Nike Inc.’s loss of the golf-club business may be Callaway Golf Co.’s gain.
Callaway Chief Executive Officer Chip Brewer, who runs the largest golf-equipment maker in the U.S., said his company expects to approach Nike-sponsored athletes as well as the country-club pros who recommend its gear to amateur players. Nike said last month it would stop selling golf clubs, balls and bags while continuing to offer footwear and apparel for the sport.
“We will entertain some new sponsorship positions,” Brewer said in an interview. “We’re excited about that opportunity, but we will be selective.”
Among the stars using Nike clubs are Rory McIlroy, Michelle Wie and Tiger Woods, whose talent helped bring golf to new heights of popularity in the late 1990s and early 2000s. Brewer declined to comment on which athletes the company would target. He noted that one of the players it already sponsors, 26-year-old Patrick Reed, has given Callaway more exposure on the PGA Tour.
Nike’s decision to drop golf came at a critical juncture for the sport. The number of U.S. golfers fell to 24.1 million in 2015 from a peak of 30.6 million in 2003. Golfsmith International, the retailer of golf clothing and equipment, is considering filing for bankruptcy as it looks for a new owner, according to people with knowledge of the situation. And Adidas AG said in May that it was starting talks with potential buyers for the bulk of its golf unit, TaylorMade.
Stable Growth
Brewer, 52, says the golf business offers stable growth and that Nike’s exit is an opportunity to increase his company’s market share. This week, Callaway, which makes the Big Bertha driver, announced that it’s buying Toulon Design, a California-based maker of premium putters. It also plans to boost spending on marketing as well as research and development. The company spends more than $30 million a year on R&D, he said.
“Golf equipment is hard, and it’s difficult to do really well,” Brewer said. “It takes a lot of commitment and focus.”
After slashing 12 percent of its workforce in 2012 as part of a restructuring, Carlsbad, California-based Callaway has turned from a money-losing business into a company that made a profit of $14.6 million last year. The stock has also doubled in the past four years as Callaway focused on its core namesake and Odyssey brands.
For a QuickTake explainer on the decline of golf, click here
Brewer said there’s little chance Callaway would be interested in TaylorMade, which has 19.6 percent of U.S. market share in golf equipment after Callaway’s 25 percent, according to Golf Datatech.
“It’s unlikely that that would make sense at this point,” he said. “There would probably be some antitrust things to work through, but as a public company we will always look at all options.”
Callaway also plans to expand into new categories after forming a joint venture this year to make and sell branded clothes and footwear in Japan, Brewer said, declining to disclose details.
Missing Millennials
One of the major concerns the golf industry is facing is a participation rate that’s dropped 30 percent over the past two decades as millennials shun the expensive and time-consuming game. In the U.K., where modern golf originated, the average age of once-a-week players jumped to 63 in 2014 from 48 in 2009.
Callaway’s average customer is in his or her mid-to-late 40s, Brewer said. The reason golf doesn’t attract more millennials, he said, is because they have lower spending power, heavy debt and trouble finding jobs.
The company is trying to boost participation among younger players by partnering with Dude Perfect, a popular YouTube-based sports entertainment group, and investing in Topgolf, a golf-restaurant-entertainment company with locations in the U.S. and U.K. He said young golfers like Reed are also helping to drive interest in the sport among young people.
“Golf is not going anywhere,” Brewer said. “It’s never going to be for everybody. But the energy around the sport now I believe will be appealing to millennials, and will continue to grow.”
This article was provided by Bloomberg News.
