Hankook UK focuses on brand, ups TV advertising budget 50%

After nine years of at the helm of Hankook Tyres UK Ltd, years that have seen the company grow from the position of a newcomer into a force to be reckoned, Richard Page has announced his retirement from the role of managing director. Tyres & Accessories understands that he will continue in a consultative role throughout what has been a pre-planned and progressive changeover into the capable hands of new MD Gang Seung Lee. In a recent visit to the Hankook UK headquarters T&A met with Mr Lee, who is commonly known as Tony Lee in the UK, and a freshly reshuffled management team to find about more about what’s in store for South Korean tyre manufacturer in 2011.

Hankook’s progression during the last years has seen the company grow significantly in terms of turnover, unit sales, market share and crucially brand recognition. The rapid advance of the UK company’s market position (particularly in terms of its truck and bus share which leapfrogged some much longer established premium names during 2009) has been documented in these pages before, which brings the company onto the next step – solidification and development of brand recognition.

Retirement of Richard Page leads to new MD appointment, management reshuffle

Incoming managing director Tony Lee is a 20-year veteran of South Korea’s leading tyre manufacturer, Hankook. While he only recently took over as MD, this role is the not the first he has held at the UK headquarters. His first visit to the British Isles saw him take a desk in Daventry in 2004, a posting that was followed by a stint at the company’s European headquarters in Frankfurt, before returning to South Korea to take on an overseas sales management role.

Bearing in mind the fact that Lee has spent the last two decades working for Hankook, T&A asked what future may hold – “that depends on these guys,” the new managing director quipped, pointing out that this is team effort. Barrie Horrocks expressed his confidence in Dave Thorp and Ian Mayoll’s ability to support the company’s sales and profitability of the company and added that he appreciates the opportunity to steer them in the right direction. Dave Thorp commented that he looks forward to “continuing success with Hankook’s great commercial vehicle team, which is made up of a lot of experienced guys and continuing to support customers with a view to long-term growth.”

In parallel with Tony Lee’s appointment as UK MD, Barrie Horrocks has been promoted to the role of UK sales director. As a result Dave Thorp, who joined the company in 2006 to head up its Truck Masters programme, has been promoted into the vacated role of sales manager commercial. Ian Mayoll continues as UK sales manager passenger car, with both sales managers reporting to Horrocks.

Korean tyre manufacturer maintains sales/market share after strong growth in 2009

Bringing the two sales departments under the same director is said to streamline the firm’s efforts in what is already said to be “a lean and mean” organisation. To put this into perspective, currently the company achieves all it does (placing well within the top five manufacturers in the UK commercial vehicle tyre market) with just 55 staff in total. Divide turnover by the number of employees and, according to the annual Plimsoll Report of tyres and related industries, it is one of the most successful sales companies per employee in the country (see table).

After strong gains in the market during the recessionary year of 2009, the latest news is that the company was able to at least maintain sales during 2010. At the end of 2009 the company reported that sales grew 10 per cent, against a decline in the market in the car sector. In the truck and bus tyre segment the firm grew even faster, gaining significant market share as sales grew 20 per cent against a similar sized decline in the market. With Hankook, like many other tyre manufacturers, being forced to impose price increases during 2010 and with the size of both segments (particularly the truck side) recovering after dipping in 2009, the challenge was always going to be defending the very strong gains the company made.

So, with this in mind the fact that Hankook was able to maintain sales volumes virtually across the board during 2010 is something of a victory. However, owing to the fact that both markets virtually regained their pre-recession sizes last year, doesn’t this mean that the impressive market shares the company gained in 2009 have to have been diluted in the last 12 months? While the executives conceded that this was a mathematical reality in the truck sector, newly posted MD Tony Lee pointed out that the fact that passenger sales grew “2 – 3 per cent” during 2010, which means overall shares in this segment remained stable compared with the strong gains made in 2009.

The real challenge facing the highly motivated and sales driven team at Hankook UK is that demand continues to exceed supply. Despite continued expansion at the firm’s modern Hungary passenger car tyre manufacturing plant there still aren’t enough tyres to service new swathes of customers, putting the focus on the customer service the firm offers to existing partners. Supply is expecting to ease during the second quarter of 2011, following the completion of the plant’s pre-announced phase two expansion plan. When this is complete, there is said to be room for two more phases of expansion on the site. However, this doesn’t rebalance the company’s truck tyre supplies with the continued strong demand in the short term.

