SEOUL, South Korea—Ramping up capacity globally is providing Nexen Tire Corp. with some legs that the company hopes will propel it into a sweet spot in relationships with its dealer customers.
The company recently hosted trade press journalists and representatives from customer American Tire Distributors Holdings Inc. on a tour of its plant in Changnyeong, South Korea, several hours from Seoul, where they heard of plans under way to boost capacity. That move goes hand-in-glove with the tire maker's goal to bring its newest plant, a $1.1 billion project in Zatec, Czech Republic, on stream by 2018. All those additional units certainly don't hurt, Nexen officials said.
Tier III South Korea-based Nexen's Nexen Tire America unit also is knee-deep into 85 so-called “Dealer Partner Days” it kicked off earlier this year to meet with some of its 3,000 to 5,000 dealer customers across the U.S. in major metropolitan areas. The effort is reaching some 30 to 40 dealers at a time and plays nicely into the company's growing Next Level associate dealer program it launched at the 2014 Specialty Equipment Market Association (SEMA) Show in Las Vegas.
The company continues to enhance that program, according to Kyle Roberts, Nexen marketing director, and has seen fairly positive results.
During a bus trip to the Demilitarized Zone (DMZ) at the border between North and South Korea, Mr. Roberts outlined for Tire Business a number of Nexen's plans for the remainder of the year, noting that dealer reaction to the Next Level program has been “extremely positive—they're raving about how easy it is to understand what their payouts will be, they're very impressed with the generosity of the payouts.
“There's continued incentive for them to continue growing through (the program's) different tiers, which they really like. And then the million-dollar sweepstakes part of it has just added excitement to it, which is a great twist.”
Unlike last year, the company has decided it will not exhibit at the 2015 SEMA Show, focusing instead on the Dealer Partner Days—and private meetings with customers—to promulgate its message. Mr. Roberts acknowledged that last year's SEMA Show “went really well; we had a big story to tell and it was a great platform from which to tell that story. We're very appreciative of SEMA and look to return in the future, but at this point in our growth strategy, it requires us to be more organic and out in the field more.”
Mr. Roberts—whose got an actor Vin Diesel kind of thing going for him in the looks department—has been with Nexen about 16 months. Prior to that, he held positions with several manufacturing companies outside the tire industry—in building products, recreational products and packaged goods. A native Californian, he grew up in Orange County, went to the College of San Diego, then moved back to Orange where he got an MBA.
The following is an edited Q&A discussion with Mr. Roberts:
What are your brand-building efforts in this country and how many dealers are in your network?
“We have 2,200 signed up through the Next Level program, of which about 1,500 we would consider 'committed' to the Nexen brand. They're buying more than a couple of hundred units or more a year.”
Isn't that a low amount—kind of baby steps for the company?
“Yes, obviously we're not one of the main volume guys out there—we only have 2-percent market share—so for an account to do 200 units with us, that's pretty significant. Now, we don't start rewarding people until they do 400 units in a year, but that gives customers that are doing a hundred, 200, 250 the added incentive to step up to the next level, and that's really where we feel we're going to get the most growth—from people who are purchasing Nexen but not as much as they could.
“This is sort of that nudge to help them get there.”
Who are your biggest competitors in your tier—which brands?
“There's Falken and Toyo and Yokohama. Kumho's a competitor. They're the main targets. If we're going to take share, it's from them. And Giti, also.”
What's the importance/relevance of Nexen's OE fitments and what effect does that have on your dealer customers?
“It's huge. Not only does it lend to the credibility of our product line by passing the specifications and rigorous testing that the OE manufacturers put on us, but it creates a greater brand awareness for the consumer. The more and more they see our tires on their vehicles, the greater that's going to help our brand.
“And lastly, it just directly relates to business. Our studies show that 27 percent of tires are replaced with exactly what was on (the vehicle). So the more tires we can get on the road at the OE fitment level, that increases demand in the replacement market for our product, which means dealers need to begin stocking our product more so they can meet that demand.
“That makes us a more valuable brand to them, to the dealers.”
Why did Nexen choose to build its first overseas plant in Europe rather than the U.S. or the Americas?
“It coincided with the awarding of our products (OE fitment) on Volkswagen. The plant is literally next door to a Volkswagen plant. Additionally, it's a central location for manufacturing to our European market, as well. But specifically, it was a logistical decision.”
With a number of tire companies already building or looking to the U.S. and the Americas for factory sites, is Nexen also considering that?
“It's on the map, on the radar, I should say.... We have significant capacity still available to us, so with the additional 5 million units of capacity we've built over the last year, we've got some room to grow. Also, with the new Czech Republic plant coming onboard, we need to get that up and running and sustainable before we make any additional investments in new factories.
“Our growth plan in the U.S. takes us to a level where we think we're going to outgrow that capacity by 2020. And that's when we're going to begin to identify whether the U.S. is going to be the next location for a new plant.”
What's been the effect of the pending Chinese duties on the Nexen brand?
