Skip to main content
Sister Publication Links
  • Rubber News
  • European Rubber Journal
Subscribe
  • Login
  • Register
  • Subscribe
  • Current Issue
  • Mid-Year Report
  • ADAS
  • News
    • OPINION
    • BUSINESS/FINANCIAL
    • COMMERCIAL TIRE
    • GOVERNMENT & LAW
    • Humanitarian Award
    • RETAIL TIRES
    • SERVICE ZONE
    • TIRE MAKERS
    • Best Places to Work
    • RUSSIA WAR IN UKRAINE
  • Data
    • DATA STORE
  • Custom
    • SPONSORED CONTENT
  • Resources
    • Events
    • DIRECTORY
    • CLASSIFIEDS
    • SHOP FLOOR
    • AWARDS
    • ASK THE EXPERT
    • LIVESTREAMS
    • WEBINARS
    • SEMA LIVESTREAMS
    • RUBBER NEWS EVENTS
    • BALANCING
    • DEMOUNTING
    • SAFETY
    • TIRE REPAIR
    • TPMS
    • TRAINING
    • VEHICLE LIFTING
    • WHEEL TORQUE
    • Best Places to Work
  • ADVERTISE
  • DIGITAL EDITION
MENU
Breadcrumb
  1. Home
  2. News
June 10, 2020 11:00 AM

Mid-Year Report: Kenda says value products play well in market

  • Tweet
  • Share
  • Share
  • Email
  • More
    Print

    With unemployment at record levels and the economy struggling, value products seem to be winning, according to Brandon Stotsenburg, vice president, automotive, at American Kenda Rubber Industrial Co. Ltd. Mr. Stotsenburg told Tire Business the shift has benefited Kenda "as retailers are more easily demonstrating our premium performance message and seeing higher margins in return."

    Q How would you describe business thus far in 2020?

    A Kenda's orders and shipments have remained strong — there was a brief slowdown during the initial lockdown period, but consumers and our channel partners have embraced our message of premium performance at a value price.

    As the economy has been stressed, consumers are actively seeking value, but don't want to surrender expected performance and safety. We are consistently over-indexing in sell-out performance with our channel partners responding to exceptional margin opportunities.

    Q How has your company reacted to COVID-19?

    A Kenda has all of its tire plants up and running, capable of 100% capacity. Maintaining the best work environment safety while keeping our warehouses, essential offices and manufacturing open in the U.S. remains our best way to keep our employees safe and our customers servicing essential businesses operating.

    Based on past experience under financial stress, consumers will over-index for value-based products. We empathize with people under stress but want to provide exceptional, high quality products that mean they won't sacrifice the safety and performance with our products developed for the Americas in our Akron-based Technical Center. As important, we continue to develop channel programs that offer exceptional margin opportunities for our channel partners.

    We are being very prudent about any discretionary expenses and have eliminated or postponed planned expenses that don't immediately follow our channel support planning.

    Q Do you expect any supply difficulties in the second half of the year?

    A No. Kenda has all of its global supply chain intact to support our channel partners, including the U.S. facilities for warehousing and wheel production.

    Q What type of practices has your company implemented in light of COVID-19? Do you suspect they will continue?

    A The key activities are assuring the best possible safe work environments for our employees — we are doing this across all of our Kenda America divisions. This includes temperature checks to enter our facilities, physical distancing in all practices, limiting travel and conducting more video meetings. Kenda supplied both masks and medical-grade hand sanitizer to support the first responders in our local communities.

    We have also augmented our channel partner communication to include podcasts, improved email platforms and team access for electronic meetings. In the mid-term, American Kenda is owned by a global company that is well positioned to accelerate growth in North America.

    We have established a broad range of premium products that are unparalleled with PCR, LTR, ST radial, ATV, UTV, motorcycle, golf, lawn and garden, light industrial and bicycle.

    Our products are complementary, and we offer many options to allow our channel partners to offer products to cover most of these segments. Kenda is working on new products and supply-chain system improvements that will provide our customers better solutions moving forward. We are continuing to work on online options for education.

    Q What are some of the pleasant surprises you are seeing in the industry?

    A As local business has begun to open up, we see some of the effects of the economic slowdown — driving instead of flying and postponing new car purchases. This is providing the aftermarket retailers additional service and tire opportunities.

    The additional shift from Tier 1 to value products has been a benefit for Kenda as retailers are more easily demonstrating our premium performance message and seeing higher margins in return.

    Interestingly, we have continued to see a strong response to our new Klever A/T2 KR628 launch and strong growth in our Klever R/T KR601 product — this indicates that consumer demand for high quality light-truck products, including plus-sizing, remains stronger than we initially anticipated.

