Leonard Finkel: Chip, I had a chance to interview you when you were president of Adams golf. You now head Callaway Golf, among the most iconic brands in golf. How is your job different now than it was at Adams?
Brewer: There are a lot of similarities, but it’s bigger, it’s busier, and there are a lot more resources. It’s global. The general themes are the same, about making the best product and building relationships and bolstering the brand. The things that you need to do to move the needle here are more significant, but the resources are a lot greater too. It’s kind of a dream job for me though. I love golf and I love being in the industry. I’m unabashed about that and I’m enthusiastic about all aspects of that. So it’s kind of like going from the minors to the majors in a way. I relish that opportunity and the challenge.
LF: You took over Callaway Golf in 2012 and seem to have turned it around with positive revenue and earnings growth since 2013. How were you able to accomplish that feat?
Brewer: We, and the emphasis is we because the team has really done a good job, but we started with a great brand. Callaway, as you said, is an iconic brand. I knew that coming in, but it was even stronger than I expected. It has resonance across all handicap ranges across the globe. I remember shortly after getting the job, being on an airplane (there was a lot of that), and people would ask me what I do. I’d say I worked at Callaway and they’d say, “That’s so awesome! You must be killing it.” And for some time the company wasn’t doing so well, but the perception was so strong and the brand affinity remained strong. The second thing is the resources here. We spend $30 million a year on R and D (Research and Development). We’ve done that forever. So there is a very deep knowledge base and expertise on the product side.
Thirdly, we’ve put together what I think is a great team and the results would support that. From his product development, Doc (Dr Alan Hocknell, SVP, R&D) and his team, operations and sales, Harry’s team (Harry Arnett, SVP, Marketing) on the marketing front bringing the energy and enthusiasm. We’re proud of what we’re doing. I think we’re good at what we do. We love it and the results have been good. Our market share is up over 50% over the last few years. In fact, we’re a leader in almost all categories. We’re either number one or number two in every club category. We’re number two in golf balls, growing our shares and bringing energy to the marketplace. We’re doing it through fun and authentic marketing, but most importantly, it’s product that’s differentiating us.
LF: Can you tell me, what the thought process was and what factors are involved in deciding what components you will use for instance, in a driver? Is cost a factor? Do you come up with a profile for a specific type of player and then build around that?
Brewer: That’s one of the changes -- slight but it’s really significant – that has happened over the last few years. What we factor in the most is, what’s going to benefit the golfer. What’s the best possible part for performance? I think the company previously had been worrying about nickels and dimes in terms of product costs when what’s really costly is a product that doesn’t excite consumers. We’re building a lot more quality and putting a lot more cost into the product, whether that be components, shafts or grips. We’re moving into premium, cutting edge product, laser welding, cup face technology and the technologies involved in heat treatment, which are incredibly expensive. We have more laser welding capability than any other manufacture across Asia.
We have heat treatment that is more complicated from aerospace technology, that’s actually adding costs. But it’s leading to better product, a product that gains market share, which is the way to run a business. It varies a bit on different products and player type. We have products that are specifically designed for better players. We have some products that are designed for higher handicaps, women or seniors, as it should be. One product doesn’t fit all people. A great product will fit a wide range of individuals but there are products that can be tailored specifically. Cost is the last thing we’ll consider when we’re making those decisions.
LF: Endorsement contracts with players such as Phil Mickelson are big part of Callaway's marketing efforts. How does Callaway promote its products on Tour, making sure Tour players like Phil Mickelson have golf equipment that fits them and improves their game?
Brewer: We’re passionate about that so investing in the Tour has been a one of the big moves of the last 3 years. When I took over Callaway it had a history of having a nice Tour presence and certainly Phil Mickelson and Annika were iconic players. Although Annika’s retired now, Phil remains probably our most noteworthy player. But we’ve added a lot of fresh, young, energetic individuals. When I took over there were 12 players on the PGA Tour. Last year, there were 31, young players like Patrick Reed, Harris English and Kevin Kisner; players who are turning to Callaway and getting better during the process. That’s a big part of our brand messaging. It’s something that we love being part of.
Even at my level, I’m talking to the team about how is this player adapting to the new technology. Phil and I will text back and forth. I play golf with him occasionally and he will constantly give me feedback on what’s working and what’s not. It’s a big part of our development and our marketing program. It’s really important for us and we put a lot of time and energy and money into it.
LF: On average how many times a year does a Callaway Tour professionals get fit or work with a Tour representative on his/her golf clubs?
Brewer: Every player is different. We have players that change product all the time. There are players that will win and then change the next week. There are players that never want to change. So it’s very player specific in how often they want to tweak their product. Our job is to be with them and support them because their game has to come first. When we’re recruiting new players, I’m often talking to them or their parents. What I’m going to tell them is that we’re going to treat you or your son or your daughter like they were my son or daughter, and do what’s best for them. They are only going to convert product when it’s appropriate and makes sense for their game. We are going to hold ourselves to the standard of delivering product that improves their game. We encourage our players to change when we have something that’s better for them.
LF: Do you believe the average golfer can benefit as much from a club fitting as a Tour Pro?
