News
TRADE TALK
7/25/2003
Never mind consolidation talk, says Golf Datatech founder “You’d swear there weren’t but three [golf equipment] companies in existence anymore,” says Tom Stine, founder and partner of Kissimmee, Fla. – based research firm Golf Datatech. He, like everyone else in the golf business, hears the talk – the big companies are getting bigger and gaining more control of the market every day. And manufacturers need to be big soon, or they’ll fade away. You could make an argument that last week’s second-quarter numbers reported by both The Acushnet Co. and Callaway Golf lend credence to that point of view. Acushnet, parent of Titleist, Footjoy and Cobra, is on pace to surpass last year’s $1 billion in sales, with $650 million so far this year. Callaway, for its part, reported record six-month profit figures. But Stine says his numbers tell a different story. No one knows better what’s happening at the retail level with golf equipment. Since 1997, Golf Datatech has been publishing sales figures for the major equipment categories at on- and off- course shops, sporting-goods stores and mass merchants. Recently Stine and company sat down and analyzed the data for ’97 through ’02. What they found belies much of the conventional wisdom about industry consolidation. In 1997, golf balls made by the top three companies amounted to 76.2 percent of on- and off-course golf shop sales. In 2002, that number totaled 72.8 percent. In 1997, retail ball sales by the top five companies represented 9.3 percent of the market. By 2002, that number was 87.4 percent. Neither of those figures points to a “rich-getting-richer” scenario, says Stine. [For the full five-year story, see the chart below.] “If [the market] hasn’t consolidated in the past five years, why would it in the future?” asks Stine. He acknowledges that there are categories where there is some consolidation, wedges and footwear chief among them. But he is an admirer of entrepreneurs like Karsten Solheim and Ely Callaway. “If Karsten Solheim had not stood out there tournament after tournament, if he had given up when he ‘should’ have given up, then maybe we wouldn’t have heard of Ping. It’s almost an inherent part of the game, that a little guy has a chance.” Stine believes that nothing is a given in the golf market, like most any other market in the United States. “That’s why they call it gambling,” he jokes. “You never know.” “Five years ago,” Stine says, “Cobra, Adams and Orlimar were the wild cards. Why would anyone have thought that Orlimar would be in the position it is today?” He could easily ask a similar question about Cobra, only in that case, it would be to wonder if anyone outside of Fairhaven, Mass., would have thought that Cobra would come on as strongly as it has over the last year-and-a-half. Stine doesn’t want to sound preachy, but he’s on a roll. “In a time when the industry is not consolidating, [Acushnet] has record numbers. And Callaway had lower sales but record six-month profit. The industry doesn’t have to consolidate for companies to succeed.” He makes a comparison. “I love local diners, neighborhood joints. Why do some stay in business, while others turn over every six months? It’s not the food, but management. It’s the same every day, so you know what to expect.” And it’s this last point that is key, because it focuses on the customer experience and on understanding why some products appeal to golfers and others don’t. “Not every golfer is a potential customer for every golf product,” say Stine, “just like not every person with a drivers’ license is a candidate for every automobile.” And in the end, knowing the difference is more important than controlling a big piece of the equipment market pie. HEALTHY COMPETITION Unit Share for the top five companies, 1997-2002, on- and off-course shops. Category ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 Balls 92.1% 91.5% 89.7% 86.0% 84.0% 87.5% Woods 72.8% 71.5% 68.9% 64.6% 61.9% 57.6% Irons 50.6% 52.1% 47.9% 49.4% 48.2% 45.4% Putters 74.0% 71.7% 62.1% 67.1% 69.0% 69.0% Wedges 48.4% 56.4% 62.2% 67.1% 69.0% 69.0% Footwear 83.4% 86.2% 84.7% 86.5% 89.1% 90.8%
