should “clean out the crazy budget segment” with its 100 or so Chinese brands and raise quality.

A challenging year for the industry

This year will be a challenging one for the industry in terms of pricing and availability, Rutger Veerman reflects. Although he believes we now may have seen the top of rubber prices, the sales and marketing manager notes that Deldo has needed to increase prices due to rising raw material price effects and he predicts considerable market shortages by spring. “It is hard to obtain supplies from both premium and Chinese manufacturers,” he shares. “In addition, the production break taken during Chinese New Year will lead to reduced supplies for Europe in April and May – key months for the summer season.” Veerman points out a further factor putting the squeeze on tyre availability – the Chinese domestic market is increasingly competing with European customers for supplies: “Sales in China are booming for both premium and budget products.” To counter this, Deldo has entered into agreements with more factories and will introduce at lest one, perhaps two more private labels in 2011 to extend the company’s portfolio. “It will be a challenging year for the whole market,” Rutger Veerman reflects in closing. “We are preparing for this by placing orders now. The smart people are doing that. The people who cannot do this will ‘pay the bill’ with prices and availability.”