Over the Green

When insiders refer to The Big 3 now days, it’s not Palmer, Player and Nicklaus but Acushnet, Callaway and TaylorMade.

As we have written about previously the equipment part of the golf industry is consolidating and undergoing lots of turmoil. Smaller manufacturers disappear or are absorbed by larger companies and bigger players fight for market share in the face of stagnant demand.

Here are a few pertinent points to provide a sense of the scope of what is going on:
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The number of golf courses is measured in 18 hole equivalents meaning two nine hole facilities count as one 18 hole course and a club with 27 holes counts as 1½. So, when the National Golf Foundation reports the number of golf facilities in the country they convert everything to 18 hole equivalents or for short – 18HEQ.

Thus according to the NGF in 2011 when there was a net loss of 138.5 golf courses it actually means 138.5 18HEQ. Their annual survey showed 157.5 18HEQ closures versus just 19 openings and the closures says the report, “were disproportionately lower priced public facilities, including a large number of 9-hole courses.”

“The cumulative reduction in course supply over the past six years has been quite modest, and pales in comparison to the net increase in facilities that occurred over the two decades prior to this recent pullback,” says Joe Beditz, President and CEO of the NGF. “In 2000 alone we gained 362 courses, and over the 20-year period from 1986-2005, we added more than 4,500 courses (18HEQ.) The slow correction that is now occurring is very much overdue and necessary, to help return the golf course business to a more healthy equilibrium between supply and demand.”

The NGF also tracks how busy golf courses were and compared with to the average number of golfers during 1986-1990, in 2011 there were an average of 17% fewer golfers per course.

Knowingly or unknowingly, millions of golfers have purchased counterfeit golf clubs usually from Internet sites featuring more hyperbole than facts. Purchasers may think they are getting the latest and greatest at an unbelievable price but usually find the clubs, at the very least, disappointing.

Counterfeit golf clubs and balls are an immense problem for the industry and it’s estimated an astounding 2 million are made yearly. They not only cost the manufacturers profits but are hurting golfers foisting off shoddily made products using inadequate materials.

This month a consortium of club manufacturers, the U.S. Golf Manufacturers Anti-Counterfeiting Working Group, announced they had been successful in getting a preliminary injunction from the U.S. District Court forcing closure of more than 175 websites selling counterfeit clubs. This followed a similar action in January closing 60 Internet sites.

This newest lawsuit covers 130 defendants operating more than 175 websites that sold not only clubs but balls and accessories. Visitors to these sites will now be redirected to a site referencing the preliminary injunction and other details of the legal action.

Speaking for the Group Christa McNamara of TaylorMade-adidas Golf said, “Over the last decade, we’ve seen a significant increase in counterfeiters using the internet as a tool to dupe consumers. We’ve shut down a significant number of websites with this recent joint action, and it gives us momentum in our efforts moving forward.”

The Golf Group, which was formed in 2004, has been engaged in an education campaign instructing consumers on how to spot and avoid fake golf products through its own website, www.keepgolfreal.com. Comprised of five big name golf companies (Callaway-Odyssey and Top-Flite; TaylorMade-adidas Golf and Ashworth; PING; Cleveland Golf, Srixon and Never Compromise; and Acushnet Company whose brands are Titleist, FootJoy and Scotty Cameron) in 2011 seized more than 80,000 counterfeit golf products.

I’ve been accused of being an equipment geek. I’m not totally sure about that but I am interested in modern technology and materials as they are expressed in the engineering and design of clubs.

In other words when you put Vaseline on the face of a driver to inhibit the amount of spin imparted to the ball
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Each year the National Golf Foundation publishes the results from surveying 40,000 people to determine the health of the game. It’s a lot taking a patient’s temperature…not a diagnosis only a sign of the current situation.

Participation continues to be a problem. The data showed 25.7 million Americans (age 6+) played at least one round of golf in 2011 compared to 26.1 million in 2010, a shrinkage of about 400,000 golfers or 1.5%. Put another way, in 2010 9.2% of Americans over the age of 6 played at least one round of golf and in 2011 it was 9.0%

Not a shattering decline but certainly extension of a trend showing there are over 3 million fewer players today than five years ago.

The patient may not be on life support but certainly isn’t up dancing either.

