Starco expands, reorganises global operations as part of agri focus
In recent times, Starco has placed a significantly stronger focus on one specific business area. While the firm has been guided by the vision to become “the global market leader in special wheels” for a number of years now, its group strategy for the period from 2010 to 2014 singles out the agricultural sector for particular attention. This focus is influencing Starco’s numerous operations, including its development of new products and the company’s wholesale business. Indeed, the agricultural sector was a crucial factor in the company’s recent expansion into a new continent.
“We decided last year that we wanted to move into South Africa,” shares Starco group marketing manager Brian Lorentzen, speaking recently with Tyres & Accessories at the company’s headquarters in Denmark. “And we have acquired an existing entity there, Mac & Tirecity. The company was run by Calie Stassen, who has been in the tyre business all his life. In South Africa you have two main businesses – one is industrial and mining, an existing focus for Starco, and the other is agricultural. Stassen built up three entities in South Africa, covering the whole South African market from three departments. We took over these last year, and by this May we will have fully turned the company around and integrated it into our group in terms of corporate identity.”
Mac & Tirecity founder Calie Stassen remains with the company and now heads up Starco South Africa as regional director. “Calie will now begin extending his business from South Africa into some other African countries,” Lorentzen adds. “We don’t expect this to happen this year or in 2014, but our clear strategy is to extend our business in Africa. Expansion in Africa will likely involve us starting our own businesses in other countries there, although if we find a particular business that matches our corporate model we might acquire it.”
Elaborating on the South African business’s integration into Starco, the group marketing manager says efforts to convert Mac & Tirecity into a Starco business unit have been very straightforward. “The great thing with the South Africa business is that the way Stassen has been operating in South Africa completely reflects the way our aftermarket entities in Europe are run,” he explains. “His company had more or less the same way of working, the same structure, the same segment groups, the same product groups – it was a perfect match. The company mentality is also the same and there are very few products that didn’t match with our programme. It all fits into what we are thinking.”
Establishing a presence in South Africa also fits in with the late 2011 opening of Starco’s fifth and newest factory, Starco Lanka Ltd. “We already had four plants producing wheels and equipment, and what we needed was tyres,” the group marketing manager relates. “Building a factory to produce solid tyres in Sri Lanka was a natural choice for us as a large part of the business requirement in South Africa is for this particular product. A lot of the shipments from Sri Lanka now go directly to South Africa. Having a solid tyre factory simply makes sense for us.”
New distribution centres
Brian Lorentzen points out that the attractiveness of the agricultural sector explains Starco’s entry into Africa. It also explains, he adds, the establishment of a central warehouse in Russia. Tyres & Accessories readers will recall that Starco began serving its aftermarket customers in Western Europe from a central warehouse located in Winsen, in Germany’s north, in mid-2012. This is now one of three central warehouses; a changing global market and Starco’s growing interest in the agricultural business have necessitated changes in how the company’s distribution network is structured. “In the past, all sales entities were seen as independent distribution centres,” the group marketing manager comments. “We built our new central warehouse in Winsen, Germany for the aftermarket. But we asked ourselves – what should we do in the case of customers located too far away from the central warehouse, and how do we cater to the original equipment market? We therefore decided to establish a further two central warehouses, in Latvia and Russia. We also set up OEM distribution centres in Belgium, France, Poland, the UK and Russia.”
These centres supply customers in their respective regions, reducing the role played by Starco’s warehouse in Denmark. “As a Danish company it is a strange feeling to downsize here, where we have been present for so many years,” Lorentzen reflects. “But the market has changed, and agricultural implement manufacturers – our core customers – are less active in Denmark now. If you look at the big manufacturers, they are now producing in places like Poland. The agricultural market is growing in areas such as Russia, the Ukraine and South Africa, and ever larger implements and tractors are being used in farming there. Where do we find the market for this? These products aren’t manufactured in Denmark as there is no market for them. You must manufacture and stock products close to the market in order to minimise transportation cost and time. If we want to stay in this business, we need to be where our customers are. The whole strategy is that we want to be as close to our customers as possible. Therefore, we have the distribution centres where the majority of our customers are.
Ag is what we do
After reporting that Starco now serves as exclusive distributor for the ATG-produced Galaxy range of agricultural tyres in Denmark, Sweden, Poland, Germany and the Benelux countries, Lorentzen sums up Starco’s current focus in one pithy sentence: “Agriculture is what we do now. On the manufacturing side of things, most of the tyres and wheels we’ve developed in the last year have been for this business. Ag is a good business, and the segment has changed from smaller machines to larger equipment – if you don’t have the capacity to follow and invest in this change to larger machinery, and larger wheels and tyres, then you’ll run into problems. But those with this capacity are in a good position, as the food industry and those industries related to it will always be there.”
With five factories now in operation, it comes as no surprise that Starco’s wholesaling and manufacturing activities overlap in certain areas. A current example of this is the use of the company’s regional distribution centres to supply OEM customers with Starco-produced ‘conversion kit systems’. Lorentzen explains: “In addition to producing large tractors, Kubota also produces small, compact tractors up to 120hp. Our conversion kit systems replace standard wheel fittings on these compact tractors and enable a single tractor to be used for multiple applications. In 2012, Kubota in France accepted Starco as a complete supplier of these conversion kits, and the Kubota importer in Germany has also accepted Starco as supplier of these wheels; we also have an agreement with Case New Holland in Germany. These deals are very good business for us as they use wheels from our own factory in Croatia and in some cases from Starco Schaad, and in most cases it is our own tyres or tyres coming from our key suppliers.”
Corporate unity aided by new website
Today Starco is made up of 32 entities around the world, including 28 sales points in four geographical regions (a fourth region was recently formed by shifting the Scandinavian countries from the West group to their own ‘Nordic’ group). It also works very closely with three strategic partners in the Americas – ATX in Brazil, Buco in Argentina and Excel in the US. When operating this number of entities, it is important to maintain a sense of corporate unity. To reinforce this cohesion, Starco has redeveloped its starco.com website. As reported by tyrepress.com on 15 March, a new group website in English and – reflecting the region’s growing significance to – Russian has been launched.
“Previously our many corporate entities sent out slightly different signals through their websites,” comments Lorentzen. “Therefore last year we decided to develop a corporate-wide site that gives visitors a quick picture of who we are, where we are and what we do. Following the launch of the main site our local entities will convert their own sites to the Starco corporate image, with local touches, of course.”
Higher turnover for 2013
This year Starco anticipates achieving turnover of just under 150 million euros, up almost ten per cent on last year’s result. “In general, 2012 was a tough year; it wasn’t a negative year, just a tough one,” Lorentzen shares. He adds that a priority for the company in 2013 will be to further develop the business and strategy it has for the aftermarket and the agricultural OE business. “Agricultural has been developing well this last year, in line with our strategy. The plan is to increase aftermarket to be 50 per cent of our turnover, and we’re pretty close to that. We also plan to develop the OE agricultural business.” Further down the track, Starco will also renew its focus on the industrial sector. “We will achieve 50 per cent of our turnover from the aftermarket by 2014. And gives us two more years, and we’ll be supplying the major European OE customers.”