Retail

Multi-brand strategy

Bob Ulrich
Posted on October 31, 2013
“In most countries, we sell tires through independent dealers,” says Yasutaka Ii, senior executive officer. “That’s common everywhere.”

“In most countries, we sell tires through independent dealers,” says Yasutaka Ii, senior executive officer. “That’s common everywhere.”

Armed with a degree in economics from Osaka University, Yasutaka Ii joined Sumitomo Rubber Industries Inc. (SRI) in Japan in 1981. Thirty-two years later, he is putting his degree to good use as senior executive officer in charge of corporate planning and international business development. He also is an SRI board member.

“I supervise all overseas operations, not only sales but also factories,” says Ii (pronounced “E”). That includes Falken Tire Corp., SRI’s North American marketing arm.

Although Dunlop is Sumitomo’s flagship brand, Falken is the only brand that Sumitomo has control over worldwide. (Under an alliance with SRI, Goodyear Tire & Rubber Co. controls the Dunlop brand in the United States, Canada and Europe.)

“By country, the USA is the largest and the most important market for us,” says Ii. “Each country requires a different marketing message. So we listen to what (the subsidiaries) say to us, basically. At the same time, we know we have to create a good global brand image.”

Modern Tire Dealer sat down with Ii at Sumitomo’s technical center in Kobe, Japan, recently, and asked him about Sumitomo’s business makeup in general, and the Falken and Ohtsu brands in particular. He also shared information about SRI’s next-generation tire manufacturing system, NEO-T01, which uses a metal core process to improve uniformity. (For more details on the automated system, check out MTD’s website.)

MTD: Of the total number of passenger tires that Sumitomo Rubber produces, what percentage do the various brands represent?

Ii: Dunlop is our principal brand from a global viewpoint. More than 50% but less than 60% of our production is the Dunlop brand. Falken is about one-third. The rest is Sumitomo and other brands. When SRI merged with Ohtsu Tire in 2003, the portion of the Falken brand was much less. Falken is growing very rapidly in the North American market... and we will continue to push the Falken brand.

MTD: What are your plans for the Falken and Ohtsu brands worldwide?

Ii: The Falken brand is currently being marketed globally, mainly in North America and Europe, but we just started selling Falken tires in India. We implemented a multi-brand strategy for passenger and light truck products in North America by using the Ohtsu brand to respond to market changes such as non-RMA share increases and diversified brands. You have so many brands in America! We do not have any plan to expand the Ohtsu brand into any other market at this point.

MTD: Do you have enough capacity to supply Falken Tire Corp. with Falken and Ohtsu tires?

Ii: Yes. We have four factories in Japan, two factories in China, a very big factory in Thailand and one factory in Indonesia. We have a new factory in Brazil that just opened, and last year, we decided to build a factory in Turkey. We want to start commercial production in Turkey by the middle of 2015. And in May, we announced the purchase of a passenger tire plant in South Africa from Apollo Tyres. SRI is expanding its production capacities, so we don’t have to worry about supply.

Sumitomo’s Yasutaka Ii, senior executive officer (second from right on the right side of the table) admits to MTD Publisher Greg Smith (third from left on the left side) that in order to reach the very aggressive goals set forth by SRI’s Vision 2020 management plan, the company may need to establish a factory near North America.
Sumitomo’s Yasutaka Ii, senior executive officer (second from right on the right side of the table) admits to MTD Publisher Greg Smith (third from left on the left side) that in order to reach the very aggressive goals set forth by SRI’s Vision 2020 management plan, the company may need to establish a factory near North America.

MTD: Where do you build Falken and Ohtsu tires?

Ii: We produce those tires in factories located in Japan, Thailand and Indonesia.

MTD: Are you looking to build a plant in North America?

Ii: We have no plan to build in North America at this moment.

MTD: How will you market the Sumitomo brand in the U.S.?

Ii: We sell Sumitomo in the USA exclusively through TBC. USA is a huge market. There are so many brands. And each manufacturer, I believe, has a multi-brand strategy. I believe we can achieve some good market share for both brands, Falken and Sumitomo.

MTD: Does Sumitomo Rubber operate any retail stores? If so, in what countries and what is the scale of operation?

Ii: We have our own retail stores only in Japan. For passenger car tires, we have 106 outlets under the name Tire Select. For truck tires, we have 148 stores under the name Tire Land.

