Starco celebrates half a century of growth
In recent times the Starco name has been no stranger to the pages of Tyres & Accessories and tyrepress.com; much has been happening within the Danish company. Indeed, in the last few years we have witnessed Starco’s development from a Europe-focused small wheel specialist into a wheel and tyre manufacturer with global ambitions. Yet this transformation is just the latest chapter in the history of a company that, as of 11 December, has been in business for fifty years. To mark the company’s golden anniversary, Tyres & Accessories recently spoke with Starco chief executive officer Peer Ejlersgaard, who gave an insight into where the company has been and where it plans to go.
“Over the last fifty years Starco has gone from being a supplier to the Danish market, to a European supplier and now to a manufacturer and supplier with a global presence,” Ejlersgaard shares. “This change has occurred in several distinct stages. I don’t see the 50 years as one, I see it as more the first 25 years and then the next 25. After the first 25 years the era of being a local trading company ended and we began the next 25, which involved implementing our European strategy; during the last ten years of this we also became a wheel manufacturer. I think the next 25 years will see the implementation of our global strategy, and I hope we will have set the foundation to become a very large company.”
This change in emphasis over the years perhaps reflects the company’s Danish character, Ejlersgaard adds – having a home market of less than six million people means companies in Denmark often face the choice of remaining small or looking outwards into the wider world. While for the first half of its history, Starco – then known as P. Ejlersgaard A/S – followed the former approach, when Peer Ejlersgaard began taking a more active role in the company some 25 years ago he brought with him the idea that a niche company can’t grow if it just focuses on one particular market. Admittedly this thinking did, Ejlersgaard shares, involve taking the firm out of its comfort zone to begin with. “When I started in the company, during the first three or four years, I remember my father (company founder Poul Ejlersgaard) saying to me ‘be careful of export, you may become dependent on it.’ The other thing he said was ‘never go into production – that’ll kill you’. Today only three per cent of our turnover is made in Denmark and the majority of all wheels now sold through us are ours.”
European and global growth
A turn towards export markets and production – despite the founder’s initial reservations – occurred as part of the company’s European Strategy, which Peer Ejlersgaard wrote in 1990. This strategy served as a blueprint for regional growth. “We followed it for a number of years,” the CEO comments. “And the last five years of the European strategy was not very far from what I wrote down 20 years ago.” Starco’s first overseas operation, in Sweden, was founded a year after the European Strategy’s implementation; this was followed by the part acquisition of UK-based company C. G. Enterprises Ltd, which later became Starco GB, plus operations in several other European markets. After the purchase of British engineering works Undergear Equipment Ltd. in 1998, Starco took its first steps as a rim producer. The design and manufacture of Starco-branded rims commenced three years later, and in 2002 the company shifted its production of agricultural machinery rims from the UK to Croatia.
“But when you look at the European market, it’s is not where future growth will come from,” Ejlersgaard observes. “When we look at tractor sales around the world, there’s not much happening in Western Europe. In Russia it’s doubling, in India it’s growing at a high rate, in Africa it’s almost 40 per cent, in South America it’s more than 50 per cent at the moment.” Therefore, in 2010 Starco replaced its European Strategy with the company’s first Global Strategy. This five-year plan calls for a doubling of turnover to 200 million euros by 2014 and increasing aftermarket from being 40 per cent to 50 per cent of Starco’s business during the same timeframe.
“The idea of becoming global started a few years earlier with the realisation that we have to – that if we want to survive long-term, we have to be worldwide-competitive,” Ejlersgaard elaborates. “And if we’re worldwide-competitive, why not become global? After all, we are already selling things around the globe. When we started our Chinese factory, we realised we can sell half the production in America, we can sell in South Africa, we can sell in Australia. And then we also realised we can also sell the products we make in England worldwide, because now we have very good distribution networks.”
This Chinese factory the CEO mentioned is Starco’s Fuyang-Zheijang plant, which began operation in 2008 and produces steel wheels (Starco also operates steel wheel factories in Croatia and Switzerland plus a plastic wheel and tyre moulding plant in Crewe, UK). Its addition to the Starco global network has been instrumental to the company’s expansion as a global player, as Peer explains: “When we only had our Croatian factory it was difficult for us to see ourselves as a world player – we couldn’t see it ourselves as we couldn’t be competitive in sending wheels to China or to other regions. With our Croatian factory we were only competitive on a European scale.”
Establishing a factory in China forms only one part of Starco’s plan to reach its goal of becoming the global market leader in special wheels; the company has also consolidated its position in this sector through a number of acquisitions, including Swiss dual wheel systems manufacturer Schaad in 2007, and joint-ventures, such as with Argentine semi-pneumatic tyre maker Buco in 2010. “We bought Schaad in order to enter the tractor wheel market,” says Ejlersgaard. “We decided that we wanted first and foremost to be a specialty wheel manufacturer. And Schaad fits very well into this.” The Schaad name is highly respected in the markets where it is known and for this reason Starco will to an extent retain it.
Production ready to begin in Sri Lanka
To supplement the company’s existing manufacturing operations, Starco has also set up a solid tyre manufacturing facility in Sri Lanka. Peer Ejlersgaard reports that preliminary production at the new plant begins in December, with the first shipment of tyres expected in the first quarter of 2012. A speeding up of production is planned for next year so that the plant is running at full capacity by 2013. When establishing the factory Starco drew upon know-how from its UK-based plastic wheel and tyre manufacturing company, Starco DML, producer of the breakthrough ‘Flex’ and ‘Flex Lite’; the British operation assisted in a number of ways, including setting up equipment and training local staff.
The Global Strategy – and future opportunities
As already mentioned, Starco’s current development is being directed by a five-year Global Strategy that began in 2010. Peer Ejlersgaard explains that this strategy includes a plan for what Starco intends to achieve and a specific order this should occur: “For 2011, for example, we had 27 projects outlined, about three for each management team member. We have mainly achieved these, and next year we will have another set of goals to achieve.” Yet Ejlersgaard points out that Starco is not locked into a rigid programme. “If an unplanned opportunity suddenly presents itself, we will take it. You can plan a lot of things, but don’t forget that planning something and setting it up takes a long time. We are very, very opportunistic, as long as it is within our strategy.”
Future steps for Starco are likely to see further expansion in China (the company is currently undertaking a market survey there to determine its strategy for China) and a division of Starco’s ‘Rest of the World’ arm into separate regional operations. The setting up of a production facility in Russia is also a possibility. Yet whatever the future holds, for Peer Ejlersgaard, one thing is certain – while the first 25 years of Starco’s half century were overseen by his father Poul, and he personally was the propelling force in the second 25 years, the next fifty years will be different. “The first 50 years have depended upon an individual person, be it my father or myself. The next 25 or 50 years will depend more upon the strong management team we have built up.”
Most importantly, the Starco CEO concludes, over the next 50 years Starco will continue doing what it does best – creating extra value for customers. “For us, new products are about creating value, making something that is better than what people currently have. For us it is a driving force. The idea behind everything we do has always been not just to go out and sell what everyone else has – people are much happier when someone improves a product.”