The Pellucid Perspective - February 2015 - (Page 4)

golf equipment SAleS Whither golf equipment in 2015: Up, down or sideways? By Jim Koppenhaver H ere's a news flash for our readers: in 2014 the golf consumer equipment industry sector recorded its largest drop since 2009. Observant readers will also note that the '09 drop was in the wake of the '08 second half financial meltdown, while the '14 hit doesn't seem to coincide with any similar macro-economic Armageddon. The NGF's traditional approach to explaining away a bad current year, to look at the composite of the recent and previous years, doesn't work here either as the '13 figure was -2% so we're in aggregate -5% now for the '13-'14 period. (Side note, that did work however for the '13-'12 period where '12 was up 8% so it bought them at least one year of not having to explain the 2% decline). Others cite "inventory imbalance" as the reason for the poor year, but that begs the question of "when did we get the plus of the inventory load if it wasn't '13?" All this is to say that the question in the headline is a valid one and of critical import for this minority revenue contributing, but important, industry sector. We've now had the benefit of seeing the "preview" of the '15 product lineups and marketing campaigns from the major manufacturers via the PGA Merchandise Show. I'd highly recommend Casey Alexander's commentary on that regarding what toys and technical specs seemed to impress as it relates to the avid, competitive golfer combined with the dual perspective of an industry analyst and veteran observer. (Write him to request if you're interested, casey.alexander@gilfordsecurities.com). One of his interesting observations this year was the evolution of the concentration of power into what he calls "The Big 4.5." In his view, the key players which will shape the equipment segment's future are those with global presence/distribution and leading share positions: Acushnet (Fila Golf ), TaylorMade-adidas Golf (TMaG), Callaway, PING and Nike. (They're the 0.5; you'll have to read his article to get the distinction, but I concur with him wholeheartedly on the fractional rationale). The inclusion of PING was interesting to me in that I had never really considered them, by size, to be in the upper echelon of manufacturers but I can say that they currently have significant "buzz" within the industry as a company that hasn't succumbed to the "throw stuff against the wall to see what sticks" product development and distribution game, which has won them increasing admiration and loyalty among the green-grassers out there. Add to the mix that, among the Big 4.5, we have a relatively new CEO at Callaway (Chip Brewer) and new CEOs at TMaG (Ben Sharpe) and Nike (Daric Ashford). On that topic, PGA Magazine ran an interview with Ben Sharpe in their most current issue (http://www.pgamagazinedigital.com/i/452951/110) and a website that I periodically follow, Golf WRX, recently ran a "no-holds-barred" (tongue planted firmly in cheek, there 4 The Pellucid PersPecTive were lots of holds barred in my opinion) interview with Chip Brewer that you might want to check out as well (http://www. golfwrx.com/250371/unfiltered-a-qa-with-callaway-ceochip-brewer/). So, will we get the "nice" or "naughty" golf equipment sector in 2015? Based on my observations at the PGA Merchandise Show and conversations with a number of fellow attendees whose professional opinions I respect, it appears that early indicators are pointing in the "nice" direction. To be clear, that's not to say I'm predicting positive results for the sector in '15, but it seems that more rational thinking is prevailing and we'll limit the instances and number of participants in recent history guilty of shooting ourselves in the collective foot both with retailers and golf consumers. For starters, there was very little "over the top" marketing of some revolutionary technology that would supposedly "solve world hunger" for the average golfer. I didn't see any of the "two clubs longer" or "straighter drives, guaranteed" hyperbole that in the past permeated the various equipment manufacturers' booths. I did however get a chuckle out of the centerpiece banner of the Callaway booth quoting Phil Mickelson saying something about the new Chrome ball along the lines of "This is a better ball, deal with it." Really? Follow that with this type of logic and you'll know that we haven't yet completely departed from the world of basically selling hope: "Phil kind of jumpstarted all this attention for Chrome Soft, but it wasn't planned that way," said Dave Bartels, Callaway's senior director of golf ball research and development. "He just started testing the ball on his own, and he was blown away by it. The lesson here is that the ball can appeal to all golfers, not just those with slower swing speeds." In the Winter 2015 issue of LINKS magazine, an article titled Magic Act outlines the challenges on the breakthrough technology side for manufacturers going forward thus: "Golf club companies are shackled more tightly than Harry Houdini wearing a chain-wrapped straightjacket in a trunk full of water." Chris Voshall of Mizuno goes on to elaborate, "We're locked in terms of head size, we're locked in terms of MOI, we're locked in terms of COR. So we have to look at other ways to help the golfer while still staying within those rules." That sounds to me like the game may be shifting from groundbreaking technology and PGA TOUR endorsement to having similar technology while being a better marketer and managing the distribution and pricing of your product more intelligently and efficiently. As Casey Alexander points out in one of his post-show reviews, that revival appears to be starting with TMaG, and other manufacturers are applauding (in anticipation I might add) their newfound "religion." TMaG CEO Ben Sharpe also foreshadows in the PGA February 2015 http://www.golfwrx.com/250371/unfiltered-a-qa-with-callaway-ceo-chip-brewer/ http://www.golfwrx.com/250371/unfiltered-a-qa-with-callaway-ceo-chip-brewer/ http://www.golfwrx.com/250371/unfiltered-a-qa-with-callaway-ceo-chip-brewer/ http://www.pgamagazinedigital.com/i/452951/110

Table of Contents for the Digital Edition of The Pellucid Perspective - February 2015

TOC
Oro Valley has ‘golden’ opportunity with El Conquistador purchase
Whither golf equipment in 2015: Up, down or sideways?
Notes from 35,000 feet
USGA annual meeting: Nothing earth-shattering
Rival FootGolf groups state their cases
Golf and public policy find common ground
No time to play? Trilogy at Ocala Preserve offers a unique solution
January golf weather impact: Off to a good start relative to ’14
Like oil prices, Houston market hard to figure
Tough week for sports legends

The Pellucid Perspective - February 2015