AKRON (Feb. 7, 2003) — Guerrillas in the mist.
Shh…keep it under your hat: While the big boys have been dealing with tire recalls, slumping stock values and the like, Kumho Tire U.S.A. Inc. has, very guerrilla like, quietly, steadily marched onward, gaining market share, profits and, the company claims, a growing legion of loyal dealers. On second thought, the Fontana, Calif.-based subsidiary of South Korea's Kumho Industrial Co. Ltd. would prefer that not be kept under any apparel, head covering or otherwise.
The firm is on a mission to tell anyone who'll listen.
Nodding solemnly though thinly disguising his enthusiasm, Mike Leverington, Kumho's director of marketing, acknowledged the tire maker's ascent in the North American scheme of things owes a lot to what he calls its “guerrilla marketing.” It's a subject some professional speakers harp on regularly at trade show seminars: how best to use your pool of talent but limited expendable cash to put a dent in some better-capitalized competitors.
That stealth growth thing's a tactic that seems to be working for Kumho. During a wide-ranging presentation to Tire Business, company execs touted the positive sides of its climb to recognition after being little more than a blip on the industry's radar screen over the last couple of years.
By the numbers
The big number Dave Hudrlik, vice president of sales, figuratively tacked up on the tote board was $327.2 million—sales the company had last year in the U.S. vs. $217 million in 2001. And that revenue did not include approximately $50 million from Canada or $35 million in Mexico.
Other talking points: While industry passenger tire shipments diminished by 4 percent in 2001, Kumho was looking at a 20-percent gain; in light truck, the industry was down 8 percent but Kumho hit a positive 5; and in medium truck radials, the Korean company had a 24-percent increase against an industry backdrop of minus 9 percent.
Just as dramatic, its numbers last year saw Kumho again outpacing industry shipments. In passenger, the industry was off 0.3 percent, but Kumho said it leaped 40 percent. It gained 15 percent in light truck vs. 6.7 percent for the industry and 31 percent in medium truck vs. 8.4 percent.
Over those three tire categories, Kumho averaged a shipments increase of 52.7 percent from 2000 to 2002 while the industry overall slumped to a negative 6 percent.
To experience that kind of growth “means our base was pretty low” to begin with, admitted Kumho President Kyu Cho.
Still, armed with a Powerpoint presentation, Messrs. Leverington, Cho, Hudrlik and Rick Brennan, high-performance brand manager, almost couldn't contain themselves, posting one slide after another boasting gains in market share, sales and new dealer-oriented programs.
For instance, they said Kumho had a 3.5-percent share of the U.S. passenger market for 2002, and enjoyed a boost of 38.4 percent overall vs. its 2001 numbers in that category.
“Since the early 1990s, we've showed steady growth in the U.S.,” Mr. Hudrlik said, though the company did experience some supply “issues” between 1999 and 2001—having to do with tires coming from Korea.
It's a problem that has, for the most part, been solved. Kumho fill rates are now at about 94 percent.
After concentrating more on the passenger/light truck segment, he noted the firm is re-emphasizing its medium truck offerings and, with a gain of some 28 points between 2001 and 2002, “we now have some leverage.”
In 2002 through November, Kumho said its market share in the truck/bus radial sector inched up to 2.5 percent.
Growth dittos for the ultra-high performance segment, in which the company claims it secured a 9.7-percent piece of the market in V-rated and above tires. “We feel we're maintaining and growing with that market,” Mr. Hudrlik said.
Perhaps one of the biggest things that happened for the Kumho brand in the last year was its I'Zenstud snagging the top spot in Consumer Reports magazine's October 2002 rating of snow tires. Mr. Brennan called that a “who's who” snow tire list, adding that making the ranking puts the tire maker on a call list of companies and “proves we're as credible as anyone else.”
The Kumho brand also “finally” was ranked in a second-highest tie for original equipment customer satisfaction in the United Kingdom by J.D. Power & Associates, Mr. Hudrlik said.
Those kudos came on the heels of a “hugely successful” Specialty Equipment Market Association/International Tire Expo trade show in Las Vegas last fall garnering so much positive flash for the company that, Mr. Hudrlik said, it “couldn't cram in any more people” into its booth. (Look for its 2003 show booth to grow, though he said the location isn't great.)
“We have had three consecutive really good years for the Kumho Tire Group,” Mr. Cho said, “and have contributed a lot to (parent) Kumho's profitability. Yes, Kumho in the U.S. is profitable.”
Continuing dealer focus
Feeling its oats after posting what it considers pretty respectable numbers, Mr. Hudrlik said he believes Kumho's “job now is to maintain and provide our customers with the products they want.”
