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Saturday, May 18, 2024
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Success is in the Bag

It’s one thing to grow rapidly. Then there’s grabbing market share to the point where you dominate it.

That’s the story of TaylorMade-adidas Golf, now without peer in the worldwide sale of two categories of golf clubs: metalwoods, including drivers and fairway woods, and irons.

About a decade ago, TaylorMade was looking up at its main competitor and Carlsbad neighbor, Callaway Golf, wondering how it was going to overtake Callaway.

It was through a combination of aggressive marketing, fortuitous product innovation, and missteps by Callaway that TaylorMade turned the tables and captured the biggest share of the all-important driver market, says Casey Alexander, director of research at Gilford Securities.

At the time, Callaway was the undisputed leader in metalwoods, but new CEO Mark King decided that had to change. He determined that selling more clubs required having more professional golfers use his company’s equipment. To entice them, the company shelled out about $1,500 a week as long as the golfers used TaylorMade clubs, Alexander said.

‘Going Pro’

It was an expensive and bold move, but one that eventually paid off. Today, TaylorMade has some 400 touring professionals, more than any other club manufacturer, including highly-ranked Justin Rose, Sergio Garcia and Dustin Johnson.

The exposure the touring pros gave TaylorMade was priceless, but so was the company’s relentless focus on innovation, and launching new products. In 2011, the company took a massive gamble in producing a new driver called the R11. The driver had a number of innovations, but the most important was its white head, which the company said it did to cut down the sun’s glare from the traditional black colored head. Whatever the reason, the color caused a major sensation in the industry.

The move prompted loads of critics, including Alexander, who called the club a “white elephant.” Besides the color, the driver allowed golfers to adjust the angle of the club’s face and its balance. Serious golfers had to have the new stick, he said.

“Whenever you see that flash of white when a pro is swinging at a tournament, you know it’s a TaylorMade club, and that helped sales to take off,” Alexander said.

Risk and Reward

A lot of the credit for the key moves should go to King, who has been at the top since 2000, Alexander said.

“You have to give them all the credit for taking the risks they did, and having it pay off,” Alexander said. “If it hadn’t worked out, King would have been fired.”

David Abeles, TaylorMade’s general manager, said over the course of the last three years, the company’s market share in both metalwoods and irons, the clubs most commonly purchased, increased considerably even as the economy and the golf industry declined.

“We’ve seen 50 percent growth in both categories over the last three years in a marketplace that has been flat at best,” Abeles said.

While the subsidiary company of the adidas Group of Germany doesn’t break out its financials, it does reveal sales and last year those increased 20 percent to $1.7 billion, according to a press statement.

In the same report, TaylorMade said its market share in the metalwoods category grew to 47 percent, while its share of the ironwood market rose to 25 percent.

Along with TaylorMade clubs, the company’s other brands are Adams Golf, adidas Golf, and Ashworth, the latter two engaged in the making of golf footwear and apparel.

Customer Connections

Attracting the most dedicated golfers to its brand is an essential ingredient to boosting sales, says Abeles.

The avid and core golfers make up about 8 to 12 million of the total 25 million golfers in this country, but that group accounts for nearly all the money spent, he said.

A third category called recreational golfers, who play far less frequently, don’t purchase new equipment as frequently, Abeles said.

“We have customers who have fallen in love with our technology and our brand that every time we launch a new product they can’t wait to get the next one,” he said.

This year, TaylorMade launched several new products, but none as important as the R1 driver. It contains some of the same features that made the R11 a huge hit, but it’s been tweaked. The latest version’s head is still mainly white, but also has orange and gray on it.

John Krzynowek, partner at Golf Datatech, a Florida-based research firm specializing in the golf industry, said TaylorMade is definitely the market leader in drivers, which he called golf’s “sexiest category.”

“(TaylorMade) now has a pretty wide lead over everybody else,” he said, without providing actual numbers.

The company also has an excellent track record in terms of bringing out innovative new products, and investing a great deal into research and development, but then so do most of its competitors, Krzynowek said.

Already a highly competitive industry, the golf business got much tougher in recent years as the number of players decreased and more golf courses closed, said Alexander.

“There was too much overbuilding of golf facilities and many of them got in trouble,” he said.

Consolidation Efforts

The shrinking pie has resulted in more consolidation. Indeed, TaylorMade acquired both Ashworth and Adams Golf (the latter just last year). “It’s similar to what you see in many other industries, there’s consolidating taking place at the top and there are fewer major brands that dominate,” Krzynowek said. “Everybody’s scratching and looking for whatever sales opportunities that are out there.”

TaylorMade’s longstanding rival Callaway was once the top dog in driver sales, with a commanding market share thanks mainly to its spectacular sales of its industry-changing Big Bertha driver in the 1990s. Yet, after founder Ely Callaway died in 2001, the company seemed to lose something, Krzynowek said.

Abeles took some glee in saying that while Callaway Golf was a viable competitor in the past, “we’re proud of the fact that our company is now twice the size of theirs.”

Alexander said Callaway lost its footing after its founder died and made some key mistakes in both marketing and investing in certain products. The reversal of fortunes is quite apparent these days, he said.

“For a long time, Callaway was the dominant guy in town and everyone knew it. Now TaylorMade is the dominant guy in town and is letting everyone know it,” he said. “It’s a less-than-friendly rivalry and each of them would like to stick it in the other one’s ear.”

Despite being owned by the much larger adidas, Abeles says the relationship has worked well since the acquisition in 1998.

The global sports gear giant can leverage its considerable buying power that often benefits TaylorMade vendor agreements. Components for the clubs are made in China and Taiwan, while the clubs are assembled here, Abeles said.

“In the mid-1990s most of our manufacturing shifted to Asia, and that’s an industry standard,” he said. “But we’ve made a decision to keep assembly here in Carlsbad.”

Of the firm’s local workforce of 900, about 400 to 600 are involved in assembly of clubs. TaylorMade has a global staff of about 1,900 with offices in the United Kingdom, Canada, Hong Kong, Japan, and Panama.

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