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May 28, 2014

Falken reveals plans to expand

In Iceland, company tells dealers it will increase truck tire operations, sales network and tire lines

by Greg Smith - Also by this author

Falken dealers were treated to volcano and river expeditions during their incentive trip to Iceland.
Falken dealers were treated to volcano and river expeditions during their incentive trip to Iceland.

Modern Tire Dealer had the opportunity to sit down and talk with Richard Smallwood, president of Falken Tire Corp.; Andrew Hoit, new vice president of sales; and Rick Brennan, executive director of marketing; during Falken’s recent dealer trip to Iceland.

It is clear the company is positioning itself for expansion. Smallwood says in the past, the company has concentrated on the United States market, but now views both Canada and Mexico as areas of great opportunity.

In addition, Smallwood is looking to expand Falken’s medium and heavy truck tire operations. “Medium and heavy truck is an area where we are going to revitalize things. In the past, we had one foot in and one foot out, but now we are going to make a bigger push.”

The first push with the medium and heavy truck tires will be to the owner-operators and smaller regional fleets “because we don’t have a wide network yet and can’t go after the large fleets,” says Smallwood.

Hoit says he intends to expand the direct sales operation to almost twice its size in the next two years to 40 people. Currently there are three sales divisions but that will expand to five, with dedicated Canadian and Mexican divisions along with a medium and heavy truck division being added.

One of the key reasons for the expansion is, “We need more people to get with the regional retail and wholesale customers,” says Hoit.

Smallwood says the company will have strong winter tire lines by 2015 that will help its growth in the Canadian marketplace.

Near term, Falken is expanding its lines in broad line to cover 93% of the market and increase its high performance line to hit 80% of the market.

“We are working to strengthen our stocking network with a re-organization on the sales network, not only to expand numbers, but to increase our ability to cover a larger geographic area,” says Hoit.

“A challenge is to grow this without too much conflict,” says Smallwood, “but we have the entire Midwest, the Pacific Northwest and the Northeast with virtually no penetration there.”

Brennan points out, “We’re going to grow the traditional channel.”

Hoit says Falken is looking to expand in the low penetration areas and wants to focus on the regional retail and wholesale dealers, noting, however, that Falken has done well with the national retailers.

In looking at the Ohtsu brand, Brennan says it was brought in to compete “in the low end of the market to help us maintain volume. Ohtsu helps us solidify the Falken price point.”

Falken is poised to enter the OE market in the second half of this year. The Falken executives could not discuss details, but already photos of the new Jeep Renegade have appeared with Falken-branded tires on it. The company also is working with Volkswagen for fitments.

Falken also is looking to expand its Fanatic dealer program. “We want it to help connect the marketing message with the sales message to smaller dealers,” says Brennan.

“Dealers have become more sophisticated and we must up our game to help them,” Hoit comments. “We need to give the dealers more tools to help them sell more of our tires.”

Brennan says the Falken marketing programs have been traditional in the past, and he’s looking to improve them.

“There’s a lot of ‘good enough’ — we must be a real asset for business development,” says Brennan.

The overall marketing of Falken is something Brennan intends to expand. “We can still be edgy, we still need the performance, but we need to put an everyday flavor to it.”

The dealer meeting

Falken announced plans to expand its Ziex, WildPeak, Sincera and Ohtsu lines to help it compete in a larger segment of the market during its dealer meeting.

Brennan says the CUV growth in the vehicle fleet has caused a significant shift in market complexity. He said the CUV segment at OE was 4.163 million vehicles in 2013 and should hit 4.490 million by 2015, clearly making it the largest segment of vehicle types.

This segment uses tires ranging from LT names and patterns to passenger HP tires to specific CUV touring tires. This factor, coupled with growing numbers of higher speed rated tires at OE and consumers who are holding onto vehicles for long periods of time, puts dealers and manufacturers in a position for more SKUs to stay competitive, says Brennan.

Currently, consumers are keeping new cars for an average of over 72 months and used vehicles for 50 months.

Brennan says vehicles 10 years and older have increased by 19 million units from 2009 until 2012. Using a Toyota Camry as an example, he showed dealers how the vehicle has gone from an OE tire of 205/65R15, to 215/60R16, to 215/55R17 to today’s 225/45R18 size. In the meantime, consumers still want mileage, comfort and low noise but now higher performance from their tires.

To address these needs, Falken launched its Ziex ZE950 A/S that it says is delivering 63% better mileage than the original compound in the Ziex ZE912. The company is including 18 new sizes for its WildPeak H/T line, with June production and August availability. That will give the new line 80% coverage in the LT/SUV/CUV market.

The Ziex STZ05 line will receive six new sizes in the 18-inch to 20-inch category, with five sizes coming in now and the last size to hit the market in October.

Falken’s Sincera SN211 will have four new T-rated sizes coming in September and October: one 16-inch size, two 17-inch sizes and one 18-inch size.

Later this year, Falken will be introducing the WildPeak M/T tire. Three sizes, a 37x12.50R17 in load range D; a LT265/75R16 in load range E; and a 38x13/50R17 in load range C are being launched this year; 23 other sizes will come out in 2015.

The company is also adding six sizes to its Ohtsu FP7000 line late this year. The H- and V-rated sizes will range from 16 to 19 inches.

Brennan adds that the company will have consumer rebate programs this year. The Sincera SN211 will have a $50 rebate for a set of four tires in June and July, while the WildPeak H/T will have an $80 rebate for a set of four during the same time period.

The Ziex ZE950 will have an August and September rebate of $50 for a set of four tires.    ■

For more Focus on industry articles, see our May 2014 issue by clikcing on our digital version here!

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