It has a number of projects under way to do that as well as help educate its dealer base. Among those, Kumho has purchased its first semi tractor-trailer—a rolling 53-foot-long billboard that will tour the motorsports racing circuit servicing and promoting the firm's racing tires and related events. It also bought two Ford Mustangs that will be loaded in the back of the truck and taken to “limited control” ride-and-drive events for dealers.
Thus far, there are 15 such events on the calendar for 2003 and a waiting list for the truck, which will go to weekend racing venues, then on to dealers' local markets during the week. Via the ride-and-drive events, Mr. Brennan said, “Kumho wants to help dealers figure out what tires customers coming through the door should put on their cars.”
With racing a natural tie-in to the tire maker's high-performance product lineup, he said the company is targeting the “value ultra-high performance” segment—where Kumho already boasts a 10-percent share of the 3.2 million tire sector—because “that's where the growth is.”
The company introduced a new Kumho Motorsports logo on Jan. 1, and counts on racing to help build trust and credibility in the Kumho brand, Mr. Leverington said. Besides being used as a research tool, the firm uses racing to target enthusiasts because “word of mouth is the cheapest form of advertising.”
The ride-and-drive programs will focus on educating tire sellers because, Mr. Hudrlik said, things like wear, all-season performance, and dry- and wet-handling characteristics are all factors that can either make a customer happy or dissatisfied with a tire they've purchased.
Asked whether Kumho plans to actively pursue new dealers, he said the company is “pretty happy right now with our customer base,” though there is room for growth on the truck tire side. “Right now we're going to work with the customers we have to try to improve our mix and our relationship with them.”
To better serve dealers in the Midwest, the company will open, on April 1, a new 120,000-sq.-ft. warehouse in Chicago. It will be, Mr. Hudrlik said, the final complement to Kumho's distribution system, joining warehouses in Fontana, Dallas, Memphis, Tenn., Columbus, Ohio, and a center opened last year in Atlanta.
Besides supplying racing tires to venues such as Sports Car Club of America events—where the Kumho execs offered that they're “giving BFGoodrich a run for the money”—the firm has gone fishin'…bass fishing, that is.
Motorsports caters to the automotive enthusiast. Involvement in the outdoor market enables the company to get next to what's called a “lifestyle segment.”
It's making a big splash on four levels of professional fishing tournaments, and this year has a Kumho-badged bass boat that will be among a dozen such crafts televised during national angling events. Later this year the company also plans to launch a series of one-day “take a dealer fishing with a pro” events.
As part of a multi-level media plan, Kumho will be a sponsor for TrackTime Performance Driving School, which will use Kumho Ecsta MX ultra-high performance tires. During the year the company plans to take dealers to race tracks for what it describes as “seat-of-the-pants” driving experience on its UHP products.
Kumho advertising will make appearances on national TV on channels including ESPN, ESPN-2 and ABC this year as well as on some targeted regional cable stations featuring sports and racing programming.
Mr. Leverington pledged that “one thing we have to do on the dealer level is communicate our plans.”
In February the company will go live with its re-developed, database-driven Web page that will feature more interactivity for dealers and consumers, a tire selector feature that will go up to plus-10 fitments, and a dealer locator. “We're trying to make it so simple to do business with Kumho that it hurts,” Mr. Leverington said.
Web-based order entry is not included, but “it's coming—there's no timetable yet for launch. Maybe sometime this year,” Mr. Hudrlik said.
A special “Turbo Kumho Retail Event” for dealers will run May 17-July 5, aimed at “creating excitement at all levels,” Mr. Leverington said. The promotion will offer consumers a pair of free mini-remote-controlled racers if they purchase a set of four ECSTA MX, STX or 712 tires.
Dealers also will have access to three new tire displays, new point-of-sale material, a debit card program and redesigned brand posters—“all literature focused on branding to build support on the local level,” he said.
“We keep hammering at the same message to build the brand, until the message is clear.”
Despite its growing presence—and sales numbers—in the crowded tire marketplace, Kumho still faces challenges in 2003, Mr. Cho acknowledged, including “getting a money infusion from outside.”
The sale of Kumho Industrial Co.'s Kumho Tire unit could take place by the end of March to a group that includes the South Korean military pension fund and foreign investors, according to Mr. Cho.
This follows the breakdown in negotiations late last year to sell the unit to an investors' consortium involving JP Morgan Chase & Co. and Carlyle Group.
He said once the deal goes through it will provide an infusion of capital allowing the expansion of Kumho's tire making capacity, first in South Korea and then in China. “This is the biggest obstacle to the expansion program,” Mr. Cho said.
Kumho Tire U.S.A sources 95 percent of its tires from the parent company's plants in South Korea and 5 percent from its factory in China, so the added capacity, especially in South Korea, should help improve supply to the U.S, he said.
As far as sourcing tires from China, he said until the expansion of the plant there is completed, it would be very difficult to get product because the Chinese market is booming.