How RPG Group scion Anant Goenka is driving the CEAT company

Call it karma or luck, but just as AnantGoenka took over as managing director of Ceat in April last year, international rubber prices started falling. Since rubber represents 70% of the input costs for tyres, this meant a steady improvement in margins. Coupled with the commissioning of Ceat’s new plant at Halol in Gujarat, this resulted in a six-fold increase in annual profits. No newbie could have asked for a better start. “It’s been a lucky year for all tyre companies, but we’ve done better than the competition. Last year, we were India’s fastest growing tyre company,” he says.

The easing of the business situation has certainly given the Goenka some breathing space. With its trade unions and entrenched dealerships, the tyre industry is not the most congenial of places for a well mannered young man with refined sensibilities. But Goenka has been coping — and changing himself in the process. “I’ve tried to become more assertive, more demanding,” he says. “I’ve also learnt how to delegate. When I started, I’d insist on making my Power Point presentations myself.”

When he returned with an MBA from Kellog School of Management in 2007, chairman Harsh Goenka wisely decided that his son would not begin his training at Ceat, the group flagship, but in the group’s infrastructure company, KEC International. The young Anant spent three years in KEC — learning the practical aspects of project planning, supply chain management and growing the US business — before joining Ceat as deputy managing director, under managing director Paras Choudhury, who retired last year.

The passing of the baton from a 60 year old industry veteran to 32 year family member was a crucial transition for Ceat. “There could have been a lot of politics during that period,” says Goenka candidly, “but Mr Choudhury never allowed that. He was a true mentor. He let me run the show, as his deputy. The overlap period helped me get integrated.”

One of the important initiatives of the transition period was the framing of a vision statement that has given the company a sense of direction. Ceat ranks fourth after MRF, Apollo and JK in the industry sweepstakes and though it produces tyres for everything from two wheelers and cars to trucks and tractors, it has never been the leader in any segment. Goenka wants to change that. “We are now focused on two-wheelers and SUVs and want to be market leaders in both. These are two segments where brand equity counts and margins are high,” he says.

The newfound focus on two-wheelers calls for a radical change in mindest at Ceat. The company doesn’t even make two-wheeler tyres but outsources manufacturing. But it has been investing in building its brand in the two-wheeler segment, with a very successful ‘idiot proof’ campaign, and the high gear advertising has given it a clear positioning and the confidence to hold prices, even as the market leader has reduced prices by 10%. “We are now priced higher than MRF,” says executive director Arnab Banerjee, with considerable pride. “We have increased our market share in the motorcycle by 9% and customers are now willing to pay a premium for our tyres.”

In a developing economy, commercial vehicles have a greater share of the tyre market than passenger vehicles. Truck tyres still constitute 60% of Ceat’s annual sales but that is expected to change and come down to 50% this year. As the company changes its product mix, it is also changing its distribution strategy. Truck tyres are sold by large, powerful dealers who also act as financiers and here, price is the all-important parameter. While it will continue to sell truck tyres through the legacy dealers, Ceat is opening up another channel for the two-wheeler segment, one on which it will have greater control. Distributers in this channel will be responsible for getting the product to small rural enterprises like puncture mechanics and spare part shops, and the company is putting more feet on the street to service these small outlets.

“Two wheelers have penetrated down to every village in India, but tyre distribution has not,” says Banerjee, who handles both the marketing and operations portfolios. “Customers here have to travel ten km or more to replace a tyre and they have no one to advise them. We want to change that. We have moved into 150 new districts and are mapping the territory to extend our reach to tehsil level.”
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Implementing this initiative is Tamal Saha, head of sales, who joined Ceat recently from Vodafone, another company that has been working to extend its rural reach. Saha is currently busy changing the culture of the sales department, in line with the new priorities. “Our sales force is not attuned to dealing with distributors. They are used to working with large dealers, who are quite different,” he says.