Getting a Grip on Golf’s $2.6 Billion Equipment Industry

The equipment industry is the sexiest and most commercially visible sector in golf, buoyed by the clubs and balls from big-name brands that are found in millions of golf bags around the country, not to mention the major endorsement deals given to mega-watt professional players.

As such, it shouldn’t come as much of a surprise that almost one-quarter of the businesses in the inaugural NGF GOLF 100 are equipment companies, with 22 spread among the club, shaft, grip and ball segments. This market is a $2.6 billion space, one that has begun to stabilize following the 2008 financial crisis. Major Original Equipment Manufacturers such as Titleist, TaylorMade, Callaway and PING are optimistic about the future of the “right-sized” equipment market, which is defining the new normal.

Based on wholesale equipment dollars, golf is among the largest recreation sports in the United States, trailing only camping and fishing. Equipment is essential when it comes to golf, which is why – even though hard good sales are down from their record highs — more money is spent annually on clubs and balls than on equipment for basketball, baseball and football combined, according to the Sports & Fitness Industry Association’s 2017 Manufacturers’ Sales Report.

(TO SEE THE FULL NGF GOLF 100 LIST, BROKEN DOWN BY CATEGORIES, CLICK HERE)

Equipment companies were front and center, as usual, at the annual PGA Merchandise Show in Orlando, with attention-grabbing booths showcasing their latest innovations.

ORLANDO, FLORIDA – JANUARY 28: Callaway golf clubs during the PGA Merchandise Show in Orlando. (Photo by Chris Trotman/The PGA of America).

The underlying health of the equipment industry manifests itself in a number of quantitative ways. Acushnet, parent of Titleist, and Callaway have both seen their stock prices tick upward in the past year. Callaway’s stock is up more than 30 percent as investors take heart from the company’s robust revenue numbers and strong sales of the Epic line of clubs.

There has undoubtedly been contraction among a number of major OEM players in the hard goods equipment sector, with Nike exiting the hard goods space to focus on apparel and footwear, adidas’ divestiture of TaylorMade to similarly focus on its core business, and DICK’S Sporting Goods’ acquisition of GolfSmith’s assets.

However, such developments have to bear in mind the ramifications of the 2008 financial crisis and the unsustainable level of growth and consumer spending during the Tiger Woods era. There are some very positive signs — golf’s continued international expansion and an encouraging number of new golfers taking up the game — fueling optimism as manufacturers have returned to a more sustainable product cycles.

“From a business perspective, the industry is getting a lot healthier,” says Callaway CEO Chip Brewer. “It’s a lot more rational, healthy environment for equipment companies and our customers now relative than it was a few years ago – longer life cycles and improved innovation, etcetera. The innovations that have been coming have been continuous; the new golf balls we make nowadays, the new technologies, the new approaches to adding distance to drivers, it’s an exciting time. I’m passionate about what we do and that we’re able to continue to add enjoyment.”

Brewer says the game itself is in a much healthier position following the recession.

“It’s hit a new normal now and you’re seeing some real positive signs about the health of the game, which makes all of us feel good about it,” he added.

ORLANDO, FLORIDA – JANUARY 29: Titleist golf clubs at the Titleist booth during the PGA Merchandise Show in Orlando. (Photo by Hailey Garrett/The PGA of America).

Golf clubs make up roughly two-thirds of equipment industry sales, with balls comprising one-third. Not surprisingly, then, manufacturers and suppliers for golf clubs and components feature prominently in the NGF GOLF 100: Acushnet (Titleist), Callaway, Bridgestone, Cleveland/Srixon, Cobra Puma, PING, Tour Edge, Wilson, U.S. Kids Golf, PXG, TaylorMade and Mizuno are all on the list.

David Abeles, CEO of TaylorMade, says continued technological advancements are a necessity, but also notes the growing importance of personalization and customization in the equipment space.

“I’m excited to see the equipment and golf ball business growing again. We continue to see advanced technology help golfers improve their performance, which is priority No. 1 for a business like ours,” Abeles said.

“To continue to see new innovation, new technology drive improved performance is one thing; the other thing is the personalization and the experiences that are being created on our side of the business to golfers – whether it’s through custom fitting or other experiential capabilities on or off course, that’s very exciting,” he added. “It really brings golfers closer to the game, gives them an opportunity to experience the game and their equipment. That can only be good to drive continued growth in the category.”

Online sales, fitting and equipping outlets (such as Club Champion and GOLFTEC), and a robust secondhand market give consumers unprecedented access to equipment. The challenge, of course, in such an environment is to offer equipment that is perceptibly better. The result has been an almost unparalleled amount of innovation from OEMs in recent years, both in terms of technology and consumer engagement.

“The business continually evolves and the way you ran a successful golf equipment company years ago isn’t the same way you do it now,” Brewer said. “It’s similar in terms of the significant investment in R&D and the Tour, but how you reach consumers — the marketing side of it — we have our own content creation, social media, very engaging and very lively in that environment.

“The Links at Petco was a good example at that,” he added, referring to Callaway’s golf events at the San Diego Padres’ stadium. “And then we’ve been a significant investor in Topgolf; it’s a new way to play golf, a new way for consumers to enter the game in a way that’s totally fun, relaxing and not intimidating. It’s a great evolution into a new era of golf.”

Bob Parsons’ PXG entry into the industry may also mark a new era, enticing some OEMs to test the ultra-premium equipment sector.

Additionally, the NGF GOLF 100 features a handful of successful shaft manufacturers: FEMCO (and subsidiary KBS), Fujikura, Mitsubishi-Aldila, Nippon, UST Mamiya and True Temper.

There are seven companies that manufacture golf balls among the NGF GOLF 100: Titleist (via parent Acushnet), Bridgestone, Srixon, Volvik, Callaway, TaylorMade and Wilson. Among these companies, only Volvik does not also manufacture equipment.

Golf Pride (via parent Eaton), Lamkin and Winn represent noteworthy grip manufacturers on the list. After all, the grip is the only part of the club that golfers hold on every shot.

“We may not have the same kind of top of mind brand awareness that Titleist might, but we touch a lot of golfers every year,” said Golf Pride President James Ledford.

Ledford took over at Golf Pride in 2008, right before the economic crisis. Over the past decade, he’s not only experienced the challenges in the equipment side of the golf business first-hand, but seen the stories of positive momentum.

“It’s been a tough few years and if this NGF 100 index can recognize some of those brands and businesses that have not only survived, but hopefully thrived during that period, and we can celebrate some of those wins and successes through challenging times, that’s just outstanding,” Ledford added. “Because I think things are starting to turn and it’s always good to look at the positives. There are some really good businesses out there doing some great things.”