    Brandon Stotsenburg

    Q Where do you see the industry markets heading during the second half of 2020?

    A As long as there are no significant COVID-19 setbacks, there should be continued recovery. The economic stress created by the, hopefully temporary, high unemployment rates has created a downturn in miles driven, which is always the key indicator for retail tire activity.

    During this time, Kenda advises retailers to watch their controllable expenses, focus on value products demanded by consumers and maintain strong relationships with their vendors. There may be overall lower tire sales, but smart retailers will continue to attract consumers as their staff anticipates their needs to provide safety and prioritize necessary services.

    Q What kind of trends are you seeing in the marketplace? How is your company reacting?

    A We have seen the strong shift to value. Consumers need to have their vehicles operating and don't want to overspend. Retailers offering that proposition with brands like Kenda seem to be over-indexing in all markets.

    Q What sectors look to be strong? Are they sustainable?

    A For all segments, value products seem to be winning. Retailers want to have products that provide higher margin opportunities with expected performance and "no comebacks." We are also seeing higher growth in RV applications, including trailers as more consumers are looking to travel this summer but may avoid motels in lieu of their own living arrangements.

    We have also seen higher demand for our light-truck segment, likely due to our new product offerings. We anticipate that those areas will continue to over-index as the economy recovers.

    Q What sectors are struggling? How soon do you expect them to rebound?

    A Based on retailer feedback and reported earnings, it appears that Tier 1 brands are under-indexing. Past experience suggests that this will rebound once the economy begins to recover, but may be delayed with unemployment in the mid to high teens.

    Q Kenda recently unveiled the Klever XT, a UTV tire based on the design of the company's Klever R/T KR601 light truck tire.

    A We have been working on developing a radial, DOT-stamped tire for the UTV segments, which need on-road use along with strong, off-road performance. The market has been so responsive to our Klever R/T that we wanted to offer the same performance and value for the UTV segment.

    It allows a growing number of light truck owners to have the tires on their trucks match their UTVs as well as introduce many UTV owners to this type of product. The initial response has been outstanding, and we anticipate it will grow as we produce the expanding size line-up.

    Q The company said it has had a lot of success with the Klever R/T. How are early sales? Is that segment immune to the current economic slowdown?

    A We have seen exceptional growth and response to this product. Kenda believes that the rough-terrain segment is best represented by true light-truck tires while our new Klever A/T2 KR628 will have a broader range of P-metric tires while offering the aggressive aesthetics that have made the Klever R/T KR601 so popular.

    No segment is immune to the economic stress, but the market continues to respond in a stronger way to exceptional value — our Klever R/T provides the right sizes and specifications with exceptional performance in both on-road and off-road environments.

    Our retailers and consumers are amazed that a tire that won the 2018 Lucas Oil Midwest Off-Road Pro 2 championship provides such a great on-road experience with exceptional looks and wear. We truly believe that it is the best value available.

    Q Do you expect to roll out any additional products in 2020? What will they be and what sector will they serve?

    A We are shipping our new Klever A/T2 KR628, which we introduced at SEMA last year. It has 41 sizes which complement the KR601 with limited overlap.

    Kenda used our channel partners' feedback along with advanced design tools at our Akron Technical Center to create a tire that will provide a great margin opportunity for our retailers along with exceptional value for the consumer.

    With up to a 60,000-mile warranty combined with winter snowflake certification, we believe this tire will be the best A/T tire in the market with its balanced performance and great looks.

    Additionally, we are completing size additions to our Kenetica A/S KR217 and Klever R/T KR601 patterns which we will announce in the third quarter.

    Q Do you foresee any price hikes in the second half of the year?

    A Kenda is always watching the market and evaluating our brand position to assure that we are representing the value and channel margin opportunity that we have committed to provide. If there are factors that affect the industry cost structure, we will take that into account in addition to the overall economic situation.

    Q Do you expect any major investments in the next six months?

    A Kenda has been implementing a robust capital plan for the last several years. We continue to move forward to assure that we are meeting our goals across the global markets in the many segments that we participate in.

    Q How has the UHP market fared in light of the proliferation of LTs, SUVs and CUVs? Are you seeing growth and potential for future growth? Any new innovations in the segment?

    A Many of these vehicles need a V-rated product or higher, which means that the product application will align with a grand touring tire or a UHP tire.

    UHP all-season continues to grow and expand with many CUV platforms requiring similar performance as the automotive platforms. Kenda has designed products around the vehicle application to assure that the performance for the base platform will provide the consumer the best safety and performance.

    We have our Klever S/T KR52 tire specifically for premium CUVs and SUVs – it primarily offers H- and V-rated tires for these applications. As the segment grows, Kenda may determine that there is higher demand for a true UHP tire.

