BKT aiming for segment leadership
It’s now more than fifteen years since Balkrishna Industries Ltd., or BKT, wound up its two-wheeler, car and truck tyre business in favour of a focus on off-road tyres. This ‘place every egg in one basket’ decision was a major step for the then seven year old company, yet it is one the Indian manufacturer has never regretted. Since the changeover to off-road tyres in 1995, BKT has grown at an enviable rate and produced some 1,900 SKUs of OTR, industrial and agricultural tyres. Recently, Tyres & Accessories was given the opportunity to observe first-hand the result of a decade and a half’s specialisation within the off-road sector and gain a clearer picture of where the company aims to go.
In introducing his company to European media representatives, vice chairman and managing director Arvind Poddar explains that BKT belongs to the Siyaram Poddar Group, a company with annual sales of 615 million euros and more than 10,000 employees. “Today BKT is the flagship company of the Group,” he states. Mr. Poddar then shares some figures pertinent to the tyre maker; in the financial year to the end of March 2011 BKT anticipates sales of US$450 million and sales growth rate that is on the rise. “Our annual compounded sales growth has been over 33 per cent, but if you compare last year to the current year, it is going to be over 43 per cent,” Poddar shares.
This latest year’s growth is representative of BKT’s performance during the past decade. Turnover for the 2004/5 financial year amounted to just $82 million; within the short space of six years this figure has risen more than five-fold, with sales increasing even in lean economic times. “You will note that during the years of global economic crisis, a growth has occurred – $278 million to $310 million. Almost all companies across the world showed negative growth,” observes Poddar. After years of increasing sales BKT today holds a global market share of around four per cent and as much as a 10 to 12 per cent share in the European agricultural tyre sector. Yet this share – a very respectable amount after just 16 years in the off-road sector – pales into insignificance alongside what the company aims to achieve: “We at BKT have the dream, a vision, to obtain global leadership in off-highway segments with ten per cent market share by 2015. This is definitely a very ambitious vision but at the same time we’re very confident about it.”
The vice chairman and managing director voices the question that some have no doubt asked: “How are we going to achieve our vision?” As a reply, he outlines a number of projects BKT has commenced or will shortly begin implementing. First, he mentions plans to increase total combined capacity at BKT’s three factories from a current level of 330 tonnes per day; this should be accomplished by September 2011. “The equipment order has already been placed, it has already started coming, erection at some places is going on and we’re going to have around 400 metric tonnes per day.”
Boosting capacity to 400 tonnes per day at its Aurangabad, Bhiwadi and Chopanki plants will give BKT 21 per cent more capacity, however Poddar notes this is “not sufficient” for BKT to meet its vision of a ten per cent market share within four or so years. Additional capacity is necessary, and to gain this the tyre maker is currently erecting a new greenfield factory in the Gujarat State town of Bhuj, not far from a major Indian seaport. “We have already acquired the land, 1.25 million square metres – much higher than all three plants put together. We can expand; land will not become constrained to us.”
Ground breaking for the Bhuj plant project took place on January 28, 2011. The project’s first stage involves an investment of 205 million euros and will give BKT a factory with a 90,000 tonne per annum capacity by the third quarter of 2012. Orders for the plant’s equipment have already been placed with European machinery manufacturers. “There we are going to produce almost the complete range that we are producing in our other three plants, as today our major constraint is our capacity,” Poddar continues. “We are sitting on a back order of 410 days. In spite of capacity, demand is huge, because people have realised that our product is en par with any premium product available in the world. And because we are producing in India it is available at a competitive price.”
With the Bhuj plant in operation next year BKT will have a total capacity of close to 240,000 tonnes per annum, yet even this capacity is insufficient if the tyre maker wishes to obtain a ten per cent market share. Arvind Poddar is adamant, however, that ten per cent is a realistic goal within the next few years. “We are going to do that,” he says. “That is in our agenda.” The shortfall in capacity will be addressed by a second phase project at the new plant: “The second phase at Bhuj will be an expansion rather than another greenfield project. Phase two will bring capacity at Bhuj to 280,000 metric tonnes. We can go up to 300,000 metric tonnes at that site.”
BKT has four years to realise its ambition. With between 120 and 150 new SKUs being added to an already large range every year, the Indian tyre maker has a product portfolio geared towards this and will soon hold sufficient capacity. The BKT brand image is also being tweaked to optimise the company’s global presence. “Brand is a major defence against price competition,” says BKT Europe marketing director Lucia Salmaso. “A product can be copied by a competitor, but a brand is unique. A product can become quickly outdated, but a successful brand is timeless.” With these thoughts in mind, at this year’s SIMA show in Paris BKT launched a refreshed logo and new corporate slogan – ‘growing together’. This phrase serves as an invitation to the company’s partners to share and participate in BKT’s growth. The new logo and slogan are the latest step in an emphasis on brand building BKT began in 2009. The tyre maker claims positive results from this change in brand strategy are already visible in its global markets
Summing up where BKT sees itself in 2011 and in the years to come, Arvind Poddar states “We have what it takes. We have world class manufacturing plants, the best team to develop, design, manufacture, market and service off-highway tyres, the passion to excel and the willingness to travel the journey with our channel partners.”
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