Brewer: The average golfer can probably benefit more than a Tour Pro. Tour pros obviously need to get fit, but they have been fit and pampered to for many years by the time they hit the Tour. Their launch conditions are already really good or they wouldn’t be on Tour. You don’t find a guy on Tour spinning it at 4000 RPMs or hitting it crooked because the fit is totally off. You find such small degrees on Tour, plus they can adjust. By the third ball, that pro has already adjusted the club and moved the impact location in many cases. Whereas with the average player, that’s far from the truth.
We’ve done research internally that shows that the average player can get almost 21 yards from a driver fitting. Despite our marketing and everything else, on Tour, 21 yards is really hard to get. They’re already optimized. If we’re getting them an extra mile or 2 miles an hour, that’s homerun stuff. Where for the average player, it’s a night and day difference. As I’ve stated 1000 times, I’m a huge proponent of club fitting. We love to partner to find products that give the consumer an edge.
LF: Phil Mickelson could arguably be the most popular player on Tour. What’s it like working with him and could you give me an interesting story or two about yours or Callaway’s relationship with him?
Brewer: Phil is one of the most likable guys in golf. And for good reason. He’s fun, he’s honest, he has a good heart, he engages with the fans, he smiles, he takes chances. He’s just interesting. In my role here, I’ve had the good fortune of getting to know him. We play golf together occasionally. I’ve played in a couple of Pro – Member events with him. I won one with him, I didn’t win another, which bothered him immensely. He likes to have fun on the golf course and in life. He’s a generous man in how he takes care of people, but he’s also got a pretty good needle, so you have to have thick skin when you play with Phil. If I hit it out there my Sunday best 260, he’s going to fly it and make fun of me. He’ll tell me it’s cute and he’s never seen anyone hit that short. You better be able to take it and roll with it when you play with him.
He’s a club junkie like me. He’s constantly tweaking and he’s one of the guys that likes to get involved with technology, so he’s going to keep you on your toes organizationally. I love Phil; he’s great. He pushes us and it makes us better, although it’s not easy. But he’s also one of the greatest advocates out there and we are lucky to have him. He’s great for golf.
LF: I read an interesting article in golf week this week, talking about the exploding popularity of simulators in Korea. Among other things that I found intriguing, the LPGA and PGA of America had their interest piqued with the conversion of millennials to real golf. The article goes on to say, “The primary reason is the exposure to simulators. The conversion rate to an 18- hole experience is an astounding 85%. Could virtual golf become the next grow the game initiative touted in the United States?” What are your thoughts?
Brewer: I think it’s starting to work already and I think it has great potential. Simulators in specific markets are starting to gain popularity and attract millennials into the game in a nonthreatening way. It’s more of a nightclub kind of fun experience. But also the Top Golf concept, which Callaway’s been an active part of, which is growing across the southern United States and going global. These are really fun and exciting ways to bring people into the game and it’s a type of golf that is easily accessible, fun, appeals to millennials and it does lead to interest in the game that in turn leads to conventional golf. It’s a wonderful development right now that were at the leading edge of and if it continues, it should have a real positive influence on the industry. And it’s also really cool to see the LPGA and the PGA thinking about it and getting involved in it. That didn’t happen, five or 10 years ago in terms of grow the game initiatives from these ruling bodies. And that is also a very positive sign.
LF: Do you have any new and exciting projects on the horizon at Callaway that you’d like to share with us?
Brewer: Holy smokes, of course we do. That’s what we do. That’s what gets us up every day and gets our blood flowing. Golf balls have been a huge category for us and were really transforming them with a new type of product built around SoftFast Core technology. These are lower compression golf balls, 75 compression balls, that are wildly better for most consumers. They feel better, they go further, they just have no negatives. All positive. It’s a whole new technology. In Chrome Soft, we have a new Tour-based version that’s coming out.
In irons, we’ve become the number one iron in golf based on a technology called cup face. And that cup face is unlike anything else out there. It delivers ball speed and total performance unlike anything else out there. It’s in our new Apex irons, which are beautiful, sexy golf clubs that really establish new levels of performance, both in distance and total performance.
New technology coming on the woods side with the XR 16 product; we partnered with Boeing to really move the needle from the aerodynamics perspective. So we can get a driver that’s both forgiving and has a large footprint, bigger driver. But also really makes strides in terms of ball speed with the aerodynamic improvements. There have been a lot of people talking about that for some time, but we brought in the heavyweights in terms of the research capabilities and knowledge, which put us ahead in the game on that very important technology element.
LF: How would a company like Boeing help you create a golf club?
Brewer: Because golf clubs move through space at about 100 miles an hour and it’s a very complicated aerodynamic movement that, while applying the same amount of force in your swing, you want that club to move as fast as possible without compromising any of the other features associated with it. We have aerodynamicists on staff, but can you imagine how many Boeing has? Bringing in those individuals, they use it as a tool to excite their engineers, to give them fun projects. Their projects can take years, and ours go at a rapid pace and they really engage with us aggressively. And the XR 16 is going to be a lot of fun for the fitters to be able show improvement with unmatched forgiveness.