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The State of the Industry
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John Torsiello
 
By John Torsiello
Published on 12/29/2009
 

The State of the Industry

Golfing Magazine had the opportunity to interview a number of equipment industry leaders concerning the state of golf and their outlook on 2010. The discussion included Chip Brewer, CEO, Adams Golf; Dave Schnider, president and COO of Fujikura Golf; Cindy Davis, U.S. General Manager, Nike Golf; Harry Arnett, Senior Category Manager TaylorMade Golf Equipment and Golf Ball; Dave Glod, President, Tour Edge Golf; Gene Simpson, Vice President of Marketing and Sales, UST Mamiya Golf Shafts; Tim Clarke, General Manager, Wilson Golf; Dan Murphy, Senior Director of Marketing, Bridgestone Golf; and Pete Samuels, Director of Communications, Ping Golf.
The following is a compilation of those conversations.


How is your company faring in this challenging economic climate?

Brewer:
Although the overall market is down sharply this year, Adams Golf has held or gained market share and continued to strengthen its brand. 2009 won’t be remembered as a banner financial year but it may be remembered as a pivotal year in the further development of our company. In the end, I’m proud of our team’s accomplishments.

Schnider: It has indeed been a challenge but we have fantastic innovative products and a very strong brand that still resonates to golfers in these tough times. Along with a strong employee base, we are able to ride out this storm. We have run our business as lean as possible without sacrificing quality and service to our customers.

Arnett:
We’ve had a tremendous year, all things considering. We have had major share gains in the major categories of metal woods and irons. We felt strongly that even in the one of the worst macro economic climates in recent history, and certainly one of the hardest cycles to have hit golf in many years, that golfers would still respond positively to meaningful innovation and advances in performance. We launched two revolutionary products this year, the R9 and the Burner iron, knowing the market in general would be pretty soft. We believed the best products win even in these kind of market conditions. That has worked out extremely well for us this year.

Glod:
2009 has been a difficult year for the golf equipment industry. Although Tour Edge’s sales are down for 2009, we have managed the economic downturn well and are having a profitable year.

Simpson: This year has certainly been a challenge due to the recession, but we are holding our own compared to many of our competitors. Earlier this year, we restructured our organization, merging all operations (Japan, China, Bangladesh and U.S.) under management driven by our leadership here in Texas. This change allowed us to focus on the golf market on a global basis as one strong company rather than as two independent divisions focused on separate markets in Asia and North America. Our goal has been to expand the UST Mamiya brand globally, and we have been very successful in doing just that, picking up significant market share in Japan. We have launched an international marketing campaign to maintain highly visible branding, while continuing to advertise and promote to golf consumers.

Clarke: We have been weathering it well. It’s a hard business to be in and to be successful in the long term, you have to be a global brand, which we are, not depending on one market to sustain you.
Murphy: Actually, considering what is happening around us, we’ve faired quite well. We’ve been fortunate in that we seem to have provided some products that address consumers’ needs and appeal to their tastes despite the economic challenges of the last 24 months.

Have you done anything in regards to pricing in response to the recession?

Brewer:
Partly in response to competition, and partly due to consumer sentiment, we have increased our level of promotional activity (gifts with purchase or coupons). These moves appear to have been effective for 2009. However, we are expecting less promotional activity for 2010.

Schnider: We have not lowered our pricing but we have run promotions throughout the year to bring consumers into our dealer shops as well as provide them with value opportunities. Additionally, we introduced our new Motore F1 series with HIT (High Inertia Tip) technology during this economic downturn. This new technology enabled Fujikura to develop the same high quality, high performance shaft designs at a lower cost versus some of our previous premium models. In turn, we were able to pass these savings along to our dealers and end users. The shaft performance and quality are of the highest level and it has been a huge success on the PGA Tour continuing our tradition as the number one driver shaft brand for the 9th straight year on the PGA tour in 2009, according to Darrell Survey.

Arnett:
Somewhat, yes. We are always conscious of our consumer value proposition at all times but particularly in tough markets. And not just from a retail pricing standpoint but from a marketplace positioning standpoint as well. This was a unusual year in that a lot of the market was extremely promotional this year, so we’ve had to adapt to that kind of dynamic for sure.

