With unemployment at record levels and the economy struggling, value products seem to be winning, according to Brandon Stotsenburg, vice president for automotive at American Kenda Rubber Industrial Co. Ltd. Stotsenburg told Tire Business the shift has benefited Kenda "as retailers are more easily demonstrating our premium performance message and seeing higher margins in return."
How would you describe business thus far in 2020?
Kenda's orders and shipments have remained strong—there was a brief slowdown during the initial lockdown period, but consumers and our channel partners have embraced our message of premium performance at a value price.
As the economy has been stressed, consumers are actively seeking value, but don't want to surrender expected performance and safety. We are consistently over-indexing in sell-out performance with our channel partners responding to exceptional margin opportunities.
How has your company reacted to COVID-19?
Kenda has all of its tire plants up and running, capable of 100 percent capacity. Maintaining the best work environment safety while keeping our warehouses, essential offices and manufacturing open in the U.S. remains our best way to keep our employees safe and our customers servicing essential businesses operating.
Based on past experience under financial stress, consumers will over-index for value-based products. We empathize with people under stress but want to provide exceptional, high quality products that mean they won't sacrifice the safety and performance with our products developed for the Americas in our Akron-based Technical Center. As important, we continue to develop channel programs that offer exceptional margin opportunities for our channel partners.
We are being very prudent about any discretionary expenses and have eliminated or postponed planned expenses that don't immediately follow our channel support planning.
Do you expect any supply difficulties in the second half of the year?
No. Kenda has all of its global supply chain intact to support our channel partners, including the U.S. facilities for warehousing and wheel production.
What type of practices has your company implemented in light of COVID-19? Do you suspect they will continue?
The key activities are assuring the best possible safe work environments for our employees—we are doing this across all of our Kenda America divisions. This includes temperature checks to enter our facilities, physical distancing in all practices, limiting travel and conducting more video meetings. Kenda supplied both masks and medical-grade hand sanitizer to support the first responders in our local communities.
We have also augmented our channel partner communication to include podcasts, improved email platforms and team access for electronic meetings. In the mid-term, American Kenda is owned by a global company that is well positioned to accelerate growth in North America.
We have established a broad range of premium products that are unparalleled with PCR, LTR, ST radial, ATV, UTV, motorcycle, golf, lawn and garden, light industrial and bicycle.
Our products are complementary, and we offer many options to allow our channel partners to offer products to cover most of these segments. Kenda is working on new products and supply-chain system improvements that will provide our customers better solutions moving forward. We are continuing to work on online options for education.
What are some of the pleasant surprises you are seeing in the industry?
As local business has begun to open up, we see some of the effects of the economic slowdown—driving instead of flying and postponing new car purchases. This is providing the aftermarket retailers additional service and tire opportunities.
The additional shift from Tier 1 to value products has been a benefit for Kenda as retailers are more easily demonstrating our premium performance message and seeing higher margins in return.
Interestingly, we have continued to see a strong response to our new Klever A/T2 KR628 launch and strong growth in our Klever R/T KR601 product—this indicates that consumer demand for high quality light-truck products, including plus-sizing, remains stronger than we initially anticipated.
Where do you see the industry markets heading during the second half of 2020?
As long as there are no significant COVID-19 setbacks, there should be continued recovery. The economic stress created by the, hopefully temporary, high unemployment rates has created a downturn in miles driven, which is always the key indicator for retail tire activity.
During this time, Kenda advises retailers to watch their controllable expenses, focus on value products demanded by consumers and maintain strong relationships with their vendors. There may be overall lower tire sales, but smart retailers will continue to attract consumers as their staff anticipates their needs to provide safety and prioritize necessary services.