LAS VEGAS—India's Apollo Tyres Ltd. plans to start selling Apollo-brand tires in the U.S., possibly within the next two years, while the Vredestein brand, already marketed in North America, will get wider global distribution.
This is part of a still-evolving brand strategy for Apollo following its purchase of Dutch tire maker Vredestein Banden B.V. early in 2009 from bankrupt Dutch-Russian holding company Amtel-Vredestein N.V.
“The only question is when,” regarding Apollo's U.S. debut, said Marc Luyten, who in December became chief marketing officer for Apollo Tyres Ltd. after serving as director of marketing and sales at Apollo Vredestein B.V., based in Enschede, Netherlands.
Interviewed at the Specialty Equipment Market Association Show in Las Vegas last fall, Luyten and Apollo Vredestein CEO Rob Oudshoorn said branding and the brand architecture of the Vredestein, Apollo and other lines is an important effort the company is working on.
A global tire maker
Apollo, Luyten said, now looks at itself as a global company and has divided the world into three sales regions—Europe, including the U.S. and Canada; India/Asia-Pacific; and South Africa, Africa and Latin America.
“Within those three territories, we are going to sell various brands,” said Luyten, who is responsible for enhancing each brand's position across the globe.
This means the Vredestein brand will be sold worldwide outside of its traditional sales territories of Europe and North America—to India and Africa—with the same happening for Apollo. “So we are going to bring several brands worldwide on the market,” Luyten said.
Along with Apollo and Vredestein, the company's other brands include, but are not limited to, Dunlop in Africa and Regal in India and Africa.
While the brand strategy is still under review, Luyten said the Vredestein brand likely will be positioned as a top-of-line niche offering because of its high-performance heritage, with Apollo as the middle brand and Regal mostly the third line.
The Apollo brand, Luyten added, will be the company's global brand going forward, meaning that it will be offered to the original equipment and replacement markets.
“We are already today working with a great number of OEMs in India, that is including Volkswagen and other OEMs,” he said. “We are going to expand that also in the other territories—that is including Europe, Africa, and India and Asia and so on. ... The brand also will be available in the replacement markets as a consequence of our activity in the OEM.”
In broadening the reach of the Apollo brand, the company will introduce it first in Europe and then look at the U.S., Oudshoorn said. “That's because after India, they look at Europe as the most difficult market and the most demanding market because of the quality,” he said. “Apollo realizes that once we are OK in Europe then we are prepared for expansion.”
Before introducing the Apollo brand in the U.S., the company also has a variety of things to coordinate, including making “sure that at least in the product range we have the American sizes.” Luyten said. “There's still a lot of work to do and a lot of calculations to make.”
Also limiting Apollo's expansion plans in the U.S. and worldwide is production capacity.
“Apollo is going to be the global brand, we definitely want to be here (in the U.S.) as well,” Luyten said. “How fast will that be going? We'll have to coordinate that and synchronize that with the expansion capacity. Because on the one hand we have the ambition of growing to a $2 billion company, but on the other hand you have the organic growth in the Indian market, which is an emerging market.”
Apollo, he said, has to cater to Indian market growth year after year. Even in a recession, that could run 9 percent, he said, while in a normal year it is 18-25 percent. “You can imagine how much capacity you need to add year after year.”
As a result, the tire maker will need to coordinate the expansion of the Apollo group worldwide with the expansion of capacity, “and Vredestein is part of that, and the Apollo capacity is part of that and the African capacity is part of that.”
Becoming part of Apollo will allow Vredestein the opportunity to reconfigure production at the company's tire plant in the Netherlands, where manufacturing costs are expensive.
“For us, for Vredestein, the big advantage is we can produce the lower-end tires somewhere else and specialize in the Dutch plant even more on ultra-high-performance,” Oudshoorn said. “For us this is very important. Having said that, we are manufacturing 5 million tires and these are sold every year. But when we have more of those tires finally we can expand our sales a bit more to other territories because we have been limiting ourselves to Europe and the U.S. But obviously, there are some very interesting markets in Asia as well as in South Africa.”
Asked whether capacity at Vredestein's lone tire plant, in Enschede, would be expanded, Oudshoorn said yes, noting recently the company had invested in VMI Epe tire building machines that went on stream in December. But he stressed he is more interested in the internal mix of the plant and less fixed on the numbers.
“If we produce 50 percent S and T (speed-rated) tires, we would like to go to maybe 30 percent and make more Z and Y speed-rated tires,” Oudshoorn said.
“If we speak about capacity, we also look at the Indian plants and South African plants, where we will produce Vredestein tires as well,” he said. “So, if we talk about numbers, of course we will add millions. For us, that's not important. For us, the mix of the product inside the plant, that is the most important.”
This synergy with Apollo is starting to bear fruit for Vredestein. In December Apollo started production at a new tire plant in Chennai, India, that will have capacity to produce 17.5 million passenger and truck tire radials by March 2011.
“Roughly one third of the turnover capacity of the Chennai plant will be dedicated to Vredestein,” Luyten said.
Apollo also is expanding capacity at a radial passenger and truck tire plant in Baroda, India. “Apollo decided to expand it even more,” Oudshoorn said, “because the demand for radial truck tires in India will be exploding in the coming years and there is not enough capacity in India. It was quite a courageous decision, I must say, because it involves quite a lot of money.”
Regarding the Vredestein brand in North America, Oudshoorn said the company is looking to expand in the western part of Canada, where it is not very well represented. “As you know, we are winter tire specialists,” he said.