2002: Business - Clubmakers wary about new COR deal

Golf club manufacturers praised the U.S. Golf Association and the Royal & Ancient Golf Club of St. Andrews, Scotland, for their attempt to unify the game’s rules, but many expressed concern that their compromise is short-sighted and could cause more problems than it solves.

Some complained that the new agreement could create an uneven playing field, giving clubmakers that already have “hot drivers” – ie. Callaway – a headstart in reaping sales. Others fretted that a slew of fly-by-night manufacturers eager to capitalize on the COR bandwagon might introduce .860 drivers that not only may not perform, but could undercut sales of drivers by more legitimate industry players.

Manufacturers weren’t the only ones complaining. Retailers worry that the compromise could cause confusion, if not chaos, in the marketplace. They seemed unsure about loading up with high COR drivers, fearful that a short-lived fad would add to their already growing levels of inventory.

Perhaps, more troubling, several industry leaders raised concerns about whether the compromise would indeed be temporary and feared it could lead to a permanent – and potentially harmful – change to the game.

Starting Jan. 1, the compromise allows amateur golfers around the world to use “hot” drivers with a coefficient of restitution of .860. Pros will be limited to a COR of .830 in their drivers. However, in 2008, all players would be required to adopt the .830 limit.

“A more long-term concern is the creation of two sets of rules for elite and recreational players. There is a serious danger of this proposed ‘interim’ rule disparity becoming permanent and removing one of golf’s truly distinguishing features, players at all levels of the game playing on the same courses by the same rules . . .” said Acushent Co. officials in a written statement.

However, for companies such as Callaway Golf – which had battled the USGA to allow “hot drivers” in the U.S. market – the compromise was cause for celebration. In fact, the agreement’s announcement sparked Callaway stock to jump 5 percent May 9.

“This is a banner day for golf,” said Ron Drapeau, Callaway chairman and CEO. And his executive team began mobilizing to aggressively sell its “hot drivers” domestically.

“We now have the opportunity to bring the greatest driver we ever made back to the U.S. market without the issues of nonconformity,” said Callaway’s chief marketing officer Ian Rowden in an interview with Advertising Age. “We’re going to return to fully marketing it with TV, print and broad-based golf-related sales support.”

But Drapeau also issued a promise: “Callaway Golf will not, under my watch, bring another nonconforming golf club to the market.”

Likewise, TaylorMade-Adidas Golf wasted no time in announcing it would sell its R500 series of .860 drivers to U.S. golfers beginning in July or August, even though the five-year .860 period doesn’t start until Jan. 1.

The R500 series originally was designed for areas outside the United States, but TaylorMade president Mark King issued what sounded like a warning about the future of golf.

“We have two versions of our 500 series (one originally earmarked for USGA territory and the other for R&A jurisdiction),” King said. “We anticipated that something at some point would happen, and we are prepared right now to launch the (.860) version. The other version won’t be launched. The companies that will win, I think, are the ones that have the resources – and this is one of our great advantages – to develop products on parallel paths. I’m not sure all of our competitors are ready to go like we are.”

The compromise produced no shortage of opinions:

• Mike Kelly, Nike’s director of golf clubs, criticized the USGA and R&A for a lack of business awareness: “This is going to cause, in our opinion, a lot of confusion to retailers and golfers and even some manufacturers right before we head into the most important three months of the year in terms of selling,” he said. “We’re definitely concerned about the effects in the marketplace. We’re concerned about planning future products.

“The timing is wrong in announcing it. Instead of working toward a common goal, it’s sort of like they said, ‘We’re doing this Jan. 1; everybody adjust.’ It’s not an easy thing.”

• Ping chairman John Solheim agreed: “It really scares me. My biggest fear is that the USGA and the R&A end up controlling the marketplace. This decision changes the entire marketplace for the next five years in favor of those who were already producing nonconforming clubs. (Ping has never sold a nonconforming driver anywhere in the world, and neither has Nike). We’ve been staying within the rules and winning long-drive contests, but now golfers are going to think they need a nonconforming driver – even if it’s not true, or even if that nonconforming driver may not work as well.”

• Dave Boone, chief golf club designer for Zevo Golf: “I’m definitely against it. The No. 1 golf club company in the world (Callaway) just caused a rule to be created. It isn’t fair to consumers, because it is confusing. It isn’t fair to some manufacturers, although I think it will greatly benefit our company (Boone says Zevo’s Compressor driver, with a thicker face, exhibits more stability on off-center hits). There will be some pretty bad .860 drivers out there.”

• Adams Golf founder Barney Adams asked: “Does an already sick equipment industry get a shot of poison as consumers now wait ’til ’03 for the ‘hot’ drivers?”

That’s a question with no clear answer right now – and that troubles retailers.

“I think there is a lot of confusion in the short term on what it means. And what happens after five years?” said Randy Zanatta, president and CEO of retail chain Golf Galaxy. He’s not convinced hot drivers will result in a sales bonanza.

“It’s tough because the ERC II is in a premium price category, and the people who can pay those prices are usually the elite players who may not be able to use the clubs in tournaments.”

Further increasing the competition for consumer dollars, it is likely that some Japanese companies will increase their marketing efforts in the United States because these manufacturers already are selling .860 drivers in Japan. Brands such as Mizuno, Precept, Yonex, Kasco and Srixon are seeking greater visibility in the U.S. golf club market.

Underscoring the uncertainty of the golf market in the future, Dave Glod, founder and CEO of Tour Edge Golf, expressed a different view.

“This (agreement) gives designers more freedom to design drivers to enhance recreational golfers’ ability and enjoyment of the game,” Glod said. “When it comes time to change back to .83, I believe there is potential that the standard may stay at .86.”

The first two companies to sell .860 drivers in the United States were Callaway and Dogleg Right. Dave Billings, chairman and CEO of Dogleg Right, agreed with Glod: “Once golfers get used to this technology and these benefits, they may not be so eager, or even willing, to give them up in 2008.”

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