Independent Tire Dealers Are Kumho's Top Priority
Kumho Tire USA Inc. has new ownership, new plans for its product lineup, a new pricing strategy, plus a new streamlined dealer program for 2019. But one thing remains the same – the tire maker says its focus “is on the independent tire dealer channel.”
Shawn Denlein, executive vice president of sales and marketing for Kumho, says independent dealers remain the biggest force for replacement tire sales in the U.S., and Kumho is committed to growing through its dealer partners.
“Our focus is on the independent tire dealer channel. That’s where we have to stay focused. That’s the core. Not only is it the biggest segment, but for Kumho it’s the best way for us to get out and talk about our brand.”
Denlein himself is part of the “new” at Kumho; he joined the company in April 2018. An industry veteran with time at Yokohama Tire Corp., Hankook Tire America Corp., and most recently Monro Inc., Denlein addressed Kumho dealers during the company’s 2018 dealer meeting in Costa Rica. When looking at the overall replacement market as flat, Denlein says Kumho sees an opportunity to grow by making adjustments and improvements that help the company’s existing dealers. Among the changes underway is a consolidation of overlapping treads in Kumho’s tire lineup.
The company already has launched two products – the Crugen HP71 and the Ecsta PA 51 – with this goal in mind.
- The Crugen HP 71 is a tire for CUVs and SUVs. It replaces the Crugen ML33 and the Ecsta STX.
- The Ecsta PA51 is an all-season ultra-high performance tire, and it replaces the Ecsta 4X11 and the Ecsta PA31.
Here’s what’s coming next:
- In grand touring tires, the Solus TA51 will replace the Solus TA71 and the Solus TA31.
- The Ecsta PS72 will replace the Ecsta PS91 and Ecsta PS31 in the performance category.
- For the off-road segment, the Road Venture MT71 will replace the Road Venture MT51 and Road Venture KL71.
Denlein says the consolidation won’t happen all at once, but there will be a steady clean-up force through 2021.
“We’re getting rid of five to six product lines and condensing moving forward,” Denlein says. “Part of this investment that we received from Doublestar allows us to accelerate a lot of the plans that we have.”
The Doublestar effect
For two years there were questions about the ownership of Kumho, but that was finally settled in July when Qingdao Doublestar Tire Industrial Co. acquired a 45% stake in the Korean tire company. Denlein says he’s often asked what the acquisition means for Kumho. The tire maker maintains its independent management. “Kumho still operates Kumho. Doublestar operates Doublestar. In the foreseeable future that’s the way it will be.”
Doublestar invested 3.9 billion RMB in Kumho and is now the largest stakeholder.
“With Doublestar’s financial investment it’s very positive for Kumho because Kumho can reinvest that money into things that are important to everybody in this room – product, plant and technology – three areas that can move the company forward.”
The deal also is expected to help both companies increase business in China, the world’s fastest growing market. “The focal point right now is the Chinese market,” Denlein says. “The synergy in China is the first thing being explored.”
Both companies will benefit, Denlein says. Doublestar gains access to Kumho’s technology, and Kumho benefits from the financial investment by the Chinese tire company.
Consolidating the product line is an important element of the company’s bigger focus on marketability. But it’s part of a three-prong approach.
Price: In the third quarter of 2018 the company moved away from a pricing strategy that was heavily focused on deals and bonuses.
Denlein says the old model was a transactional-based business. “We were doing deals, and being very aggressive in pricing. That works short term, but long term the issue is you don’t have a lot of stability in the market. You have peaks and valleys, and then programs get out of line and your margins will start to suffer.”
Dealer margins: “We’ve simplified our dealer program.” Denlein says it was too complex with too many pieces. He says the system has been streamlined from 10 components to three or four. “That helps us, and helps you because it’s easier to track.”
Growing with OE
Kumho has spent the past 20 years increasing its share of the original equipment market. In the U.S. the first fitment was in 1997 with Mercedes. Hyundai and KIA followed in 2003 and 2004, respectively. Since then, the company has completed OE orders on 61 vehicles, the latest of which was Kumho’s first fitment with Volkswagen.
“Our strategy moving forward on OE is concentrating more on the Japanese vehicles,” Denlein says. The company’s tires are available on the Nissan Rogue. Kumho wants to maintain its OE relationships, “but also get more involved in Japanese vehicles, and the higher inch as well.”
Those OE relationships are important to the company, but they’re also important to dealers, Denlein says, as they help with pull through in the replacement market.