Sumitomo Rubber North America Inc.’s (SRNA) “focus on Falken” strategy is paying big dividends, says Darren Thomas, the company’s CEO and president.
Thomas recently sat down with MTD Editor Mike Manges during SRNA’s 2023 Falken Dealer Invitational event in Portugal to discuss the company's 2023 highlights, including new products it has introduced, the evolution of its ever-growing Falken Fanatic dealer program and more.
MTD: Can you bring us up to speed on SRNA’s business and performance this year? What have some of the highlights and challenges been?
Thomas: I would say the most significant change in our business has been our sheer ability to maintain an improved mix position – in terms of products, price and channel. We have consistently been able to improve all three of those.
MTD: During the your August 2022 dealer meeting, SRNA officials told dealers that the company would be “laser- focused" on the Falken brand and Falken dealers. Has that strategy changed?
Thomas: It hasn't changed.
MTD: Has it been effective?
Thomas: It's been crazy-effective. We’ve gone from 4,000 (Falken Fanatic) associate dealers to 14,000. You can’t manufacture that type of expansion of distribution at wholesale. That takes brick-by-brick and now we’ve been doing this for four or five years, the math is prevailing and it has simply exploded our business. We’re putting all of our money there.
MTD: What do you attribute the Falken Fanatic program’s growth to?
Thomas: It’s attributable to us taking the initiative to put 30 well-trained individuals on the street who are going to make 10 sales calls per day. Thirty times 10 is 300 and you’re going to sign some percentage of those. Do it over and over and it’s just math.
This is exceptionally hard to do, but when we turned on the FAST (Fanatic Associate Sales Team), we annihilated our budget for advertising and promotion. We pulled it away from consumer and we put it into independent tire dealers, who ultimately sell to those folks.
MTD: Have you made any enhancements to the Fanatic program in the last year?
Thomas: We change it every day. Keeping it simple is one method that works. Always visiting dealers and always signing people up and understanding attrition is part of it is another strategy that works. Without question, our FAST team maintains our relevance in the marketplace, no matter what pressures are out there.
MTD: Let's talk products. You introduced a new all-weather tire, the Aklimate, during your recent 2023 Dealer Invitational meeting in Portugal. Why an all-weather tire now?
Thomas: Whereas for any 17-inch size (tire), we probably have 100 competitors, all-weather is going to have, at least in the near-term, fewer competitors. And it gives us an innovation story.
We’re only going to get so much of the touring (segment) business and we’re only going to get so much of that at our current price, so we needed to have something that’s more competitive. Our parent company has very good all-weather technology, so introducing an all-weather tire (was) a very easy development argument for us.
MTD: During your dealer meeting, you also unveiled the new WildPeak A/T 4W light truck tire. How significant of a product will that be for SRNA?
Thomas: Of the total all-terrain category, we have 9% share. That's massive. Nobody would ever have expected us to achieve that level of market share at the level of price we’ve achieved it, so that's significant and it illustrates just how important it is for us to make the transition to the WildPeak A/T 4W. And the 4W transition means we can’t be remiss in understanding the inventories of the WildPeak A/T 3W that are sitting in current distribution. We have to understand the long-term demand for the 3W that is still out there.
The WildPeak A/T 4W is a cornerstone of our business. The amount of product it’s going to take for us to move that into distribution and change the import strategy from 3W to 4W - our company has never faced this big of a launch.
MTD: You also have a new Azenis, the RS820, coming out...
Thomas: We’re targeting Michelin here. This is going to be a reach for us because it's one thing to achieve the performance level you need and it’s another thing to convince the customer to go with your brand. And the amount of ultra-high performance (tire) segments that are below the flagship max segment is a lot.
This is one of the first (tires) we have ever made that has the ability to attack tier-one domestic and European OE applications and this product will provide everything necessary. We’re swimming with big fish with the RS820.
MTD: It was mentioned during your recent dealer meeting that SRNA is developing a tire for electric vehicles (EVs)...
Thomas: Falken Europe already has an EV-specific line. We just haven’t adopted it. We’re not certain how many SKUs we need in the marketplace, in total, and whether or not the consumer must have an EV-labeled product or if they simply need an (existing tire) with the right load index. The independent tire dealer is going to move the consumer into the product they need. So that is something we need to continue to look at and decide how it fits into our portfolio. Ultimately, we’re still evaluating.
MTD: The U.S. Tire Manufacturers Association (USTMA) has dialed back its overall shipment projections in four out of the six tire categories in tracks. What’s your take on demand? What are you hearing from the field and your customers?
Thomas: What we're seeing is that overall demand is good. The question is, ‘What’s your measure? Are you measuring it based on price? Are you measuring it simply based on units or market share?' The market is good. And TBR will eventually recover. (Editor’s note: The USTMA projects U.S. medium truck tire shipments will be down 16% 2023 versus 2022.) But it has to work through all of these imports that didn't get shipped during COVID-19.
MTD: Looking at supply, how have your fill rates been? Are you dialing back production anywhere?
Thomas: We’re good for production. Our Buffalo plant has been good for its numbers. We have slowed down our TBR expansion (in Buffalo.) We haven’t taken down our capacity, but we’ve brought on some capacity that we’re probably not going to fire up for a while. We’d much rather wait the market out. That’s why we aren’t rushing to change our market price (on the TBR side). We’re just dealing with it on a case-by-case basis, so we can maintain our current levels and not make them any worse.
MTD: Are you making capex investments or production ramp-ups at other plants you pull from?
Thomas: Our parent company (Sumitomo Rubber Industries Ltd.) is making capital investments at all of its facilities. We only pull a small percentage of their total production, so when they make a capacity change, we’re simply part of the equation, not the whole equation. But (Sumitomo Rubber) has done an exemplary job of supplying us with product.
MTD: Looking at inventory levels throughout the industry, things seem to be moderating...
Thomas: Same with us. I can't say we’re in an overstock position, other than with TBR. With everything else, we’re in a great position.
MTD: How is your business among wholesale tire customers?
Thomas: We do business with every legitimate wholesaler in North America, other than those that don’t strategically fit into our portfolio for some other significant reason. In most markets, we have at least two very qualified, known distributors.
The message that’s most important as it relates to the Falken brand is we are going to be unwavering in our support of small, independent tire dealers. The priorities for us are products, small independents and then distribution. Innovative products keep you relevant. You come up with the right product and the customer immediately is engaged with you, so product will always prevail. Then you need distribution. Falken and distributors...we're just in the middle. Without an innovative product and the retailer, there is no business.
We’re super-proud of our distribution. We’re proud of the way our dealers behave. Because Falken is very aware of who ultimately buys from our distributors, it puts us on equal footing. The level of respect between us and our distributors is really high. The more transparent things are, the more honest and candid the conversations can be and it just makes for great relationships.