New factories, tire introductions, a TV ad campaign and MLB support
Hankook dealers who assembled at the company’s annual Partner’s Day, held in Jamaica this year, were told that the company is on schedule for the ground-breaking of its new Clarksville, Tenn., tire factory during the second half of this year.
Byeong Jin Lee, president of Hankook Tire America Corp., said the company is looking to start production in 18 months. Hankook is investing $800 million in the factory, which Lee said will eventually produce 11 million tires annually and employ 2,000 workers after phase two is completed in 2018.
Shawn Denlein, senior vice president of sales for Hankook, said the parent company had worldwide sales of $6.882 billion in 2013, and has set a goal to exceed $14.388 billion by 2020.
In a private conversation with Modern Tire Dealer, Denlein said Hankook increased its unit sales in the U.S. by 6% in 2013, but declined to reveal dollar sales. Hankook had U.S. sales of $1.2 billion in 2012.
By 2018, the company wants to be the fifth largest tire company in the world. Hankook is currently the seventh ranked company with total production capacity of 93.7 million units. Denlein said the company continues to invest 5% of its revenue into R&D; Hankook runs five technical centers manned by 1,000 researchers.
Hankook prefers to build large-scale factories in strategic places because it gives them more flexibility and “we can react to the market more quickly,” said Denlein. The company continues to look at the growth markets of the world as places of opportunity for plants. For instance, Denlein said Hankook has a market share of 9.3% in Germany, second only to Continental AG.
Denlein revealed that the company is aggressively moving toward larger diameter tire fitments and is ahead of its competition in the ratio of 17-inch and above tires versus lower sizes. By 2017, the company is forecasting that 32% of its passenger and light truck tire sales will come in rim diameters of 17-inch or greater. That is up from 10% in 2007 and 23% in 2011.
Looking at plans for the U.S. market for this year, Denlein said the company will continue its support of Major League Baseball (MLB), with signage at 25 of 28 major league stadiums. He also intends to have more television spots in prominent settings, such as MLB playoffs, to increase brand awareness.
The company is in the process of creating a new television commercial just for the U.S. market, a first since the launch of the worldwide “Be One With It” campaign started a few years ago.
From a product standpoint, the company is launching two tires, the Ventus V12 evo2 and the Ventus V2 Concept 2. The V12 evo 2 is an ultra-high performance summer tire that will come in 16- to 21-inch sizes with W- and Y-speed ratings. There are 62 SKUs in the line, which is designed for performance luxury and sports car users.
The Ventus V2 Concept 2 is a UHP all-season tire that will come in 15- through 18-inch sizes with V- and W-speed ratings. There are 22 SKUs in the line which is designed for the stylish compact and mid-sized car user.
In August, Hankook will launch the Ventus S1 evo2 SUV tire and the Dynapro HP2, according to Denlein. The Venus S1 evo2 SUV tire is a UHP summer tire that will come in 19- through 21-inch sizes and 13 SKUs. The target customer is the performance luxury and sport SUV/CUV owners, particularly German brands, according to Denlein. The last tire is the Dynapro HP2 which is a premium SUV/CUV all-season tire that will come in 16- through 20-inch sizes and 34 SKUs. Its target market will be the premium SUV/CUV market.
Denlein said the company continues to be very active with OE fitments and said this is one way the company is attempting to increase its brand awareness among consumers. Examples of current OE fitments for the U.S. market are the Ventus S1 evo2 for the BMW X5 and BMW X6. These are not run-flat tires. At Ford, Hankook has placed the Dynapro HT on the Transit since September 2013, while the company will begin supplying the Dynapro HT for the Expedition and the Ventus S1 Noble2 on the Mustang in May. The Dynapro HT also has been on the Nissan Rogue since October 2013.
The company’s Optimo H426 has been OE for the Honda Civic and Volkswagen Passat since January 2013 and on the Toyota Corolla and Nissan Altima since August 2013. The same tire became OE on the Kia K900 starting in January of this year. Volkswagen also started fitting the Kinergy GT and Ventus S1 Noble2 on the Golf in January of this year.
Modern Tire Dealer had the opportunity to sit with three Hankook Tire America Corp. executives to discuss a wide variety of topics. On hand for Hankook were Jeong Ho Park, senior vice president for marketing, Brandon Hur, general manager/marketing strategy, and Denlein.
MTD: What does the American Tire Distributor purchase of Terry’s Tire Town mean to the industry and to Hankook Tire?
Hankook: The industry, both on the retail and wholesale side, will continue to consolidate. The distributors out there are trying to fill in their footprint. In this case, ATD was trying to fill in the Northeast. It makes strategic sense to them.
The reality is there are not many companies out there now with multiple distribution centers. For us, we do business with ATD, but have not with Terry’s as yet. Whenever an acquisition comes up, no matter who it is, we evaluate it and decide whether it fits within our strategic planning.
MTD: How do you foresee your channel distribution changing moving forward?
Hankook: Independent tire dealers have something like 61% of sales and this is a channel where we are very strong, so we feel we have the right partners between retail and wholesale. I don’t think we will be changing our strategy moving forward.
As mentioned earlier, as an industry we must be paying close attention to the consolidation. But, we’re in all channels except wholesale clubs and we feel we can grow a lot with our current customer base.
MTD: What segments of the industry do you see performing the best in 2014?
Hankook: The car dealer channel has been the biggest growth segment the past few years and we see that continuing. I would say that dealers and mass merchandisers have been stable.
MTD: How many points of sale does Hankook have in the U.S.?
Hankook: We have around 3,000 and 77% of those are independent tire dealers.
MTD: What percent of your U.S. sales are to OE? And where would you like that to be in the next few years?
Hankook: It’s right at 20% currently. Globally, we are at one-third, so we would like to get to that point here, too.
MTD: Globally, Hankook has UHP sales of 26.5%. What is that number for the U.S.?
Hankook: We’re at 33%.
MTD: How much of your sales volume is medium and heavy truck tires?
Hankook: It is less than 10%.
MTD: What are your sales goals for the U.S. and Canada for 2014?
Hankook: It is $1.5 billion for the U.S. and $177 million in Canada.
MTD: What tier brand do you consider Hankook?
Hankook: We are a second tier brand, but to add to this, when we talk in presentations, we’re not talking about the tier as the industry knows it, we’re talking about being a first tier premium brand. Consumers don’t know about the tiers in our industry and with them, we want to be known as a top premium brand.
MTD: Do you consider your Hankook Roadhandler tire to be a Hankook brand or a private brand? And, how are things going with Sears?
Hankook: It is a Hankook brand distributed through Sears. We are happy with the volume. The initial launch was in December 2012 with the touring tire and now we have added a P-metric truck and a sport line and those are being ramped up.
MTD: What’s happening with your Kingstar brand?
Hankook: We have it in the warehouse and continue to promote it. We’ve seen good volume, particularly in the second half of 2013.
We’re evaluating it to see if we will continue it or come out with a second line in that segment, which is a non-Hankook branded product. (The Kingstar line is a passenger line, including HP and UHP, but not light truck tires.) ■