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Continental Italia CEO Alessandro De Martino takes a look at last season’s balance sheet: more light than shade for the subsidiary of the German group that is confident about a recovery in volumes in 2013 (expected to be +10% ) and is investing even more in the distribution network and the content of outlet service

Mino De Rigo

MARKET SHARE on course, revenues in line with 2011, contained falloff in overall volumes. For Continental Italia the year that has just ended will be filed with the satisfaction of having kept a strong hold on its positions As CEO Alessandro De Martino said: “The provisional balance data are gratifying because they reward the work that has been done. We haven’t felt any regression despite a  particularly difficult situation of petrol increases that have reduced travelling, less spending power that has put pressure on the premium brands, and unsold stocks of winter tyres have also slowed the trend for summer tyres. On the contrary, we closed 2012 with a higher winter tyre sell-in than the previous year and increased penetration of the Continental brand”, which, along with the strength of the second-level brands in its portfolio, have enabled it to take a step forward.
Which is especially thanks” – De Martino added – “to our work of a year ago, when we made the lists of top-range and winter products more competitive in segments where we had less of a presence. We also worked on the network to increase the availability of the entire range and get the channel accustomed to working on all of it and not just on key sizes; this had a positive impact on profitability and our distributors’ warehouses were emptied, which raises hopes for the new season”. Without doubt a contribution was also made by the renewal of the 5 series (ContiEcoContact 5, ContiPremiumContact 5 and ContiSportContact 5 and 5P) over two years, the line for SUVs and the winter range, completed with ContiWinterContact TS 850.

Product mix and ad hoc channels
We were proved to be right” – Continental’s CEO emphasized – “by the renewed product mix. In recent years we also focused on the specific characteristics of each brand, which led to the strong growth of Barum, a really complete range with low prices compared to Continental’s top products”. One development that made Italy the second outlet market after Germany. “Then there was the entrance of Semperit winter tyres in certain classifications of premium products, the enhancement of the Uniroyal brand in the top range – which will be contributed to by the upcoming launch of the new RainSport 3 tread pattern – and the totally new series of General Tire 4x4 tyres. The Viking and Matador lines also achieved satisfactory volumes and they are growing in their relevant segments”.
A general product renewal action in parallel with its commitment to the distribution strategy. “Over the past three years” – De Martino confirmed – “we have worked solidly to assign each brand to the most appropriate channel, with well-defined positioning to avoid overlapping. The ability to continue to improve distribution together with the revision of certain sections of the list and targeted communication, are at the basis of the progress made by Continental’s premium products”. It is reasonable to expect further contribution will be made by the European label that draws attention to specific product characteristics.

The outlet experience makes the difference
End-customers are paying greater attention to a product’s technical characteristics and this is undoubtedly an advantage, even though they cover only three parameters out of at least a dozen that should be considered. This is why the network is important for giving advice and guidance in terms of an individual user’s specific requirements”. An important role that must be part of an experience that will make the difference, that will leave customers with a positive impression of the professionalism and expertise of the service and the overall value. “Customer experience” –  De Martino emphasized – “is our primary focus. This year we have decided to make a decisive investment in retail quality and added services”.
Improving service implies an ability to listen to customers and meet their requests in such a way that the outlet experience never translates into a feeling of paucity. “We are working on the involvement of channel partners through various levers and incentives. For many years we have been working with dealers to help them manage seasonal peaks and quiet periods by  defining profitability and increasing efficiency. We expect even more attention to the content of our support proposals”.

Good growth prospects
The context has radically changed compared to many years ago, when approximations and errors were tolerated because they were covered by margins. “Now that these are narrowing” –Continental’s CEO observed – “because pressure from competition comes from several directions, work must be carried out much more efficiently. On our part, we are convinced that we can reap what we have sown to date and continue with the positioning policies and distribution strategies on which we are now working with greater foresight and penetration”.
With the increase in the number of operators in a market that is searching for new equilibrium, it is inevitable that the dynamics will become more complex. Online actions are rightly part of these new scenarios. Tyre specialists will certainly maintain their role but they will have to be supported by more organized structures, a situation that is already widespread in Europe. “A development that should be followed” – De Martino commented – “from the business continuity standpoint. As to prospects for the year that has just begun, despite the pessimistic forecasts we are convinced that we can increase volumes by 10%, confident in our ability to dominate the top range and maintain our share, thereby demonstrating that we know how to do it, not only when there is a crisis but also in a context of recovery”.

• An ambitious plan and new investments
Continental is looking ahead and continues to invest. Not only globally, with an ambitious plan for the tyre division (which accounts for about a third of its total revenues: 32.7 billion euros in 2012, a 7% increase against the previous year), but also in Italy. On the one side, investments here in 2013 will focus on brand communication in view of the massive campaign for the German group’s role as main sponsor of the football world championship in Brazil next year. On the other side, initiatives will be oriented towards improving customer experience in outlets. So new specialists to help retailers directly in the field and new resources for expanding the range of POS services are being recruited. For Continental’s Italian subsidiary, which has increased its employees by 30% over the past five years, it is an injection of confidence. The same confidence the group is demonstrating by planning to open 7 new factories by 2025 to increase its production capacity. After establishing its domination in BRIC (by opening factories in Brazil and China two years ago, a factory in India in 2012, and, this year, a production site in Russia), Continental aims to become one of the world’s top three manufacturers in this sector. The next stage, between 2016 and 2025, will be the opening of three new factories in Asia, the same number in the Americas and additional plant in east Europe. The prospects are that the group’s business will be divided equally among the continents: a third of revenues from each.

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