CEAT expansion plans: Aiming to make deeper inroads into small towns, plans to open 1 lakh outlets in next 2-3 years

CEAT Ltd plans to expand its tyre sales network in places with population of 5,000-10,000 via its FMCG style of distribution, aiming to double outlets to 1 lakh in two to three years, company COO Arnab Banerjee said on Friday.

The company, which has successfully partnered with kirana store operators, small automobile spare parts sellers and puncture repair shops, feels that it has more or less "saturated" penetration in places with 25,000 population in the country and there is a need to go to even lesser populated areas for its two-wheeler tyres.

What started around 2011-2012 as a step to come closer to rural two-wheeler customers, who otherwise had to travel over 25 kilometres to buy replacement tyres, has now yielded good returns for CEAT, contributing around 70 per cent of its overall sales from the replacement segment, Banerjee said.

"We have a total of 50,000 outlets, which we plan to double to 1,00,000 in the coming years. For that one huge operation is going on for further improving penetration. We think we have (reached) saturation in places of up to 25,000 population but below 25,000 there are gaps," he said.

At the moment, he said the company is doing a habitat-based survey "because not all places with 5,000 or 10,000 population have outlets" and CEAT's aim is to reach the customers as close as possible whether it is through kirana stores, auto spare parts shops or even some concept shops.

"Wherever there are customers, (the intent is) how can we set up a network which can supply tyres to these customers. If there's nobody other than a kirana then it will be a kirana. If there is a spare parts fellow, the tendency to go to a spare parts shop will be higher for the customers. So, we are not fixated on kirana or auto spare parts shops," Banerjee said.

When asked about the timeline for the expansion, he said, "Within two to three years, a maximum of three years' time, we want to reach 100,000 direct outlets, with which we have a relationship and we have a visibility and there is buying and selling of our tyres."

These incremental 50,000 mostly will be the "unconventional" outlets but the company may get some dealers in some places as well, Banerjee said, adding these channels will be value-adds in smaller towns, large geographies between towns and villages, small 'mandis'.

On the success of its FMCG style of tyre distribution, Banerjee said, "If the total sales in replacement segment is 100, then 70 per cent is (from the) unique business. It is significant."

At the moment, the company's monthly tyre sales in the replacement segment is less than 10 lakh units a month as the market has not not yet fully recovered to pre-COVID levels, he said.

"The market should expand if the rural demand comes up, then we should be good for 1 million plus regularly in the replacement segment," Banerjee added.

In the first quarter ended June 30, 2022 the company's consolidated revenue from operations increased to Rs 2,818.4 crore, from Rs 1,906.4 crore in the corresponding period a year ago.