CDP Group discusses counter-trend strategies in Italian wholesale market

CDP Group’s CEO Andrea Reggi calls 2011 "a year of consolidation", which ended with success. While the turnover remained constant at about 38 million euros, net profit came in at more than 2 million euros, an improvement of 15 per cent over the previous year and a percentage of profit on turnover of more than 5 per cent. Reggi hit the targets he stated in an interview with PneusNews.it last year: to strengthen the company’s financial position, increasing the return but not the turnover. "In 2011 I wanted to understand if the 38 million euros in revenue, achieved in just three years, was a temporary episode due to specific factors such as winter 2010," said Reggi.

“In 2011 we did not want to pole vault, running risks that might have weakened our financial position. We settled for healthy and real growth with no holes due to heavy defaults or movements within the group, as many of our competitors have, increasing a fictitious revenue. This has worked well, demonstrated by the fact that, at equal revenues for 2010, we increased profit and are now ready to start to grow. “If 2011 was closed with the same sales numbers as the prior year, CDP Group’s 2012 is already setting a trend of +20 / 25 per cent in the first two months.

The company, which has 18 employees and was founded four years ago as a real tyre distribution center, decidedly emphasises profitability and financial strength applying a price policy on the market. The numbers now show that the business model worked. Reggi is no brand or product strategist, and has no contractual links with manufacturers, preferring to work with dozens of suppliers throughout Europe, with no brand or custom preferential agreements. CDP Group’s business policy can be summarised by the motto “four tyres at everybody’s home”; it is targeted widely to the entire market, offering a free choice of over 30 brands.

This strategy is counter current trends, compared to companies or groups that emphasise loyalty and the creation of networks. “Our politics reflect market demands and do not require any kind of product loyalty, we arrange only agreements based on turnover. The customer chooses freely without any obligation,” says Reggi. The company’s microdistribution, which counts more than 10,000 customers already, will be further enhanced in 2012.

The product range currently offered by CDP Group is wide, introducing brands like Hankook, Matador, Kumho and Nexen in the last year. Its selection covers all premium brands, many second and some third tier groups. “I do not believe in pushing one product over another, or having customised products,” Reggi says, “I never believed in it. The reality today is that the customer asks for price and service.”

Regarding the distribution market in Italy, Reggi believes the current situation is very dangerous, because many (not CDP Group) are involved in a frenzied race that has increased turnover as its ultimate objective. This, he believes, exposes companies to greater risks. “Three years from now some of the big distributors might not be there any longer, because the politics of running mainly for turnover is wrong. Companies are kept up by their solidity, especially at a hypercompetitive time like this. In Italy many wholesalers now have ‘feet of clay’ – if you read their financial statements, the financial exposure of customers and suppliers is huge .”

2012 commitments

CDP Group’s commitment this year will be to increase its sales network, which today consists of 33 agents, mostly coming from other business background, covering the Italian market 360 degrees. “We need to optimise sales areas, to subdivide some of them in order to provide a better service, improve the use of the sales force, and change some agents who do not follow the company’s trade policy or are not willing to work seriously in order to achieve consistent and steady growth,” says Reggi. “The relationship between agent and customer is fundamental, but basically what the customer is looking for is competitive price. In 2012, with the technology available, we cannot delude ourselves that the tyre dealer is not free to make inquiries online and, as a stockbroker, choose the cheaper product most suitable to its needs.”

Reggi says he is not ashamed to have spent a year in consolidation, allowing him time to increase cashflow. Now, with the fruits of 2011, he can act, buying winter / summer tyre inventory from others who have overflowing stocks, for example. “I needed to figure out what CDP Group was and now I can start to enact an important period of growth, but always with a logic of profit and financial strength in the first place,” he explains.

“CDP for me is first of all a passion, because starting from scratch and being where we are now is a point of great pride for me and for everyone working in CDP.” Reggi concludes: “we know our potential and we are only halfway there.”

This article is available in its original Italian at tyrepress.com partner site, PneusNews.it. Click the link to navigate to the article there.