NEW YORK—Cooper Tire & Rubber Co. is "well positioned" to take advantage of the evolving marketplace for tires, CEO and President Brad Hughes told investors May 11, thus solidifying the firm's goal of achieving an operating profit of 10 to 14 percent over the coming five years.
Speaking at its Investor Day event in New York, Mr. Hughes and other Cooper executives stressed that their company is implementing strategic initiatives to leverage its position with consumers, accelerate the cadence of new product introductions and enhance consumer involvement in product development and testing.
Hughes identified three themes—the increased influence of consumers, underlying trends in the auto industry and consolidation in distribution—that are driving changes in the tire business.
"Our brand strength and attractive value proposition represent a solid foundation to build on with consumers, which is important as we move into additional growth channels," he said, noting that Cooper's emerging original equipment business will drive enhanced product technology and keep Cooper current with emerging trends such as electric and autonomous vehicles.
Hughes said recent consolidation moves in distribution have "created disruption and (are) pressuring long-standing relationships."
Disruption, however, creates opportunities, he added, "and Cooper is taking immediate action to benefit."
The executives pointed out that Cooper is "actively pursuing" a joint action plan with key distributors and a "conquest plan" to increase its associate dealer program exposure and participation. Such plans will draw on Cooper's core strengths, including brand equity, quality products and strategic relationships with national and regional distributors, to harness the opportunities.
In order to strengthen relationships with consumers, Cooper is focusing on consumers' needs, expanding channels and digital capabilities to communicate directly with consumers and to further reinforce its brands, according to Chris Ball, senior vice president and president, North America.
This strategy, he said, includes efforts to:
- develop products more in-tune with consumers' preferences and accelerate the development cycle;
- broaden the firm's retail channel penetration with mass merchants, auto dealers and in e-Commerce; and
- focus marketing and consumer promotion dollars on digital, directing consumers to retailers where the brand is available.
Regarding the last item, Ball said Cooper is building an internal digital team that will focus on developing tighter digital partnerships and the right content, while also establishing direct communication with consumers to help support them through their "purchase journey."
Regarding brand strength, Hughes noted that Cooper has reduced its manufacturing footprint with private brand distributors over the past five years, freeing up approximately 5 million units of annual capacity for the firm's house brands.
The Cooper brand, for example, had a "net promoter score"—signifying what percentage of respondents who own a specific brand would recommend that brand to a friend or family member—that was rated No. 3 in the U.S., trailing only Michelin and Pirelli.
Despite recent setbacks affected by market headwinds, Cooper is confident that 2018 will be a turning point for its financial performance, according to Ginger Jones, senior vice president and chief financial officer.
The market environment is expected to stabilize going forward, she said, allowing Cooper's key strategic initiatives to translate into tangible financial targets mid-term.
Cooper management believes the company can achieve above-market growth (low- to mid-single digits) at margins in the 10-14 percent operating ratio, she said, while also offering "attractive returns" on invested capital in the 14-16 percent range.