Lassa, Brisa, Bridgestone and Sabanci – tyres from Turkey to the world
With unit sales of 7.06 million expected for 2006, a domestic replacement market share of 26 per cent and thriving export sales, no wonder Lassa producer Brisa is expanding its manufacturing and warehousing headquarters. As Brisa (Bridgestone Sabanci Tyre Manufacturing and Trading Inc) continues the $176 million production expansion programme it started at its Izmit plant in Turkey in 2004, Tyres & Accessories went to see how the plans are developing and visit some of the company’s retail outlets in Istanbul.
Most would agree that holding a 26 per cent share is a fairly healthy position in any given market. Brisa executives wouldn’t argue with that, but it is clear they have no intention of staying in this position. The first thing the company wants to change is production. Currently Brisa is selling virtually every tyre it produces. That’s why in 2004 the company announced it would invest $176 million in expanding its manufacturing plant. This was followed by another $5 million in 2005 for a new product warehouse. Then in June this year Brisa announced it would pump a further $19.9 million into its factory, this time for the enhancement of its agricultural capabilities. The ambitious plans have been put in place to fulfil equally ambitious goals of increasing capacity (and therefore sales) by over 50 per cent to around 11 million units by 2008.
Brisa executives plan to do this by building on their current strong domestic OE and aftermarket positions and increasing export sales. In this respect Brisa’s recent performance somewhat bucks the general Turkish trend. While two-thirds of products manufactured in Turkey are exported and two-thirds of Turkish retail products are imported, Brisa is not as export-dependent as the norm, selling 57 per cent of the tyres it produces domestically. Overall this leads for a fairly evenly balanced sales picture with 43 per cent of sales going to export, 34 per cent to the domestic replacement market and 23 per cent to various OE projects. Furthermore, the company’s sales are not dominated by its Japanese joint venture partner as 64 per cent of sales are of Lassa branded products.
Having said the company’s sales department is not as dependent on exports as other Turkish companies, this does not mean the management is not dedicated to exports. In fact around $140 million (2.5 million units) of the company’s sales were generated by exports in 2005. And once again the brand mix is not Bridgestone heavy – $82 million of that figure was generated by Lassa exports. The majority (68 per cent) of exports end up in Western Europe, but Lassa-branded tyres also find their way to markets as diverse as Azerbaijan, Slovenia and Lebanon as well. Recently the company gained new distributors in Norway and Sweden.
Interestingly, the vast majority of Western European exports are distributed to just five countries – and Germany and the UK are second and third largest buyers rather than the top two as you might expect. Instead Italy is the largest single destination in Western Europe with 19 per cent of exports. Germany and the UK have 18 and 11.5 per cent of exports respectively, while Bulgaria and Austria have 7 and 6.5 per cent each.
So, building on the strong performance of markets like the UK remains key to Brisa’s plans for future Lassa growth. According to international sales director, Haldun Kuran, the company does not just treat customers as wholesalers or distributors, but partners or even “a marriage.” Furthermore all partners have exclusive territories so there is not said to be a problem with competition or grey imports. In the British Isles for example, Lassa’s six partners operate across seven distinct territories, selling around 190,000 Lassa-branded tyres in 2005. The next target for the UK is a 2 per cent market share in the next three years, while Brisa’s corporate long-term vision is to be a top 10 global manufacturer.
In order to further distribute its growing production capacity Brisa is also looking for new customers that could come from markets like Russia, says Haldun Kuran. As T&A learnt earlier this year, the company is in the early stages of selling Lassa branded tyres on the Russian market. One channel is through the “Pole Position” franchise, which is linked with Bridgestone and operates about 100 outlets. In addition Lassa tyres are sold at various other points where Bridgestone is distributed in Russia. As you can see from developments in Brisa’s domestic market, having a good retail philosophy is another important part of the growth strategy.
Fast-fit comes to Turkey
In Turkey the Lassa brand is both more famous and more common than the products of global market leaders Michelin and Goodyear. And this means you can hardly drive for 10 minutes through residential Istanbul without seeing a Brisa-affiliated dealership selling either Lassa or Bridgestone branded products. But that’s not surprising as the company has 624 sales points across Turkey. However, with block exemption regulations looming, Brisa has decided to introduce another retail concept into the mix.
