REYKJAVIK, Iceland (June 11, 2014) — In the highly competitive second tier of the tire market, everyone makes good products, so how does a company like Falken Tire Corp. stand out from the crowd?
That’s the challenge facing newly promoted Falken executives Andrew Hoit, vice president of sales, and Rick Brennan, executive director of marketing, as they and the Falken team prepare to grow the company beyond its ultra-high-performance roots and traditional sales regions that are focused primarily along U.S. coastline states.
“Second tier is a tough place to be today,” Mr. Brennan told Tire Business recently during a trip to Reykjavik, where the company was hosting key dealers and distributors.
Falken’s plan for surviving what Mr. Brennan calls “the second-tier compression” is to be seen as having more ability than the competition to help tire dealers on the business side while keeping prices up.
To stand out among the second-tier tire suppliers, Falken wants to help dealers be better business people, understand the dynamics in the industry, understand what they should be buying and why they should be buying it, Mr. Hoit said.
“All these moving parts in the industry we have to support them better at sales, in the field, at the sales level, face-to-face,” he said. “Our sales force needs to adapt quickly, and that’s how we are going to differentiate in the second tier.”
The idea is for Falken to be at the top of the list when dealers start looking for a company to get on board with, Mr. Brennan said.
In a presentation during the Iceland trip, Mr. Brennan talked about the changing tire and vehicle marketplaces and how the Internet and social media are influencing consumer buying habits.
He also outlined several expansions to Falken’s Ziex, WildPeak and Sincera lines and Ohtsu associate brand.
Changing buying habits
The Internet “is changing the way people are buying things, the things that influence them are changing and sooner or later it’s going to change the tire business,” Mr. Brennan said.
To help dealers understand and prepare for these changes, Messrs. Hoit and Brennan are devising a strategy to assist dealers in becoming better businesspeople but also preparing them for a tire marketplace that in five years likely will be different than today’s.
Mr. Brennan cited numerous new technologies already in the general retail marketplace to illustrate this point, including a new motorcycle helmet that has an LED screen on its faceplate that can display the motorcycle’s rpm and speed, provide navigation and answer the telephone.
Technology is “changing our industry without us even knowing it,” he said.
He likened these changes to a jigsaw puzzle. To get the full picture requires putting together a lot of different pieces, which serve as a guide to the future.
Looking to grow annual revenues in North America significantly, Falken will expand its U.S. sales force to five divisions from three while adding employees.
Falken needs to get more bodies in the field, more face-to-face interaction with dealers, Mr. Hoit explained. With just two divisions, East and West, “for us to expect our divisional managers to have good quality face time with our customer base is really not realistic,” he said.
“So we’re shrinking it down to give them more time in the field, face-to-face with our customers.”
The new sales regions include the Southeast, Northeast and West divisions (which could be expanded to four regions in a few years depending on growth), a retail division and a new commercial division.
“We have not, historically, had a dedicated sales staff only to TBR commercial, which we will be forming in the next several months,” Mr. Hoit said. “We’ve kind of relied on our existing sales force to this point to be our commercial sales as well as light truck sales.”
Also in TBR, the company is converting its medium truck tire line to the Falken brand from Ohtsu, most of which already has been done, Mr. Hoit said. Falken offers the SmartWay-verified line of Ecorun medium truck tires.
With industrywide tire sales flat the past few years, Falken plans to grow by expanding its consumer lines into broadline categories. It also looks to increase its market penetration into the heartland of America, an area of weakness for the company, which is dominated by broadline products—light truck and touring tires.
“There’s a lot of low-hanging fruit,” Mr. Hoit said. “If we can get our regional holes filled and when we get our product holes filled, we have huge upside potential.”
Light truck tires, in particular, present an opportunity for Falken. The company has never been a brand that’s been fully committed to light truck, according to Mr. Hoit.
But now it has a powerline in light truck with an all-terrain product, the WildPeak A/T, a soon-to-be powerline highway tire, the WildPeak H/T, with expansions coming in the third quarter, and a new mud tire, the WildPeak M/T, available in the fourth quarter.
Together these products will give Falken a full family in the light truck tire category, Mr. Hoit said.
Setting sights on OE
Gaining original equipment contracts is another initiative for Falken, “and you’ll see us beginning OE later in 2014,” Mr. Brennan said. Already the company is working with three auto makers on securing fitments.
While Mr. Hoit would not name them, he did point out Chrysler Group L.L.C.’s fitment of Falken tires on a Jeep Renegade the auto maker debuted at the Moab Easter Jeep Safari recently.