“So far, not as immediate as we'd thought due to the overstock in Chinese products after the (government's) announcement. However, we're starting to see, with the depletion of the Chinese inventory, a boost in the demand for our product because we meet that price point that's being left open with a gap.
“But long term, we don't see the tariff as a savior to our brand. We have to build our own brand and not depend on a duty to be successful in the marketplace.
“Although it's a temporary boon to our business, it's not what we're relying on for long-term growth.”
Any plans to add larger truck tires to Nexen's mix?
“We have no plans to add medium truck tires at this time. However, we're in the middle of a market analysis and a business plan for larger mud tires. Any decision on a plan would not involve adding any new (mud) patterns for at least 12 to 18 months.”
Any other marketing plans for dealers this year?
“We recently had our NCAA 'Hoops Challenge,' which was a success. And it basically just brought Nexen to the forefront of the industry for a month. It had nothing to do with product, it had nothing to do with educating people about the Nexen brand. It was just about having a good time and having people in the industry think about Nexen for a month.
“We're going to be doing something similar to that for the NFL season, so that'll be an additional opportunity for our name to be out there in the marketplace. It'll be something fun for dealers and competitive manufacturers and our distributors to have the opportunity to be engaged in a competition, fun event, and hopefully it's something where a dealer can go to work in the morning and have a good time with fellow co-workers in talking about the Nexen NFL pick-'em season and (how) he got more right than his friend got right. It's just a fun event for the industry.”
“On the consumer side, we're partnering with four major league baseball teams—the Angels, Dodgers, Rangers and the Tigers—and we also have (another) partnership...that focuses on the younger demographics, the young, active families. The focus there is on family hobbies such as snowboarding, camping, kayaking, skiing, surfing and motocross.
“So our thought there is that these young, active families are packing up their vehicles on weekends and going to drive a hundred miles or 200 miles to a river, to the mountains or to the lake to do something fun, and we want to be the tire that gets them there.
“We feel that our warranty message falls right in line with that. People are putting miles on their cars and going through some rugged terrains at times, and if we can be there to help them out sometimes in the case of a flat tire or any type of road hazard—that's where our warranty really takes effect.
“So the warranty message falls right in line with the young demographic that we're targeting. It's really the type of customer we want—it's a life-long customer; it's a customer who's putting weekly miles on, and that's where we feel we can best explain the value of the Nexen product to a consumer at that point.”
What is the warranty?
“We have a treadwear mileage warranty on most patterns. We have two-year road hazard on most patterns, minus light truck and winter. And the road hazard is 100-percent replacement on the tires within the first two years of owning the product or the first 3/32nds of tire tread—whichever comes first.
“And that's the most generous free road hazard program in the industry.
“On top of that, we have every pattern that we sell—including winter, light truck—all tires have the roadside assistance. So it's 36 months free tire change or tow service to anybody who buys a Nexen tire. And that's good for 24/7 service for the U.S., Canada and Puerto Rico, with no limit on the number of miles they can be towed.
“Our goal there is, once you purchase a set of Nexen tires, you have no premature costs associated with those tires, whether its tire treadwear, whether it's a road hazard claim or whether it's through getting a flat tire and having to be towed, or have someone come out and change your tire.
“...The only time they're going to have a cost associated with their tires is when they need standard rotations or to purchase a new set of tires.”
What's been the reaction in the marketplace to the warranty?
“Extremely positive. Retailers love it—it gives them an advantage. Consumers absolutely love it because it adds value to the Nexen brand, which is already at a value price. And now they have additional value over competitive brands with this free road hazard and free roadside assistance that they normally would have to pay for with other brands.”
Do you see other marketers jumping on that warranty bandwagon to keep up with Nexen?
“Continental recently launched a pretty competitive warranty program. And it's probably inevitable that other manufacturers will follow, but our goal—and we'll maintain that—is that, as they continue to evolve, we will evolve to maintain our primary position as the warranty leader in the industry.
“If it gets to the point where we need to adjust our warranty to be more aggressive, we'll have the ability to do that.”
Any other plans or dealer programs in works?
“No, basically (we have) a five-year plan where, year one in 2015, is developing our reputation within the channel. It's starting to prime the pump on our consumer awareness programs.
“And in 2016 and 2017 it will be a greater push on consumer awareness, and with that elevating our brand and demanding higher market price for our product.
“Ultimately, in five years our goal is to double our business from 2014, while elevating our position in the marketplace.”
Do you feel your products are adequately priced now?
“We believe our products are undervalued in the marketplace, but that's at our own fault. Nexen has really focused on pushing through the marketplace and relying on high quality and a niche price-point for success, which doesn't allow for an elevated brand in the marketplace at a higher price.
“So now that we're very comfortable in teaching people about the quality of the product, and where it truly belongs in the positioning in the market, it's our duty, our responsibility to bring that awareness to the consumer and demand a better price and see what the marketplace will bear for our product.”
To reach this reporter: [email protected]; 330-865-6130; Twitter: @SigMikolajczyk