The NGF correctly points out golf is one of the most popular participation sports and that the rate of decline is 25% of what it was two years ago. Quoting from the press release, “We suspect this reduced net outflow is yet another sign that we are bouncing along the bottom of the trough and on the verge of a modest recovery.”

A recovery, modest or not, would certainly be welcome. Here are some other interesting bits from the report.
Of the 25.7 million golfers who played in 2011:
By rounds:
6.8 million Avid golfers (25+ rounds annually and incl. in the Core number below)
14.4 million Core golfers (8+ rounds annually)
11.3 million Occasional golfers (fewer than 8 rounds annually)
By demographic:
2.4 million Junior golfers (age 6-17)
5.1 million adult Female golfers
5.4 million non-Caucasian (incl. Hispanic, African-American and Asian-American)

Adams takes over Adams

Chip Brewer, CEO of Adams Golf (Nasdaq:ADGF), has resigned from to take the position of President and Chief Executive Officer of Callaway Golf (NYSE: ELY), the move to be effective March 5, 2012. Industry icon and Adams Golf founder Barney Adams Chairman of the Board of Directors has become interim CEO of Adams.

On January 4 this year Adams Golf announced the hiring of Morgan Stanley to “review strategic alternatives, may consider among its options a sale or starting a dividend,” according to a company statement. In the event of a sale of the company Brewer’s position as CEO could have been in jeopardy. Just over a year ago Adams purchased Yes! Putter, which was in bankruptcy, and reintroduced a complete line of putters from Yes! at the PGA Merchandise Show in January.

Callaway Golf, which has seen its number one position in the lucrative driver market segment challenged and surpassed by TaylorMade Golf in recent years. Callaway has been searching for a new CEO to replace interim Tony Thornley since July of 2011.

Callaway Golf is also on a short list of possible buyers of Adams Golf, a list that includes TaylorMade Golf parent Adidas AG (NYSE:AG) and Nike Inc. (NYSE:NKE). Barney Adams founded Adams Golf in 1987 which in their last fiscal year had sales of $97 million.

Ed Travis, editor of FrontPageGolf, won two first place awards for writing in the International Network of Golf’s 2011 Media Awards competition. The awards were announced at the award ceremony Jan. 26, 2012 during the PGA Merchandise Show in Orlando, Fla.
Travis took first place in the Equipment Writing Category for an article in New England Golf Monthly entitled “The Best Apps In Golf.” His second winning piece, “Clubmakers Support The Tee It Up Initiative,” was tops in the Business Writing Category and was published in Golf Oklahoma.

The International Network of Golf is a non-profit association with membership representing the golf media plus top golf industry executives and companies.

Just before Christmas PING’s CEO John Solheim made his proposal public calling for the USGA to adopt rules mandating three classes of golf balls – one that would go the same distance as today’s, one 30 yards less and one 30 yards more.

Recreational players presumably would have their choice (does anyone think they will pick the 30 yards less ball?) and tournament organizers could specify which was to be played as a “condition of competition.” In particular the PGA Tour with all those long hitting superstars would use the 30-yards-less-ball in an effort to contain their mighty blows. MORE…

Year two of TEE IT FORWARD

Last year Barney Adams pushed the idea golfers play from tees that are too long for their ability and should move up a set, at least. According to Adams, founder of Adams Golf and golf industry iconoclast, that would mean they could, “…be hitting eight-irons and wedges into par fours like the pros…not fairway woods.”

In other words the 99.99 percent of golfers who do not make their living on the links are playing for recreation and recreation is supposed to be fun. It’s undeniably more fun to play holes of a length you have a chance of reaching with a couple of good shots rather than par-4s that require a driver, then a 3-wood, then a 9-iron and maybe another iron since the 9-iron missed the green.
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Time changes many things but not everything. More than fifty years of love with devotion, from a manufacturer, shows that time does not change the quest for a better idea or a product; in fact, some things just last.

PING calls 1959 an official birthday but those who know understand the birth of great ideas begins long before a venture happens and stay long after its inception.

In 2009, PING celebrated the big five-0. Recalling fifty is easy on one hand and not so easy on the other. A recent warm spring day in PING Chairman and CEO John Solheim’s Phoenix office, surrounded by his support team of Pete Samuels and Dave Engelking, found the conversation stirring and reflective, yet enriching. Looking at fifty through the years, examines PING’s journey, which is quite a ride. MORE…