India’s largest tyre manufacturer, MRF, is a household name today, but do you know the story of how this iconic company fought off foreign multinationals to become the market leader that it is today?
ORIGIN
MRF was founded by K.M. Mammen Mappillai (KM), who was born in a Syrian Christian family based in Kerala, with 9 other siblings.
Although his father used to own a bank as well as a newspaper, when KM was studying at Madras Christian College, all of his father’s assets were seized and he was imprisoned for two years by the then princely state of Travencore. Overnight, KM went from riches to rags and since the day of his father’s arrest, began to sleep on the floors of St. Thomas’s Hall.
Surviving in such challenging conditions, when he graduated, KM, along with his wife, started making and selling toy balloons back in 1946, with an initial investment of just Rs. 14,000. By 1949, his initiative expanded into making latex cast toys, gloves, and contraceptives.
After experiencing some success with his venture, he started to look for new, bigger opportunities. That’s when he took notice of his cousin’s business. KM’s cousin ran multiple tyre retreading plants. The retreading process involves taking a worn out tyre and making it as good as new, with a new tread pattern.
The tread rubber being used in KM’s cousin’s plants was being supplied by foreign companies. KM saw this vacuum of local players as an opportunity and in 1952 began manufacturing a type of tread rubber that was better than what the competition was offering. This saw MRF not only go toe-to-toe with multinational players but emerge as the market leader with 50% of the market share in a short period of time, by 1956.
With his tread rubber manufacturing business performing splendidly, KM decided to expand downstream the value chain and began manufacturing tyres. Hence kickstarting the birth of India’s largest tyre manufacturer, but this was easier said than done.
INITIAL STRUGGLES
MRF decided to partner with an American tyre maker called Mansfield Tire & Rubber, to jointly create tyres, with the then Tamil Nadu chief minister, Kamaraj, himself releasing their first tyre. The same year, KM decided to take the company public, with MRF listing on the Madras Stock Exchange.
But there was a huge flaw in MRF’s plan. You see, the kind of tyres that MRF’s partner, Mansfield Tire & Rubber, was used to making, were not meant for Indian conditions. Not taking into account the local dynamics hurt MRF, as the quality of tyres born out of the collaboration proved to be not well suited for Indian roads. Soon, rumours started doing the rounds, perhaps stirred up by foreign competitors, that Indian companies simply aren’t good enough to make tyres.
The tyre manufacturing business in India at the time was an oligopoly dominated by the trio of Goodyear, Dunlop, and Firestone. These three would together engage in collusion over pricing, production numbers, and which suppliers to work with. Doing their best to keep new players at bay, they would operate like a cartel, consolidating their grip over the Indian tyre market.
In fact, Dunlop, one of the three big multinationals, used to dominate orders from the Indian government. Things were so bad that at one point, when MRF tried to argue that it deserved a higher proportion of government orders, they were blatantly told that they only deserved whatever Dunlop felt they did!
Recommended by LinkedIn
Of course, such uncompetitive conditions are not only bad for businesses, but for the country as well. With foreign players maintaining a solid grip over the market, if there was ever to be an emergency situation, such as a war, the Indian government could be held hostage by these multinationals and be forced to pay eye watering prices.
TURNING POINT
With things taking such an extreme turn, the government decided to clean up the mess and ensure fair competition, giving MRF a fighting chance that they took with both hands. In 1963, Prime Minister Jawaharlal Nehru himself laid the foundation stone of their factory and MRF began to compete fiercely for government contracts, along with other Indian manufacturers as well.
Now, with a level playing field ensured, MRF began to expand its focus towards becoming a household name. This was quite an unconventional move at the time, as MRF had just broken into the ranks of the B2B Indian tyre market and now was looking to make a splash on the retail front as well.
To turn this manufacturer into a brand they hired the man called the father of Indian advertising, Alyque Padamsee. To give you some context, Padamsee worked with over a hundred brands, including Bajaj, Surf, and Fair and Handsome, becoming the first Indian to be indicted into the Clio Hall of Fame, the advertising world’s equivalent of the Oscars.
Upon being hired by MRF, Alyque decided to go straight to the target audience, that is, the customer. He met-up with truck drivers who told him that a tyre should be strong and powerful, leading him to create the MRF Muscle Man in 1964, which personified the strength of MRF’s tyres and would later be leveraged in TV commercials during the 1980’s as well.
But coming back to 1964, the company also opened is first overseas office in Beirut and in 1967, MRF became the first Indian company to export tyres to the US, turning the tables on the same multinationals that once used to dominate MRF’s home ground of India, by now taking the fight all the way back to their own home turf. In such a short period of time, MRF had turned the tables spectacularly.
Looking to expand its presence domestically as well, the company worked hard to connect with dealers across various parts of the country, giving them confidence that MRF was the right horse to bet on. Having learned from its initial struggles with Mansfield Tire & Rubber, MRF committed itself towards ensuring that it’s tyres were well suited for Indian roads in particular, becoming the first to introduce nylon tyres in India. With state governments offering tax concessions, MRF continued its forward march, establishing more and more manufacturing units in the years to come. But MRF didn’t stop there though, going on to invest in motorsports and cricket as well, including its famous pace foundation with fast bowler Dennis Lillee, which has gone on to produce speedsters like Zaheer Khan and Irfan Pathan.
The 1980’s saw MRF become the largest seller of nylon passenger car tyres and also the leading truck tyre seller in India as well. The Maruti 800 which kicked off the automobile revolution in India, too came with MRF tyres. Having gained significant market share in both the passenger as well as commercial vehicles tyres segment, in 1989, MRF launched the funskool brand, in partnership with the world’s largest toy maker, Hasbro, and also entered the conveyer belt business in the same year.
Fast forward to 2007, the company passed the billion dollar annual turnover mark, followed by crossing the two billion dollar threshold just four years later in 2011. If an investor had bought 13 shares of MRF for Rs. 1 Lakh in January 2011, then they would see a return of 12 times a decade later in January 2021. Such is the immense growth that MRF has experienced. There was even a story a few years ago about a man who bought 20,000 shares of MRF in 1990, that became worth Rs. 130 crore in 2017! The company today has the highest priced shares on Indian bourses.
MODERN DAY SUCCESS
Today, MRF commands a market share of 25% and exports its tyres to more than 65 countries across the globe, with USD 3 billion in revenues, and is valued at over Rs. 300,000 crore. The company goes beyond producing tyres, also making tubes, paints, conveyer belts, and toys.
MRF’s story is one of national pride, of how a man persevered against a foreign oligopoly and turned a tyre company into one of the most recognisable household names. For his accomplishment, KM became the first industrialist of South Indian descent to be awarded the Padma Shri in 1993.