Glod: The industry has seen a lot of downward price pressure that has resulted in some of the best golf equipment buying opportunities in decades. Our management team anticipated this early in the season and in February we were the first club company to offer a free fairway wood with any driver purchase. In addition, we responded by cutting prices where appropriate and offered multiple direct from manufacturer consumer rebates.

Simpson: The U.S. market has been particularly soft, with golf consumers searching for bargains. So, we have been active with our retail accounts in creating promotions to help bring buyers into the shops. We haven’t lowered prices across the board but we have offered specials on specific brands during the year to keep the consumer engaged.

Clarke:
We haven’t done any reducing of prices. What we have learned over the years is that sales that result from reducing the price of your product never makes up for money you lose by reducing the price. We are priced at a good point in the marketplace, right where we want to be, in the meat of the market.

Murphy:
We believe, now more than ever, consumers are becoming more discerning in their purchase decisions. So, through our free ball-fitting service we’ve been able to deliver substantive results for golfers as opposed to just marketing hype. We’ve successfully educated 40,000 golfers that it is important they find the right ball for their swing, which flies in the face of the old way of thinking of just playing whatever products the Tour pros are using. That being said, instead of cutting prices we’ve looked to create greater value for consumers by increasing their on-course performance. In some cases that increased performance does represent a cost savings. For instance if a player switches from the Tour level ball ($50 per dozen) to more of a distance performance ball ($27 per dozen).

Can we expect a lot of new, cutting edge products in 2010?

Brewer:
Yes! From new cutting edge aerodynamic drivers to new approaches in iron set design and other products that are not developed far enough for me to discuss, Adams Golf will continue to push the limits on innovation and technology.

Schnider: Yes, Fujikura has several new products for 2010, one of which is our New Motore Speeder. Motore Speeder is supercharged with our Triax and Quadra Axis woven materials creating our 7 Axis technology. This technology creates uniformity throughout the shaft, assists with eliminating deformation, yet provides the maximum amount of speed throughout the swing for increased distance and accuracy. Motore Speeder was introduced to the PGA Tour this fall and within the first two weeks of introduction, a top 20 player in the world won using Motore Speeder in his driver, the first week he put it in play. We will have two different profiles of Motore Speeder for 2010 and expect this new break through shaft technology to be a big success for all golfers.

Arnett: Always. We have new products coming again in 2010 that we think will once again lead the category in performance, and will once again be accepted and put in play quickly by the best players in the world.

Glod: At Tour Edge we are very excited about 2010. Without a doubt we have our best line-up ever. In the Exotics brand we are introducing several world firsts. The XCG-3 driver is the world’s first combo-brazed titanium, tungsten and carbon crown driver, and we have the first combo-brazed titanium cup face and tungsten sole fairway wood. In fact, the Exotics XCG-3 and our new CB3 Tour fairway woods are so long we are guaranteeing they will hit 20 yards longer than your current fairway wood or they can be returned for store credit or a refund, depending on the retailer’s policy. With the Tour Edge brand we continue to deliver premium quality at an affordable price with the introduction of our $39.99 Backdraft GT putter. Plus, this spring we will introduce several products that offer exceptional performance for extremely affordable pricing. As always, we continue to be the only manufacturer to stand behind the quality and performance of our products by offering a lifetime warranty and 30-day play guarantee.

Simpson: UST Mamiya launched our all new ATTAS International Series shafts as an early 2010 introduction in Japan this past September. (ATTAS was just introduced to the U.S. market on Nov. 1.) This project is the first in a new joint collaboration between our design engineers in Texas and the engineering staff in Japan, utilizing only the finest quality carbon fiber materials available from Japan’s best fiber producers. ATTAS shafts are manufactured to exacting and repeatable tolerances, tighter than anything else we have tested in the market. Our handcrafted manufacturing process and meticulous attention to detail at every phase of the production process guarantees that the final product is the world’s finest carbon fiber golf shaft. We realize this is a bold claim but it’s a declaration that we take seriously and ATTAS delivers!