    Q What is your view of the wholesale channel, given the current conditions? Any concerns for a future disruption?

    A Kenda has aligned with strong independent distributors that are able to offer programs to their retail customer bases. We believe that partnering means that Kenda works with the distributors to assure that retailers who support the brand have distinct trade areas with limited competition. We intentionally do not oversaturate the market with many distributors due to this strategy.

    We do believe that the strong independents have distinct advantages in the market as they focus on their retail customers. There will likely be continued distributor consolidation as SKU proliferation and capital needs continue to expand, while the service levels and underlying associated costs have been increasing.

    Q What are some of the challenges of the industry going forward? What keeps you up at night?

    A I am concerned that the economic pressures are putting a large amount of stress on small businesses, which are Kenda's chosen primary partners. We believe in this business model and have aligned our programs and strategies to provide these folks with excellent margin opportunities. If the government doesn't provide a framework to allow the economy to return to pre-pandemic levels, small business will need additional support.

    Q Anything else you would like to add?

    A Some thoughts for the independent dealers. First, continue to take advantage of the government offers for low-cost loans and grants to support small business — having access to cash is going to continue to be critical.

    Be closely affiliated with your bank and have them assist with necessary capital needs. Be prudent and diligent with all variable expenses and continue to control costs.

    Make sure that you have a good relationship with your key vendors — if there are needs for supply and cash flow, have an open dialogue with them so that there are no additional surprises. If you have a good relationship, vendors should be looking to the recovery which Kenda feels will continue as we move toward the third quarter.

    For automotive retail, know your local markets and anticipate how the needs of your customers may be changing to be in the best position as we come out of the current reductions in car count. Kenda feels strongly that consumers will want value-priced tire brands, but won't want to sacrifice performance.

    We advise dealers to find brands that will offer this promise while allowing the retailer to make above-average margins — in the near term, initial margin at the sale should be emphasized over the back-end additional margin provided by loyalty programs to improve cash flow.

    Letter
    to the
    Editor

    Do you have an opinion about this story? Do you have some thoughts you'd like to share with our readers? Tire Business would love to hear from you. Email your letter to Editor Don Detore at [email protected].

    Most Popular
    1
    Trelleborg Wheel Systems: sales, earnings up double-digits
    2
    ATD bolsters supply chain with addition to leadership team
    3
    Bridgestone extends 'connected vehicle' partnership with Microsoft
    4
    Nokian using historic locomotive to deliver materials in Tennessee
    5
    EVs not far from achieving cost parity
    SIGN UP FOR NEWSLETTERS
    EMAIL ADDRESS

    Please enter a valid email address.

    Please enter your email address.

    Please verify captcha.

    Please select at least one newsletter to subscribe.

    Newsletter Center

    Staying current is easy with Tire Business delivered straight to your inbox.

    SUBSCRIBE TODAY

    Subscribe to Tire Business

    SUBSCRIBE
    Connect with Us
    • Facebook
    • LinkedIn
    • Twitter
    • RSS

    Our Mission

    Tire Business is an award-winning publication dedicated to providing the latest news, data and insights into the tire and automotive service industries.

    Reader Services
    • Staff
    • About Us
    • Site Map
    • Industry Sites
    • Order Reprints
    • Customer Service: 877-320-1716
    Partner Sites
    • Rubber News
    • European Rubber Journal
    • Automotive News
    • Plastics News
    • Urethanes Technology
    RESOURCES
    • Advertise
    • Privacy Policy
    • Privacy Request
    • Terms of Service
    • Media Guide
    • Editorial Calendar
    • Classified Rates
    • Digital Edition
    • Careers
    • Ad Choices Ad Choices
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • Mid-Year Report
    • ADAS
    • News
      • OPINION
      • BUSINESS/FINANCIAL
      • COMMERCIAL TIRE
      • GOVERNMENT & LAW
      • Humanitarian Award
      • RETAIL TIRES
      • SERVICE ZONE
      • TIRE MAKERS
      • Best Places to Work
      • RUSSIA WAR IN UKRAINE
    • Data
      • DATA STORE
    • Custom
      • SPONSORED CONTENT
    • Resources
      • Events
        • ASK THE EXPERT
        • LIVESTREAMS
        • WEBINARS
        • SEMA LIVESTREAMS
        • RUBBER NEWS EVENTS
      • DIRECTORY
      • CLASSIFIEDS
      • SHOP FLOOR
        • BALANCING
        • DEMOUNTING
        • SAFETY
        • TIRE REPAIR
        • TPMS
        • TRAINING
        • VEHICLE LIFTING
        • WHEEL TORQUE
      • AWARDS
        • Best Places to Work
    • ADVERTISE
    • DIGITAL EDITION