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AUSTRALIA
Tyre Lug Follows Diversification Strategy in Challenging Climate
The majority of Tyre Lug’s retreading activity is in the waste sector with garbage trucks from councils. Overall, about 50 per cent of the company’s retreading operations consists of Vipal waste haulage work. Tyre Lug targeted this sector about 15 years ago, when they realised this part of the market was underserviced.
Danskin suggested that they need to improve their performance in the bus sector, which at this stage accounts for about 5 per cent of their retreading work. Bandag have a majority of the bus contracts in Victoria.
“Bus work is clearly a glaring omission in our portfolio at the moment. Hopefully we can pick up some work from councils, but it is difficult as most goes to tender. Getting on the tender list is the starting point, but is proving to be a complex task.”
Besides this, in the OTR section, Tyre Lug carry out 60 to 80 major OTR repairs per month. These OTR repairs are mostly done using an open-stream autoclave, with the Monarch machine being bought one year ago. The company’s OTR materials were originally sourced from Malaysia as they came in at a cheaper price. However, for today’s operations they have a local supplier of their materials.
Danskin explained to us, “We talk to anyone. We are always testing compounds. For example, now we are testing pre-cure compounds.” With all of these businesses and internal capabilities it facilitates the possibility of offering, pre-cure, truck, OTR and light retreads, major repairs, truck, bus and agricultural tyres, steam engine wheels and regrooving as well. Putting it in a list, shows you the immense diversification Tyre Lug has undergone.
“Diversification is
a key part of our
strategy. For
example, the pre-
cure retreading has
shrunk, but the
OTR business is
up by about 50
per cent. This
spreads the risk.
We also try to
streamline where
we can as well,
making us more
competitive,”
added Danskin.
Then we turned to
the elephant in the
room. The New
Chinese Tyre
Elephant,
unsurprisingly, not
a rare species in
these interviews.
Danskin and
Stevens had some thought- provoking comments on them and the retreading approach.
Danskin began, “there are some good new Chinese tyres out there now, but that comes at a more expensive price. This has forced us to sell these brands in our retail division now. It does make it more difficult with commercial tyres. For example, the price went up by 3.5 per cent last month, before increasing by 4 per cent more the following month due to pollution regulations in China.”
This has impacted the retreading division, since they sell the Chinese new tyres at around $150 and the retread at approximately $120. Stevens expanded; “there is a
stigma about retreading from 30 years ago, which is strange because the Vipal tread is outperforming the Chinese new tyres.
“It seems to us that the industry is not teaching about the benefits of retreading well enough. There is not sufficient marketing, promotion and that needs to be pushed further as well as the cost per hour side being promoted more.”
As always in these interviews, the conversation turns to investments for the future and Tyre Lug had several exciting investments to divulge with Retreading Business. Firstly, on the retreading side, the company are looking at an upgrade its pre-cure operations within the next year. Stevens explains; “we want to purchase a 22-tyre autoclave, an AZ builder and an extruder and all this within the next year.”
On the retail side of things, Tyre Lug is assessing the possibility of extending to a third store. Danskin substantiated further on this for us, “the third retail store would likely be in the Geelong area. This would complement our retreading business
Vipal retreader Tyre Lug, located on the outskirts of Melbourne, is minimising the threat of cheap Chinese new tyres by following a comprehensive diversification
wholesale partners.
Moving forward, Danskin and Stevens spoke about branching out geographically by expanding in rural areas. An example of this by going
Tyre Lug’s previous retreading facilities
strategy.
General Manager Stevan Danskin and Factory Manager Jason Stevens were available to sit down with us and give us a tour of Tyre Lug’s operation in Melbourne.
Tyre Lug was started between 60-70 years ago and was originally under Vacu-Lug ownership. Today it is under the ownership of the Barro Group who acquired the pre-cure retreading plant around 25 years ago, before amalgamating the company’s three businesses (retreading, repairs and retail) under one roof a few years later. Danksin explained; “even today we are the only retreader that can provide truck and OTR retreading, repairs and retail options. No one offers the range of services that we do to our existing client base.”
For truck retreading, Tyre Lug mostly sells into Victoria and regional Melbourne, but also sells a few retreads in Tasmania and New South Wales. “The only retreader in Tasmania is Bandag, and some customers want to use the Vipal tread. For that reason, we have managed to sell a few retreads in that area,” explained Danskin.
As for OTR retreading, Tyre Lug covers Western Australia, Tasmania, New South Wales and South Australia - pretty much everywhere except the Northern Territory, where the company’s absence is due to the harsh travel conditions. The company is also active in Victoria and New South Wales through
directly to the end-user with pre- cure retreading in South Australia. Danskin clarified; “there’s an opportunity to pick up some market if you aren’t a Ringtread dealer in South Australia. We are looking at targeting independent tyre operators who don’t want to be part of duopolies.”
Tyre Lug produces around 1,100 retreads per month. This figure used to stand at 2,200 a few years ago, before the company lost a larger account, forcing them over time slowly but surely build production levels back up. Stevens is positive about the situation, “it actually proved to be a good opportunity to become much leaner and to get the balance right.”
These retreads are produced over one split shift that starts at 4:30am and lasts until 2:30pm.
Tyre Lug’s casing mix is roughly balanced at 70 per cent COC and 30 per cent stock casings, which are sourced from their customers.
Of Tyre Lug’s finished product, approximately 80 per cent is made up of Vipal retreads, with another 20% taken up by Nam Bee and the Continental retread option. Danskin spoke in glowing terms about Vipal, “the product from Vipal is a great own. It is outperforming certain patterns on lugging tracks and is a good offering for long range. Another advantage of Vipal is that they offer training for one employee in Brazil a year, allowing them to earn their Vipal accreditation.”
The company also does a significant number of OTR Repairs
32 Retreading Business