Private brands, global trade remain key to Deldo’s business

A lot has been said about the tough year in our market during 2013 and the reasons for this, but despite such talk many larger wholesalers managed not just to turn a profit, but to enjoy a very good year. Deldo Autobanden N.V. was one such company; sales and organisation director Tom Van Dyck tells Tyres & Accessories that while the Belgian wholesaler’s results last year weren’t on the level experienced between 2010 and 2012, they were still the fourth or fifth best in the company’s 40 year history.

Speaking at Deldo’s headquarters in the port of Antwerp, Van Dyck comments that although turnover was down on the prior couple of years and varied from market to market, the wholesaler performed well given the overall market situation. “After a couple of record years we experienced lower turnover in 2013, but we were able to limit our decline in turnover for a number of reasons. First, our sales were extremely differentiated – we are present in a number of regions and successful in many countries. Second, we focused on what we’re good at – the markets we know and our private labels. This helped us limit any decline and keep our margins.”

Private brands account for around 50 per cent of Deldo’s business, and in the past 18 months the company has particularly invested in building up what Van Dyck says is an “unprecedented” size range in this segment. “Our flagship Minerva range, for example, has 196 summer and 160 winter sizes. A size range like this is unbeatable, and we were able to do this for our private labels through intensive product development in partnership with manufacturers. It involved a lot of work and took time but we are now profiting from the huge advantage it gives us against our competition.”

In addition to Minerva, a brand it has owned since 1995, Deldo has the following private brands in its stable: Fortuna, Wanli, Roadstone, Atlas, Rockstone, Imperial and, new this year, Tristar. Van Dyck shares that production of the Tristar range started in February with the first 47 sizes, and by the middle of the year 120 sizes will be available. “Tri Star will be a main focus for the winter segment in 2014/15,” he comments. “The brand’s introduction has come too late for the summer in most markets.” The sales & organisation director adds that the goal with Tristar, as is the case with all Deldo private brands, will be to sell the range in every market where the wholesaler is active.

The importance of private brands to Deldo cannot be underestimated. While Van Dyck concedes that a lot of investment is required to establish a private brand, this investment pays off. “Many distributors have budget brands, but that’s not the same. Our brands are our brands. We own them and can sell them where we want, without competition. Therefore the investment pays off in the long run, both for us and for our dealers and clients. They know they’ll be able to get a brand that won’t disappear next year or some time in the future. This control and security are reasons why we invest so much time and money in product development. If you just take a budget, factory brand that is owned by a trading company in Hong Kong or somewhere else, you don’t have any influence on product development. You’re just happy to get something cheap, but there’s no guarantee you’ll always have that brand.”

Half of Deldo’s business is private brands, and the remainder is divided between mid-range and premium tyres. The market for mid-range tyres hasn’t been good of late. The sales and organisation director says this segment is being squeezed from both above and below; the 7th place (out of 50) ranking that the Atlas private brand achieved in Autobild’s February 2014 tyre test shows clearly that budget is encroaching into what was traditionally mid-range territory. But Deldo’s sales of premium brand tyres increased in 2013, while the company saw “a very clear increase” in premium tyre sales in the first months of this year. “Why is this? We’re getting better deals. Over the past three to four years most market players were offered the same price, but as Bob Dylan said, the times they are a changin’. More interesting deals are coming towards us – manufacturers are rewarding good customers with good prices. Furthermore, limited capacity existed in recent years but the market has been down of late. This means manufacturers have more tyres to sell and need customers who can take and pay for high quantities.” Deldo anticipates that sales of both budget and premium tyres will increase slightly during 2014, a growth that will come at the cost of mid-range tyres.

A global player

Back to the first point Van Dyck made regarding Deldo’s performance in 2013. He says the company was in part able to maintain its margins because of its geographic spread. Here in Europe we’ve become so accustomed to hearing about the effects of financial downturn that it’s easy to forget that some regions are enjoying very good growth. “We could in part limit our decline in 2013 through differentiation. We are a global player – we sell worldwide and this business has been important for a number of years. Performance balances out on a global scale. When this region has debt, people somewhere else in the world have lots of money.”

He adds that global trading is very much part of Deldo’s DNA and even though sales outside Europe have particularly expanded in the last three or four years, these had already been steadily growing for the last 20 or more years. “It’s been an essential part of our organisation for a long time, in both the private brand and premium segments. We give our customers what they want and what they need.”

Outlook for 2014

When asked how he sees the market for wholesalers developing this year, Van Dyck replies that he and the Deldo team expect 2014 to be better than 2013. “The summer season will of course depend on the weather and whether people change back to summer tyres or not, but we expect it to be better than last year. And it is logical that winter tyre sales will increase, as stocks have finally decreased after the exaggerated sell-in of 2011 and 2012. This winter stock is now much lower. Furthermore, some of the winter tyres bought in 2010 are now due to be replaced; these factors combined should allow for new sell-in and sell-out sales. Therefore there should be a slight plus in the market on a yearly basis, even if the summer isn’t especially good.”

And what about Deldo? Last year the company handled around six million tyres, and while sell-in and sell-out was an issue last year, Van Dyck says pre-sales of budget tyres for 2014 have increased enormously; Deldo sees this growth as a response to its product development efforts. “We believe Deldo will do better than the market,” the sales and organisation director adds. “We have seen this in results from the first two months of 2014 – we had a very nice plus in January and February due to the reasons mentioned earlier.

“We look very much forward to the coming months,” concludes Van Dyck. “We started 2014 well and are realistically positive about the coming year.”