The Pellucid Perspective - October 2016 - 6


GOLF
EQUIPMENT

The only fly in the ointment in this theory is that these guys
don't like to waste their time and energy on small endeavors and
things that can't produce significant returns. That said, there's
a company up in Canada called GolfNorth that's applying this
model to course ownership so it's not that far-fetched for our
little corner of the world.
In this new corporate environment, we would likely see immediate challenges to many of the current practices in the golf
equipment manufacturing world and the relationships with retailers and green grass shops. Meticulous process is in this type
of acquirer's DNA and things like the pyramid of influence, the

6 THE PELLUCID PERSPECTIVE

number of new products introduced annually and the precision
of metrics and scorecards accompanying those launches would be
scrutinized and refined or eliminated. Decisions on how many
and which green grass outlets should be supported would be reduced to metrics of volume, profit and "cost-to-serve" as would
stand-alone retailers. Those who couldn't be efficiently serviced
would be dropped and they'd never look back. From my observations, what they're experiencing in Consumer Goods is that about
half of their challenges to the status quo are at least directionally
correct and they tweak those to stop the bleeding when they cut
too deep. Interestingly, the other half that they challenge turn out
to be non value-added and never missed
(and they get to keep all those savings).
The other effect this has had in the
non-golf industries I've observed is that
it forces the direct competitors to the acquired company to relook at everything
they're doing so as to not be at a competitive disadvantage from a cost and
profitability perspective. Companies
like Kimberly-Clark, Mondelez and
ConAgra, etc. (all $10B annual sales and
50+ years legacy) are looking over their
shoulder daily and putting their current
practices under a microscope lest they
become "3G'd" (one of the firms particularly adept at this and active in the Consumer Goods space). To be clear, I'm not
saying this is necessarily the way that the
TaylorMade story is going to play out.
What I am suggesting however is that I
think there's a better than 50/50 chance
that the transaction will be something
unique and will bring with it some form
of disruption in the golf equipment sector and business model beyond the passing of the brand baton from one company to another which will execute only
a modestly different business plan.
When you add up the fact that we're
going to come out of '16 with some
pretty ugly equipment sales numbers
(but there are some underlying share
gain stories so everyone is not suffering
uniformly), Nike out of the picture as it
relates to star-power and some share-ofvoice lost in selling equipment overall,
financially-stretched big box retailers
and the fate of the share and volume
leader in drivers swinging in the wind,
something new, different and unexpected is bound to emerge. Whether that
turns out to be a net "good" or "bad" will
remain to be seen; the only thing that
I feel I can say with relative certainty is
that it won't be a "return to normalcy." n
OCTOBER 2016
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Table of Contents for the Digital Edition of The Pellucid Perspective - October 2016
