Golf Industry in the Rough

As an industry, golf has a lot of factors working against it—the economy, a growing public distaste for executive junkets, tighter schedules that make a four-hour game untenable—but it doesn’t suffer from a lack of equipment.

Quite the contrary. The  PGA Merchandise Show in Orlando, Fla., last month witnessed a record-setting amount of new products for the 2009 season. All the major golf manufacturers attending were showcasing new drivers, irons, putters and, if they make them, balls, along with booths full of new footwear, apparel and other accessories.

“This was the greatest amount of new products we’ve seen introduced at the PGA Show in years,” said Ed Several, show director, who did not have an exact figure. Part of the reason is the two- to three-year R&D pipeline. “For a variety of reasons, some of them competitive, companies are compelled to go ahead with scheduled [equipment] introductions,” said Gidge Moody, Nike Golf marketing manager.

Casey Alexander, a golf industry analyst at Gilford Securities, agreed. “The stuff being introduced now was on the drawing board 24 to 36 months ago. Still, some of the companies that are SKUing the market to death are acting out of desperation.”

The product glut comes during a decade that has not been kind to golf. Back in the booming 1990s, the industry was opening new courses at a rate of 300-plus every year; the number of new golfers, total golfers and rounds played were on the rise; retail sales were on fire, producing the first billion-dollar companies (Callaway, TaylorMade, Acushnet).

In contrast, rounds played in the U.S. in 2008 were down 1.8 percent, per Golf Datatech, and overall rounds played since 2001 are down 5.1 percent. The total amount of golfers, factoring in new players along with those leaving the sport, is down 4 million over the past seven years. Retail sales last year slumped 2.8 percent.

Throughout the drought, the golf industry has continued to boost marketing support, but that may be coming to a screeching halt this year. In 2008, ad spending in the U.S. (excluding online) for the industry hit $349 million, up from $310 million the year before, per Nielsen Monitor-Plus.

Annual marketing budgets—which include tour staff programs, sampling giveaways, demo days, POP, etc.—can add another $25-40 million in spending. According to sources, all of the top five spenders (Acushnet, TaylorMade-adidas, Callaway, Nike and Ping) will hold the line or cut spending in 2009.

“Everyone is trying to adapt,” said Bill Knees, svp of marketing, Callaway Golf. “But consumers still want new, and that doesn’t change with the economy. Our goal is to be a leader at all the major price points. We’re looking to gain share, but we are adjusting our [ad] spending some. And, we are streamlining our tour strategy. The tour players we do have [Phil Mickelson, Ernie Els, Rocco Mediate, Stuart Appleby] will be used more effectively.”

One of the few companies planning to increase its ad spending in 2009 is Bridgestone Golf, which markets its namesake plus Precept balls and clubs. Bridgestone spent $10 million-plus on advertising in 2008. “There may be a recession, but we choose not to participate,” said Dan Murphy, senior director of marketing, pointing to a market share growth in off-course ball sales from 3 percent in 2005 to more than 20 percent now. “We’ve been able to establish a clear product differentiation: individual ball solutions for individual players. We’re going to increase our spending this year, and that includes advertising and tour staff.”

Along with Callaway, Nike, TaylorMade and others, Mizuno is planning a major pullback from its original 2009 budget, which had included a hefty TV purchase but now will focus primarily on print and grassroots promotions. “A lot of things have changed in the [past quarter],” said Lisa Mark, senior director of marketing at Mizuno USA, whose company spent $5 million-plus on ads in 2008. “We’ve had to make some significant changes to adjust.”

Alexander sees 2009 as a particular struggle for Mizuno, which recently launched four new sets of irons. “This will be a tough year for irons and probably the easiest purchase for golfers to defer,” said Alexander. “Mizuno’s four new sets of irons? That smacks of desperation.”

Alexander also sees particular challenges for Cleveland. “Their core has been wedges, but now they are way over the SKU line with so many similar products,” he said.

“We don’t sell $399, $499 drivers,” countered Keith Patterson, Cleveland Golf marketing communications manager. “We sell drivers for $299. We’re price competitive. If our sales stay flat, we’ll gain market share.”

Alexander agrees with the price point strategy. “The $299 driver category, in this economy, is one the companies need to exploit,” he said.

It doesn’t appear as if the shakeup in golf companies will slacken over the next few years. A number of brand names, such as Lynx and Snake Eyes, are now retailers’ private labels. Other companies, such as Goldwyn, Burrows, Fidra, McHenry and MacGregor, have folded or are on the verge of closing up shop.

A few hardy souls, like Nicklaus, PowerBilt, Tour Edge and Hippo, maintain value-priced places. And, a few smaller companies, like Heavy Putter, Scratch Golf, Gel and Yes!, are trying to make headway with a one- or two-product niche.

Meanwhile, mergers and acquisitions have created conglomerates, such as TaylorMade-adidas-Sunice-Ashworth, Titleist-Cobra-FootJoy, Cleveland-Srixon-Never Compromise, Callaway-Odyssey-Top-Flite-uPro. A company such as Ping, a privately owned, fiscally conservative family entity, is a rarity, both in its independence and profit-making.

“If you have a global footprint, you are likely to be down only 10 percent [in 2009],” said Gilford’s Alexander. “If your operation is mostly in the U.S., you’ll likely be down more than 10 percent, and possibly a lot more than 10 percent. There’s a clear mindset that the top four or five equipment companies are going to get the lion’s share of sales, for several reasons. One, retailers are going to focus on the top brands. Two, major companies will be able to take advantage of global markets.”