Clarke: We’re coming out with a combo set that Adams Golf has had such a strong position in. We’ve got a proprietary graphite shaft under the hand area with the bottom third of the shaft made of steel. The two materials are fused together and our play testing response has been fantastic. This is actually a change for us, as it will put us in combo set market at the $799 per set price point.

Murphy:
Yes, we are always looking to bring innovation to the industry, as we have done with our e-Series and B330-RX golf balls. Bridgestone Golf is an R&D based company and we’re constantly working on new products. In addition, having now fit 40,000-plus consumers through ball-fitting, we’ve amassed a greater bank of knowledge than anyone else in the industry, with regards to what the average golfer needs. Through those ball-fittings we’ve identified gaps in what the industry offers and in 2010 we’ll be working hard to fill those gaps.

Davis:
At Nike, product innovation doesn’t stop in a challenging environment. In the most difficult times opportunities exist for those who understand the consumer and marketplace best.

Samuels:
We launched the G15 and I15 products in September of 2009 and we’re optimistic about business in 2010. We’re looking to ride that momentum and the good success we have had with the products on Tour into the 2010 selling season.

What are your predictions for the marketplace in 2010?

Brewer:
Overall, the market will most likely be flat to up in first part of the year and gain strength throughout the year. Having said this, the only thing I know is that we don’t know how to predict the marketplace. We’ll have to be ready for anything.

Schnider:
The great thing about golf is that it is a passion for most participants. Even though times have been tough, eventually people are going to invest in their passion. You only live once, so you might as well enjoy yourself. I think in 2010 people will start playing more golf again and start purchasing new innovative equipment that will add to their enjoyment of the game. Fujikura is optimistic about 2010. We have a great new shaft lineup for both the average golfer and the highly skilled golfer. We have invested in custom fitting and will introduce our new state of the art fitting system at the PGA Show in Orlando.

Arnett:
We are extremely positive about the market in 2010. This year was really unusual and we know it will be some time before the industry gets back to the levels it was at a few years ago. But we think 2010 will be a growth year again for us, and we expect the category as a whole to grow again as well.

Glod:
We are expecting the pricing pressures to be less than 2009 but are anticipating a continuation of downward pricing pressure that was started in 2009 season, as retailers and manufacturers continue to clean up their inventory.

Simpson:
We see more of the same in 2010. The economy continues to struggle as jobs and fear of job losses keep the consumer on a tight budget. The huge discounts on golf clubs offered at the retail level in 2009 has conditioned the consumer to expect a lower price point, even on premium equipment. Some club manufacturers are expressing optimism, and that is a good sign. And if they deliver something truly groundbreaking in design or performance, the recovery could be significant. But the question remains as to whether or not the golf consumer is optimistic about their own financial situation in the light of this continued weakened economic climate.

Clarke:
We see a good year in 2010, especially based on the positive things that happened for us in the third and fourth quarters of 2009. We still need, from an industry standpoint, to do something to grow the game and keep people playing once they start. It’s all about sustaining growth when it occurs.
Murphy: Overall, I see a slow improvement in the general economy. I expect a gradual increase in consumer confidence as a result. Core golfers are still going to play golf. They may behave differently in terms of what equipment they buy or the courses they play, but they’re still going to play golf. As I said before, golfers will continue to look for more value in their purchase decisions.

Davis:
I believe the consumer will remain price-value conscious but will pay for innovation.

How about the chances for increased participation in the game?

Brewer:
The demographics bode well for golf over the next 10 years.

Schnider: I think we still have a big challenge to increase participation. The governing bodies of golf need to make a switch from trying to preserve the past and focus on the future. The current rules/restrictions of the game and equipment, keep people from entering and continuing with the game. It currently takes too much time to play, it’s too difficult for beginners, you need to invest money up front to enter the game, and the social environment is uncomfortable for most people. Golf course operators need to create 1-to-3 hour golf experiences, lend out equipment for beginners, have instructors on hand to help teach and allow the participants to wear everyday clothing that they are comfortable in. Right now, you literally have to invest a good amount of time and money just to try the game, so most people don’t even bother. Additionally, the governing bodies of golf need to lift the restrictions on “conforming equipment technology” and allow manufacturers to design the technologies that will make the game easier and more enjoyable for all golfers. New rules continue to be added to restrict technology in order to “preserve the tradition of the game.” Just like rules, traditions are also meant to be broken. Will it ruin the game if PGA Tour players score even lower than they do now? No, it won’t! You will never be able to prove that Tiger Woods or Jack Nicklaus or Bobby Jones is the greatest golfer of all time. There are so many variables involved and they never played against each other in the prime of their careers. It will always be opinion, records won’t prove anything. If the professional Tours want to restrict technology for their players then let them make that decision. The focus of golf’s governing bodies should be in the best interest to grow the game, not to preserve old traditions of the professional Tours. Lastly, the social environment of golf must change to accommodate all people. It is a social game and anyone at any level can play together. There isn’t another game like it where all ages and abilities can play together. We should all embrace this, not keep people from it.