So is a truck tyre plant alongside the Hungary site on the European management’s mind? I would appear so. In an interview published in German business magazine WirtschaftWoche, Hankook Tire Europe executive vice president and COO Jin-Wook Choi seemed to suggest that this kind of investment would be seen in the next three to four years. However Tony Lee and the UK management played down these comments, describing them as plans and aspirations rather than definitive commitments.

Following successful OE wins during the last few years, the obvious question is: are there any more high profile contracts in the offing? The enigmatic answer is “Hankook is in talks with high profile German manufacturer.” Considering the company is already working with Volkswagen group brands such as the eponymous VW moniker and Audi, the latest talks are likely to centre on another name – be it Mercedes, BMW or even Porsche. Whichever it is the talks are expected to conclude during the next 6 months. However these are not likely to begin before phase two of the Hungary factory’s capacity expansion is complete due to the volume restrictions. Similarly, while European commercial vehicle OE is on the Hankook roadmap, it is unlikely to become a reality until the firm has secured more truck radial tyre production capacity.

100 million units by 2014 – Hankook’s increasing global production capacity

Securing more production capacity shouldn’t take long though, as keeping up with news about the rapid expansion of the company’s latest factories isn’t easy.

Future supply will be provided from across a range of factories.  Specific plans for where truck and bus tyres will come from are less clear. However Tyres & Accessories understands there is “a possibility” of Indonesia and Hungary having truck and bus radial production facilities. In addition Hankook has already started expansion at its new plant will be located in Liang Jiang Xin Qu, Chongqing Municipal.

Hankook’s seventh plant in Indonesia will produce passenger car as well as light truck tyres in its first phase. Truck radial production is not during this period.

Hankook’s sixth plant (its third in China) will initially start its production from the second half of 2012. This factory is designated to produce passenger car and truck radial, over 80 per cent of which will be destined for the Chinese market. However, owing to the fact that Hankook’s China operations may produce more truck and bus radial within the country, company representatives told T&A there may be “some capacity available for Europe from Hankook Tire’s main TBR production in Korea.”

The UK is Hankook’s second largest market in Europe

The UK continues to be Hankook’s second large market in Europe with UK sales equating to somewhere around 15 per cent of total European turnover (both truck and car sales). To put this into context the German market generates 31 per cent of the tyre manufacturers total European turnover and third place France contributes around 12 per cent.

The UK branch’s ability to grow car tyre sales and defend its truck and bus position is set to support the global company’s corporate aim of increasing the value of sales by approximately 13 per cent compared with 2010. At the same time global production capacity will increase by more than 10 per cent during 2011 with the eventual aim of manufacturing 100 million tyres worldwide by 2014.

Hankook UK pumps up TV advertising budget 50 per cent, two new tyres to be launched

What this means is that the company has set aside a significantly increased marketing budget designed to raise the profile of Hankook tyres as an investor in the company’s and its distribution partners’ future success. This includes raising TV advertising spend by 50 per cent, increasing consumer magazine efforts with high-profile titles such as Auto Express and Evo and investing in an “impressive” ready for April’s CV Show. All this while maintaining support of UK motorsport series, continuing investment in IRC rallying and adding supply to the European DTM touring car series – not to mention elite sponsorship of nearby Northampton Saints Rugby Club.

Marketing efforts in the commercial vehicle segment include a return to the newly resurrected CV Show after the recession caused the UK’s premium truck industry event to go into hibernation for a couple of years. Hankook’s stand is described as impressive and has reportedly even been modified as recently as February in order to strengthen its impact. According to marketing manager Ben Francis, the company give its e-cube range of eco tyres their UK debut.

In addition the company will sponsor the Fleet Engineer of the Year award at the Motor Transport Awards on 6 July (the third year company has been a headline sponsor at this event) and continue investment in advertising in truck-orientated magazines such as Commercial Motor and Motor Transport.

All of the increased marketing activities set the stage for the 2011 launch of two new into Hankook’s car tyre portfolio. The first will be focussed on eco-friendly “but safe” driving. This new range of tyres will form its own segment called Kinergy Eco. The name stands for Kinetic Energy and eco-friendly approach, focussing on low rolling resistance thus reducing fuel consumption while maintaining braking performance “and good drivability.”

The second product will focus on the HP and partly on the UHP segments from the mid size saloons to the luxury class and due to newly established technologies “the new Hankook Ventus Prime might be even more successful than its predecessor,” say company representatives.