The Pellucid Perspective - March 2012 - (Page 6)

EQUIPMENT Chip Brewer chosen to write Chapter V of Callaway Golf By Jim Koppenhaver iling equipment manufacturer Callaway Golf recently announced that the search for the next CEO to right the heavily listing ship was over and that Adams Golf CEO Chip Brewer was the best captain to assume the helm. This is concurrent with one of Chip Brewer’s last acts at Adams Golf, which was to announce that Morgan Stanley & Co had been retained to explore “strategic options” aimed at increasing the value of the company. It’s an interesting intersection of two stories connected by one man which will result in two different future corporate trajectories. Callaway’s announcement makes Brewer the 5th CEO to take the helm of Callaway (Ely Callaway (1983-1996), Donald Dye (1996-1998), Ely Callaway (1998-2001), Ron Drapeau (2001-2004), George Fellows (2005-2011)) with only Ely Callaway having demonstrated any sustainable success in strategy, brand positioning, revenue and share expansion. Only time will tell whether this was the ideal succession plan for 2001 only delayed 11 years (as suggested by Golfweek’s James Achenbach recently), and if Chip Brewer’s success formula at Adams can be tweaked and applied to Callaway with similar results over the next 3-5 years. Before diving into the Callaway upside/downside prognostications, let’s first look at the Adams situation that most likely helped make this decision a “Chip shot” (sorry, couldn’t resist inserting that somewhere in this article). Looking at the Adams press release, my sources say it wasn’t even a thinly-veiled For Sale sign hung on the door of Adams Golf in January. Retained was Morgan Stanley which, coincidentally, had recently conducted the due diligence and screening of suitors for the Acushnet sale. Putting 2+2 together, Morgan Stanley has a slate of 10+ unsuccessful bidders for Acushnet. Do we really think that they were retained to “explore strategic options” for Adams Golf that didn’t include the word “sell?” Following that line of thought, my favorite handicapper in these matters, Casey Alexander, thinks that unlike Acushnet, the Adams Golf situation aligns well with and favors what he calls a “strategic buyer.” His rationale is that a strategic buyer has tremendous potential efficiencies in manufacturing and distribution not available to non-golf buyers, which will allow them to justify a higher investment price in the company and its brands. Following that to an even more logical (although not assured) conclusion, the likelihood that Chip Brewer and many other Adams employees will be out of jobs by the end of this calendar year are better than 50/50. It reminds me of the opening scene in the original Pirates of the Caribbean where Captain Jack Sparrow steps out of the crow’s nest of his ship with perfect timing onto the dock as the ship disappears beneath the waterline. Moving on to the Callaway story looking forward, there’s A no doubt that, among the four successors to Ely Callaway, Mr. Brewer has the strongest industry experience and golf participation pedigree coming to the position. Borrowing from the movie Moneyball, his success with Adams Golf over a 14 year tenure would suggest that “he’s a 5-tools guy.” People that I’ve talked to since the announcement refer to his intellect (Harvard on the resume), his persistence and unwavering focus over time as key professional assets he’ll leverage to figure out the current Callaway situation. One of the best quotes I heard was the passive Board of Directors that allowed George Fellows too much rope (and time and money) will actually be a better fit for Mr. Brewer, who has courage of his convictions and isn’t a “ring kisser.” Hopefully the Board won’t awaken from its slumber now and try to exert more influence where it may not be needed in trying to demonstrate that they’re no longer asleep at the switch. My sources also cite the fact that Mr. Brewer is masterful at the distribution game, using it to surgically carve out incremental share points before incumbents realize they’re gone. All of these things should bode well for some of the basic blocking and tackling that have been missing in the current Callaway era under multiple production/cost-focused CEOs. On the potential downsides of Mr. Brewer’s appointment and skill set, several I spoke with cited the relatively new area of international distribution (my latest information shows Callaway’s international contribution near 50% of sales). They also cited that he’ll have to extend his thinking to a key area unrelated to the Adams portfolio, that of Consumables in general and the key Balls subsegment in specific. This is one area where Callaway has struggled mightily and still doesn’t have a clear strategy and path to significant revenue/volume/share/profit success. Finally, it’s my personal belief that the shift to a Big 3 marketing strategy will also require new thinking for Mr. Brewer. I say the Big 3 because, for all intent and purposes, Nike is currently on the sidelines as it relates to consumer marketing; has anyone heard anything from Beaverton in the last two years even remotely related to equipment marketing since Tiger fell from grace? This will be an acute area of interest to me since the opening salvo of the new marketing era for Callaway under Dick Thornley was the appointment of Justin Timberlake as the Creative Director for the company. Really? While I understand and get the star-power and PR that an individual of his stature can summon, I think that Callaway trying to out-PR TaylorMade and/or Acushnet at this particular point in time is not the big win and also plays into the clear momentum of those players vs. exploiting the competition’s marketing vulnerabilities. As one glaring example, none of the Big 3 currently scratches the surface of Customer Relationship Marketing (CRM), March 2012 6 The Pellucid PersPecTive

Table of Contents for the Digital Edition of The Pellucid Perspective - March 2012

The Pellucid Perspective - March 2012
Contents
New twists in Cincinnati muni course taxation situation
Study cites “Best Practices” to generate more female play
Chip Brewer chosen to write Chapter V of Callaway Golf
Knowing your customer and making it work
Golf Industry Show, CMAA Expo to share San Diego venue in 2013
February weather impact: The hits just keep coming!
Cleveland, OH
Southworth Development acquires Willowbend CC from Reebok head Fireman
Show me the money

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