Michelin, facing fierce competition from lower-cost Chinese tiremakers as it expands in Asia, is counting on a little luxury splash from haute cuisine to boost its brand image.
The French company is introducing its eponymous restaurant guide for Bangkok in December as part of a broader effort to increase the brand’s appeal in Asia. In July it bought a 40% stake in the U.S.-based Robert Parker wine guide, which hosts tasting events on the continent, including in Singapore, Hong Kong and Macau, where Michelin already has food guides.
While selling tires may seem to have little to do with finding a tasty coq au vin at a fancy restaurant, Michelin sees the unprofitable guides as helping to position its brand as high quality as it goes up against China’s Shandon g Linglong Tyre Co. and Aeolus Tyre Co. The company also is moving upscale thanks to high-tech connected tires such as its airless prototype resembling coral,or light tires designed for electric vehicles.
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“The guide is part and parcel of our brand image in mature countries,” Chief Financial Officer Marc Henry said in an interview. “In emerging countries where more and more people are buying a car for the first time, we see that we can re-create a bit of this brand attraction.”
Expanding in Asia will help reduce the Clermont Ferrand, France-based company’s dependence on Europe and U.S., which together account for more than three-quarters of its sales. Cie Gener ale des Etablissements Michelin, as the company is formally known, also is diversifying into services such as fleet management and insurance.
The so-called red guide was created in 1900 by Andre and Edouard Michelin. At a time when cars weren’t popular yet, it became a tool to encourage people to drive for longer distances and to stop at restaurants and hotels.
Michelin also is eyeing the US market, where it already has guides for New York, San Francisco, Chicago and Washington DC’s restaurant scenes. Michelin’s red book is available in 26 countries and is bound to expand as the company aims to double revenues from services by 2020, from €1 billion in 2016. Michelin had total sales of €20.9 billion ($24.3 billion) last year.
The French company is investing in the guides even as it cuts costs amid fierce competition in the tire market, leading it to plan for some 2,000 job cuts by 2021, mostly in France. Chief Executive Officer Jean-Dominique Senard aims to make the guide and mapping unit, known as Michelin Travel Partner, profitable. He moved its headquarters from Paris to a close suburb and reduced headcount. Michelin doesn’t disclose sales for the business, though it said in a filing that revenue rose sharply last year.
Rating apps such as Yelp or TripAdvisor aren’t a threat to the guide, because the Michelin inspectors who review restaurants are independent, anonymous and pay for their food, said Claire Dorland Clauzel, the Michelin executive vice president who oversees the guides.
“In a world full of fake reviews, we realize that the reassuring nature, the seriousness and the quality of the brand does matter,” she said in an interview. The company has expanded to online reservations, including with the purchase of U.K-based BookaTable and Spain-based Restaurantes last year, and is considering other acquisitions.
News by Bloomberg, edited by Hospitality Ireland