At the moment, we don’t have a plan to open retail stores outside Japan. In Japan, we have very few competitors: Bridgestone, Yokohama and Toyo. So each tire company has its own outlets. Japan is a kind of unique country compared to other markets like the USA or Europe. But to survive as a retailer in the USA, I think you have to carry many brands, not the Falken brand alone.

MTD: Is the medium/heavy truck tire segment a significant part of Sumitomo’s business?

Ii: Last year, the truck tire segment represented about 5% of our total sales units, but 15% of our total sales turnover, which is quite significant. Going forward, we are planning to expand sales mainly in Asia and Brazil. (Andrew Hoit, Falken’s vice president of marketing, says Falken Tire will continue to grow Falken brand medium truck tire sales in the U.S.) ■

5th isn’t good enough

Sumitomo Rubber Industries Inc. is the fifth largest tire manufacturer in the world, just ahead of Pirelli & Cie SpA and more than $4 billion behind Continental AG. When asked if the Japanese-based company was satisfied with its ranking, Senior Executive Officer Yasutaka Ii said no.

“There’s a big gap between the top three and the second group,” he said. “But at least we would like to be at the top of the second group by 2020. At the same time, we know our competition is working hard to expand its business.

“We are striving to achieve our Vision 2020 goals, and to be a true global company,” he added.

Six degrees of Falken: a time line

Falken Tire Corp. (FTC) is owned by Sumitomo Rubber Industries Ltd. FTC is responsible for Falken and Ohtsu sales in North America. TBC Corp. is owned by Sumitomo Corp. of America, which is a wholly owned subsidiary of Sumitomo Corp. It has exclusive distribution rights to the Sumitomo brand in North America. The largest shareholder in Sumitomo Rubber is Sumitomo Electric Industries Ltd (26.8%). Goodyear Tire & Rubber Co. controls the Dunlop brand in the United States and Canada as part of its alliance with Sumitomo Rubber.

Sound confusing? Hopefully it won’t be after you look at our Sumitomo time line.

1585: Masatomo Sumitomo is born. In the 17th century, he opens a book and medicine shop based on his Founder’s Precepts, which are followed by Sumitomo Group companies today.

1909: Dunlop Rubber is established in Japan.

1919: Sumitomo Corp., one of many companies in the Sumitomo Group, is founded.

1937: Dunlop Rubber changes its name to Nihon Dunlop Rubber Ltd.

1944: Izumiohtsu, Japan, tire factory is established.

1944: Ohtsu Tire & Rubber Co. is established.

1952: Sumitomo Corp. of America is established. It is a wholly-owned subsidiary of Sumitomo Corp.

1961: Nagoya, Japan, tire factory is established.

1963: Sumitomo Group assumes management of Nihon Dunlop and changes its name to Sumitomo Rubber Industries Ltd.

1974: Shirakawa, Japan, tire factory is established.

1976: Miyazaki, Japan, tire factory is established.

1983: Falken brand is created by Ohtsu.

1985: Falken begins distribution in North America.

1986: Sumitomo Rubber acquires Dunlop Tire Corp. in the U.S.

1991: Falken Tire Corp. opens its headquarters in Rancho Cucamonga, Calif.

1995: Indonesia tire factory is established in Cikampek.

1999: SRI forms an alliance with Goodyear Tire & Rubber Co.

2003: SRI absorbs its Ohtsu Tire & Rubber Co. and Dunlop Japan subsidiaries.

2005: Thailand tire factory is established in Rayong.

2005: TBC Corp. is acquired by Sumitomo Corp. of America (SCOA), a subsidiary of Sumitomo Corp. (no relation to Sumitomo Rubber).

2007: TBC purchases Treadways Corp. from SCOA.

2009: Sumitomo Tire Technical Center is completed in Kobe, Japan.

2009: 1st Falken distribution center opens in Fontana, Calif. (D/C No. 6 will open in Chicago in 2014).

2013: Falken introduces its Ziex ZE950 line, with 95% coverage, at the SEMA Show. It will be released in 2014.

2014: SRI plans to begin production using its automated NEO-T01 manufacturing process at one of its Japanese plants. The first tire being built will be a Dunlop run-flat tire.

2014-2015: FTC will have an OE fitment on a Chrysler vehicle, its first in the U.S.

2020: Introduced in 2012, Vision 2020 is Sumitomo’s long-term global management program. It sets financial targets (1.2 trillion yen in sales) and goals (expansion in emerging markets; an “insatiable drive for innovation”) for fiscal 2020.

Related Topics: Falken Tire Corp., SRI, Sumitomo Rubber Industries Ltd., Yasutaka Ii

Bob Ulrich Editor
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