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TaylorMade is up for sale - does it matter?
08 May 2016
by Pete Wlodkowski of AmateurGolf.com

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OK, so maybe the 15-inch hole wasn't the greatest idea<br>after all, but Hack Golf's efforts fizzled out too quickly
OK, so maybe the 15-inch hole wasn't the greatest idea
after all, but Hack Golf's efforts fizzled out too quickly
Adidas Group recently announced that they have put their golf division, TaylorMade, up for sale. It's easy to blame golf (or more specifically the golf consumer) as the culprit for TaylorMade's recent woes. The thing is, this kind of complaining doesn't help anything, it just perpetuates a problem facing the game. We've known golf is a no-growth business for years, but the sport of golf is much bigger than the equipment business. So I hope people won't again sound the "death of golf" alarm bell when seeing that TaylorMade is being sold.

Geoff Shackelford recently reported, on former TaylorMade CEO Mark King's recent interview with Yahoo Finance. (You can watch the video at the bottom of the page.)

"I think the decision was made to sell it," King says, "because the company has realized that we should be focusing on the biggest growth opportunities. And the biggest growth opportunities are in running, training, basketball. And we have a lot of runway in those. As opposed to being in something that is harder to focus on." 

Harder to focus on? In other words, golf equipment is a bad business these days (despite Adidas Group CEO Herbert Hainer's insistence to the contrary)? "It is," King says. "And that was the realization."

King's comments struck a nerve with me, but to be fair, a great deal of the credit for TaylorMade's meteoric rise in the 2000's came under King's leadership and I think his recent words are an attempt to justify Adidas putting TaylorMade up for sale. I've always known King to be upbeat and full of energy. He's the kind of guy who remembers everyone's name and loves playing golf with the guys on weekends. So as much as I'm disappointed with his recent tone, and with TaylorMade's inability to follow up on their $5 Million commitment to foster new grow-the-game ideas after the "Hack Golf" announcement in 2014 (remember the 15-inch hole?) I'm willing to give him a pass. After all, he's not running the company anymore, having moved on to the role of running Adidas in the U.S. in 2014. Maybe the 15-inch hole and other ideas quietly died because he was not there to champion them.

My take is this. While TaylorMade was riding their "Number One Driver on Tour" position to double-digit growth, the overall equipment market wasn't growing. Something had to give. Just ask Apple, now trading at a 52-week low. Great products, ecosystem, and happy customers. But people aren't' going to buy a new smart phone every year forever, especially at Apple's prices.

The same goes for golf clubs. I would love to see all of the top manufacturers do well all the time. But that's simply not going to happen. The biggest success story of the past three years has been the comeback of Callaway Golf under the leadership of Chip Brewer (former CEO of Adams Golf). Fighting against a shrinking equipment market, foreign currency headwinds -- the strong dollar makes sales in major foreign markets like Japan less valuable -- Callaway has focused on improving their entire product line. They've brought back the "Big Bertha" name, focused on a young and vibrant Tour staff (Lydia Ko can be a force to reckon with for years to come), and focused on the core strengths in creating performance equipment. Several years ago, low handicappers might have overlooked the brand. But Brewer insisted that any "pro" model club include (at no upcharge) the same OEM shafts that would cost hundreds of dollars if purchased separately, not just a "made for" model that saved the company money. They also leveraged Roger Cleveland's strength not just as a wedge designer, but as an industry design veteran. Callaway is now No. 2 in wedge sales. And their new Chrome Soft ball is the best they've ever manufactured.

Callaway never complained about the golf consumer, they just focused on getting better. I think that might be a metaphor for improving our golf games!

Neither did Titleist, who would of course love to have their huge golf ball market share in a larger market, growing at 20%. But since that's not going to happen anytime soon, their focus is on the core of the game. Their Jim Nance-narrated advertisements THANK golfers. "The dew sweepers, the weekend golfers..." -- you know the commercial. On the equipment side of Titleist's business, the most amazing thing is that while the other manufacturers have at times released as many as three drivers in a single year, Titleist has maintained its commitment to a 2-year product cycle, alternating release years with irons and woods the way the Walker Cup and Curtis Cup are played in alternate years.

As for PING, they can be credited with popularizing custom fitting, inventing a color-coding for lies of irons before most Tour players were born. Heel and toe weighting was born in Karsten Solheim's Redwood City, California garage -- it's continued to be a mainstay in putter and club design to this day. There was a time when PING could have complained about losing driver market share. Instead, they designed the G30 series, which was such a hit with consumers that it became the number one driver at retail for a period of time, while TaylorMade was continuing to advertise themselves as the Number One Driver on Tour.

Nike took a long view when they entered the golf market, and it seems to have worked out well. The fact that they didn't jump into the ball market and claim the number one spot (while having the number one player using their ball) speaks volumes about golfers' brand loyalty. Their clubs are bold looking, and appeal to young golfers. Cobra-Puma also continues to carve out a niche appealing to younger golfers, and like Nike the performance apparel and shoe connection makes the brand more relevant (and profitable) as shoes and apparel leverage the companies' design and manufacturing strengths.

The reason I've chosen to highlight the strengths of these companies is that I sometimes get tired of hearing that golf is a dying game. It's not like golf equipment manufacturers are making fax machines or PCs. (Now there's a business I don't envy.) Golf has been played for hundreds of years and it will be played for hundreds more. Even if the number of golf courses gets cut in half due to population growth and water constraints, the lure of our historic game will always be there. And somebody smarter than me will come up with ways to fight the issues we've always faced in golf: It's hard to learn, expensive to play, and takes too long.

Recently, that somebody has been Top Golf, a driving range/entertainment complex that has to be experienced to be appreciated. Rock music, bright lights, colorful targets, and 500 friends hitting balls on a Friday night? That's fun. And I guarantee if you live anywhere near a metropolitan area, Top Golf is coming to a location near you. As for traditional golf resorts, I've got just two words for you. Bandon Dunes. Swimming upstream in a slow-growth business is putting it lightly, the place is pure magic as a destination and a business.

Rounds of golf just soared through the roof in the first quarter of 2016, according to the National Golf Foundation. I'm not sure if that trend will continue. But as I've said all along when people ask me about the state of the golf business: "All I can tell you I'm still playing my 100 rounds a year -- golf isn't dying because of me!"

ABOUT THE AUTHOR

Pete Wlodkowski is the founder of golf tournament website AmateurGolf.com. Three of the equipment manufacturers referenced above -- Callaway, Titleist, and PING -- are paid sponsors of that website.

 

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