Up till now single brand retailers have been commonplace in Turkey. These are often even bound by contract to sell 100 per cent Michelin or Goodyear products for example. And that is one reason why Brisa is trying a new approach to the market. The latest addition to Brisa’s retail strategy is the OtoPratik fast-fit concept. The opening of the first OtoPratik represents a new way of thinking as far as the Turkish tyre market is concerned. While you might see the occasional Speedy outlet (an international part of the Kwik-Fit group) on the outskirts of Istanbul attached to a large out of town supermarket, they are far from the norm.
Brisa executives want to use this concept to make the most of the fallout when block exemption regulations burst the single-brand bubble. Sure there are Lassa and Bridgestone dealers who currently sell only Brisa products, but company executives are adamant that this will not be a bad thing for the company. “We expect sales to go up,” Lassa executives told Tyres & Accessories. The reason being companies that were previously contracted to competitors will then be able to sell Lassa tyres. Despite this projected overall improvement, Lassa representatives are bracing themselves for a roughly 10 per cent decrease in sales from dealers that currently operate as virtually Brisa-only outlets.
And at the same time the management obviously thinks that outlets like OtoPratik are the way forward and so they have put significant amounts of investment into the foundation of the tyre and light service retail chain. The first was launched in Istanbul four months ago, but further outlets are scheduled to follow, first in Ankora and Izmir then elsewhere in Turkey. Possible sites being considered include Mercin, Bursa and Adrana. OtoPratik outlets are clean modern and equipped with European technology, making them perhaps more advanced than you might expect. And while they are not exactly the multi-brand outlets that you might encounter in the UK or Western Europe, the fact that they openly stock more than half a dozen brands represents something of a paradigm shift.
In addition to tyres OtoPratik outlets sell and service oil, brake and wheel systems. The first outlet also offers a mobile fitting service, Nitrogen inflation (adopted by up to 10 per cent of customers at 5 Turkish lira or about £1.50 per tyre), and professional wheel alignment services. The Istanbul Oto-Praktik outlet, owned and run by Nedim Dincbay, sells some 30,000 tyres a year of which, the vast majority (around 25,000) are still either Lassa or Bridgestone products. The chain also sells DJ and CMS brand alloy wheels.
So if Brisa are the overwhelming market leaders and the main competitors are Michelin, Goodyear and Pirelli, are any “budget” products sold on the Turkish market? According to Nedim Dincbay and Brisa international sales manager Cem Yazmanoglu, buying low-priced Chinese products was something of a fad recently, but after a short time, customers generally came back. Lassa products really are seen as a premium brand in Turkey and are priced accordingly. To put this into perspective you have to compare it with another brand that is well known in the UK. Take Kumho for example. In Turkey Lassa tyres are sold at a 40 per cent higher price level than the South Korean competitor.
Turkish consumers are generally considered to be quite shrewd when it comes to tyre purchases, more so than is generally the case in either the UK or most of Western Europe. The main reason for this is the fact that a 195/65 R15 Lassa or Bridgestone tyre costs 142 or 162 Turkish Lira (approximately £50 – £60) respectively. As the average annual salary in Turkey comes in at somewhere around 9000 TL (£3000), tyre purchases represent a very significant proportion of consumer income. As a result Turkish consumers reportedly have a longer “investigation period” than one might in the west. And it’s this “thinking market” that Brisa is hoping to capitalise on with the development of its Oto Praktik concept.
But not everyone in Turkey is earning less than a Premiership footballer’s daily wage. Some earn more than the western European average. On the other side of town car dealerships selling Land Rover Sports, Mercedes and even Ferraris are not uncommon. (And this is despite import taxes that make sure luxury cars are around 50 per cent more expensive than they might be in Western Europe). So in order to serve the more affluent clientele, Brisa also runs a network of Bridgestone Performance Centres that it started in 2005. Not surprisingly these are often situated only a stone’s throw away from the premium car dealerships and offer a radically different size range than any of the other stores. Bigger tyres and bigger wheels are on offer in the hope of attracting higher value sales from premium sector drivers.
Brisa has a total of 624 outlets in Turkey. 372 are Lassa dealers, 284 of which sell both Lassa and Bridgestone tyres. In addition there are 149 Bridgestone outlets 127 of which sell both brands. Most of the dealerships are single dealer operations, but 64 dealers own at least two of the three possible Brisa retail outlets. Many choose to run two different options to improve their sales mix. Cenk Kilci, the manager of one of the Lassa branches T&A visited in Istanbul, exemplifies this strategy. In addition to this fast-fit style outfit, Kilci also runs a Bridgestone dealership down the street. In total he sells 25,000 tyres a year between the two outlets, which are divided 65:35 between Lassa and Bridgestone tyres.