Arnett: Even in this tough economic climate, and it has been tough for everyone across every industry, golfers have still been playing a lot of golf. Rounds played as a whole haven’t dipped. So, golfers in general have continued to find ways to fuel their playing passion. They’re spending less money and the supply side of the business has really caused prices to drop for actually playing the game. I believe now is the time to start attracting newer entrants to the sport as it’s more affordable now than ever to do so.

Glod:
For 2010 we are not anticipating any growth in the game due to the unemployment rate and difficult economy.
Simpson: In our area of the country rounds played were remarkably steady compared to last year. But there were a lot of discounts offered by the courses to bring in players–so revenue was actually down. As an industry, we still have a problem of getting younger players outdoors and into the game. The Internet and video games are a tough competitor for their attention, and thus their interest.

Clarke:
Again, we need to focus on programs that will encourage new players and retain those who are in the game already. We know people are watching golf on television, especially when Tiger plays. The challenge is getting those people to a golf course.
Murphy: Bridgestone is very interested in seeing participation grow, so we want to make it as enjoyable as possible for everyone. We believe making the game more enjoyable means giving players the tools to improve their scoring. That can be achieved first and foremost by providing the right ball for the right player. Therefore, we are dedicating more resources to our ball-fitting program in 2010 than ever before

Samuels:
It’s challenging out there right now and participation needs to grow. We look at our job as bringing evolution to the sport and making higher performing products that make it easier and more fun for people to play golf. We hope doing that will encourage more people to take up the game and stick with it.

If there is to be growth in the game, both short- and long-term, in what area and demographic will it be?

Brewer:
Baby boomers and empty nesters that finally have more time on their hands.

Schnider: I don’t think there will be growth short-term because major change still needs to be made. I think the discussions are happening now for growth in the long term. Women and children will be the biggest growth for the game along with young families. What could be better than spending time as a family hitting a golf ball around a beautiful golf course for a couple hours. If this environment existed a lot more people would try the game and many would get hooked on the game and become avid golfers. Worldwide, I believe we will see an increase in overall participation short-term because of golf becoming an Olympic sport. But the increases will come in emerging golf markets, such as Southeast Asia, Eastern Europe, India, etc.

Arnett:
Absolutely. Obviously there is growth to the game outside of the United States. But the aging baby boomer generation is also having to put off retirement now. Every golfer at that place in life has had to delay his or her retirement plans, so as an industry, we’d better find ways to get even younger professionals into the sport and grow there too.

Glod: We continue to expect growth in the senior population as more and more baby boomers retire and seek out new recreational activities.

Simpson: Honestly, the growth potential is global in nature at this point in time. As more wealth shifts into Asia and India there will be new courses and tremendous growth opportunities in those regions. Our challenge in North America is to draw young people out of their homes, away from their computers, and onto the golf course. Time to play and cost will continue to be issues with this group.

Clarke: The growth we will see in the future will likely be in the Asian markets. I believe the inclusion of golf in the Olympics will be a major driver of increased interest and participation in many countries in Asia and even in South America. It will do much to accelerate the growth of the game in markets outside of the U.S.

Murphy: In the analyses we’ve done, we see most of the growth coming from the last baby boomers as they near retirement age. It is true that many of these people already play golf on weekends but, as when they retire, they’ll have much more time to enjoy golf, so we should see an uptick in rounds played overall. In addition, some of those boomers who haven’t picked up the game will have more time to do so when they retire.