Mr. Brennan foresees a lot of changes in the car market over the next five years, especially with the shift to more crossover vehicles at the expense of SUVs.
“Did you know that by 2016 (CUVs) will be 62 percent of the market for passenger and light truck vehicles?” he asked rhetorically during his presentation.
And what kind of tires go on a CUV? “A CUV is really a car that’s a little higher off the ground, like a taller station wagon,” he said. “So you can put just about any tire on it that’s more passenger based, but it’s being added to light truck tire lines, it’s being added to high-performance lines, it’s being added to broadline tires. So it’s really changing the face of what you guys deal with on a day-to-day basis.”
Other changes Mr. Brennan sees happening in tires include longer mileage warranties, with some SUV tires coming with 80,000-mile limited treadwear warranties and UHP tires with warranties as high as 50,000 miles.
Tire speed ratings also are climbing. In 2011 there were 5.3 million H-rated tires fitted at OE, he said. Two years later there were 9.3 million.
A lot of the sizes that used to be non-rated, S-rated or T-rated are now populated with H-rated sizes, he said. “And because H-rated is so popular in China, all the Chinese entry-level products are mostly H and V.”
The number of vehicles 10 years old and older also is climbing. There were more than 19 million more of them in 2012 than there were in 2009. And consumers are keeping their vehicles longer, an average of 72 months for a new vehicle and 50 months for one that is used.
What this all means, Mr. Brennan said, is that dealers should expect to see a constant evolution of tire size.
An example is size 235/75R15. At one time the industry sold 12 million tires in this size. Now it sells about 2 million of them, while about 20 other sizes have taken up the rest of that 12 million units, according to Mr. Brennan.
“We are going to continue to see the overall volume decline of each size,” he said. “We’re going to have that volume spread out over to more sizes.”
Along with high speed ratings, tire makers also continue to address ride comfort issues, especially as cars get lighter, Mr. Brennan said.
“We are having to really pay a lot more attention to uniformity and a lot of other things to make sure we that we make a tire that’s trouble free for the consumers that you sell to.”
As for the overall tire market in the U.S., Mr. Brennan doesn’t see much pent-up demand for tires, as some industry observers have suggested. With tires lasting longer and with 1.2 vehicles for every licensed driver in the U.S., household mileage is getting divvied up among more and more vehicles. Each vehicle is being driven less, so tires are not getting worn out as fast.
For 2014, Mr. Brennan said Falken’s new Ziex ZE950 A/S high-performance and UHP tire offers 63-percent better treadlife than its predecessor, the Ziex ZE912, and a 10-percent improvement in snow and ice traction, without giving up any other performance attributes.
The Ziex ZE950 is a significant product in that it replaces the line that really has defined the Falken brand, built the market share and been the connection with the dealers and consumers, Mr. Brennan said.
With 95 sizes and 93-percent market coverage, Falken is positioning the Ziex ZE950 A/S as a go-to tire for dealers, because it’s one line, one tread design from H-rated all-season performance to ultra-high-performance all season.
To help sell the Ziex ZE950 A/S, Falken plans to reactivate a consumer-rebate program in August and September offering $50 off a set of four tires.
Another Ziex product, the S/TZ05 high-performance tire for luxury SUVs and light trucks, also is getting new sizes, five now and one in October, including two 19-inch versions, Mr. Brennan said.
In addition, the Sincera SN211 touring tire will receive four new sizes, three in September and one in October.
Falken also is beefing up sizes in its light truck tire offerings.
The company will introduce 18 new sizes to the WildPeak H/T light truck highway tire with availability starting in August. The new sizes will give the WildPeak H/T 44 SKUs providing 80 percent market coverage.
Adding to the WildPeak lineup, Falken will introduce a mud-terrain version later this year in three sizes. The WildPeak M/T initially will be offered in sizes 265/70R17, 37x12.5R17 and 38x13.5R17. Additional sizes will be added in the second quarter of 2015.
In the Ohtsu brand, Falken will expand the FP7000 by six CUV and other performance sizes. Production of the additional sizes will commence in October with a December availability.
Falken is offering consumer rebates on the SN211and WildPeak H/T in June and July. Purchasers of four Sincere SN211s will receive a $50 rebate, while those purchasing the WildPeak H/T will receive an $80 rebate.
To reach this reporter: email@example.com; 330-865-6131
What is the best business practice?
|Treating your customers fairly.||
67% (36 votes)
|Offering the lowest price possible.||
2% (1 votes)
|Doing the job well, as quickly as possible.||
22% (12 votes)
|Staying ahead of technology.||
4% (2 votes)
|Be heavily involved in the community.||
6% (3 votes)
|Total votes: 54|