When you set ambitious goals, you need to be prepared to come up short once in a while. Kumho Tire USA Inc., which has been on a growth tear over the last few years, certainly understands that. Even though it fell well short of its annual sales goal, company officials simply set the bar higher.

During the last few years, capacity shortfalls, tighter-than-expected allocations from its South Korean parent, and distribution center changes have alternately worked against Kumho’s growth plans. Still, the company posted 2005 sales of $405 million, well off its $475 million revenue target but respectably ahead of its 2004 sales of $353 million.

Undeterred, Dave Hudrlik, Kumho’s vice president of sales, laid out a 2006 goal of $505 million for dealers, who gathered in Puerto Vallerta for the company’s annual dealer meeting.

To reach that point, Hudrlik said, its parent, Kumho Tire Co., has been rapidly adding capacity. With one plant in operation in China, Kumho is building two more there – both set to come on-stream over the next 12 months – which will lift the company’s global capacity to about 48 million units. And, there have been rumors of yet another plant, this one in Vietnam.

The theme of the meeting was “Xceeding Xpectations,” and, despite missing its sales goal, Kumho executives seemed satisfied that 2005 was a good year. Globally, Kumho Tire Co. posted 2005 sales of just over $2 billion, Hudrlik said, with North America accounting for 32% of its sales.

Of the company’s current capacity, 59% is earmarked for export, he explained, while only 25% hits its own domestic replacement market. As capacity is added, those percentages may not necessarily change, though total available units will certainly increase.

Because its products are imported, Kumho has had to play to niche markets. But, over the years those niches – high performance, UHP and light truck – have grown as a percentage of the U.S. market, taking the brand along with it. Hudrlik told dealers that, today, the brand holds a 5.9% share of the high performance segment and a 7.9% share of the UHP segment.

Over on the medium truck tire side, though, things remain rather tight, Hudrlik explained, because the U.S. arm is not likely to see a near-term increase in product from its parent. “We’re doing well in medium truck, but we really can’t do more right now,” he said, noting that he expects added capacity will mean more tires in 2007. “We’re going to get more involved in medium truck. In the next few years, you’ll see us give greater consideration to medium truck. That’s a core aspect of our business.”

Opening New Opportunities

While Kumho says it will maintain its focus on the replacement market, Hudrlik indicated that the Kumho brand will soon have OE spots with U.S. carmakers. As many as four fitments are possible this year, he said. He couldn’t provide many details, but he said the company’s capacity expansion efforts have allowed Kumho to begin working with OEMs on tire programs.

In fact, Kumho opened a new OE sales office in Detroit on Feb. 2. Kumho, Hudrlik said, is committed to developing “good, profitable” OE business in the U.S. but wants to make sure that business “will help you, our dealers.”

Improving fill rate has become a priority for customer service manager Kenny Lee, who said the company’s new 830,000-square-foot distribution center and headquarters in Rancho Cucamonga, Calif., will be a big help. The transition to the larger warehouse, though impacted customer fill rates, he admitted.

Lee said the company would launch a new customer service system – Enterprise Resource Processing System – in 2007, which he said will improve Kumho’s product management and, consequently, dealer fill rates. Another improvement will come from Kumho’s discontinuation of direct container orders, which will free up product for dealers.

Kumho brand manager Rick Brennan told dealers that U.S. OEMs will continue upsizing their tire and wheel packages, with more vehicles expected to roll out on 17- to 20-inch product. By his estimates, only 30% of replacement tire sales went to plus-sized fitments, a percentage he feels will continue to fall.

Brennan also expects LT-metric sales – particularly the larger diameter off-road styles – to continue to grow, particularly in the Southwest.

Another trend to watch, Brennan said, was the replacement run-flat tire segment. Run-flat replacement sales doubled in the U.S., hitting 312,506 units in 2005 vs. 151,794 tires in 2004. To meet this trend, Kumho will launch a run-flat version of its Ecsta SPT in late 2006.

New Products Unveiled

New tires launched at the meeting included the Ecsta AST, an H-rated directional line that, Brennan said, targeted price-conscious buyers. The AST, which will formally launch in April, will be available in 18 sizes covering 15- through 18-inch wheel diameters, with nine of those being extra-load sizes.

Kumho’s famed “smoke tire” will also hit the market this year, with four sizes – 215/45R17, 255/40R17, 275/40R17 and 225/50R16 – of red- and blue-colored smoke-producing Ecsta MX-Cs available on a limited basis.

The company’s Road Venture AT and MT lines have also been expanded, he said. The Road Venture AT is now available in 35 total sizes – 23 of which are LT-metrics – covering 15- through 20-inch fitments.

The Road Venture MT now has nine sizes, five of which are 20-, 22- or 24-inch options.

Gens X & Y and Chromes

Mike Leverington, Kumho’s director of marketing, said Kumho’s focus will remain the younger Gen X and Y crowd, but new 2006 programs “get deeper into that target market.” Additionally, Kumho is focusing on another target: the “chromes,” the 35-to-44-year-old age group that has graduated out of Gen X but is familiar with the brand. The goal, Leverington said, is to capture the tuner-market buyer and follow that customer through future years. “As they grow, we have to grow products to meet their needs,” he said.

Kumho will remain active sponsors of extreme sport, lifestyle and motorsport events and programs, he said, such as the X Games, Street Warriorz and grassroots and professional race programs, including the American Le Mans Series, SCCA, Formula Drift and Championship Off-Road Racing.

Television ads will run against the Winter and Summer X Games and to support ALMS on network and cable TV. Promotions and sweepstakes are also set to support dealers, including a Petit Le Mans sweepstakes and the “Xpress Yourself” consumer giveaway, Leverington explained.

Kumho also launched a new consumer Web site – www.kumhotire.com – that, he said, is easier to navigate and features new tire tool selectors and a plus-sizing calculator. Its dealers-only “Vault” page has also been updated with product literature, photos, ad slicks and ordering information for POP materials.