2002: Business - Drapeau: Clubmakers ‘tricked’

La Jolla, Calif.

Ron Drapeau, chairman and CEO of Callaway Golf Co., is known for speaking his mind. At the Callaway Partnership Event, an annual gathering for the company’s top retail partners, he did just that.

In a wide-ranging address Oct. 22, he abandoned his promise not to sell a new nonconforming driver in territories governed by the U.S. Golf Association, saying the ruling body had “tricked” equipment manufacturers. He insisted COR confusion still was plaguing some professional tours around the world. And he issued a dire warning about how plunging retail prices could hurt the long-term health of the golf industry.

Most notable, however, were Drapeau’s comments retracting a pledge never to sell nonconforming drivers again in USGA markets.

In May, when the USGA and Royal & Ancient Golf Club of St. Andrews, Scotland, appeared to be heading toward a compromise that would allow use of high-COR drivers for a five-year period ending in 2008, he said, “I like the solution, and Callaway Golf will not, under my watch, bring another nonconforming golf club to the market.” Even after the USGA reversed its position and decided to continue a ban on such clubs, Drapeau remained steadfast. He said then, “We will stick to our word.”

That’s no longer the case. The recent debut of the Great Big Bertha II family of drivers includes the GBB II+, a nonconforming driver with a coefficient of restitution approaching .860 (the USGA limit is .830). It’s being sold in the United States, Mexico and Canada – the three countries that are enforcing the .830 limit for competitive and handicap purposes.

“Quite frankly, if you look at it now, we were tricked (by the USGA),” Drapeau told his audience. He went on to refer to “embarrassing situations with the products you sold . . . ours and TaylorMade’s.” (Callaway’s competitor already had begun advertising its high-COR R500 driver in anticipation of USGA approval and was blindsided when the ruling body altered its proposal.)

Callaway, however, will not actively market the GBB II+.

“We are not going to do any advertising, any promotion, any media around GBB II+ in the North American market,” he said. The company decided to sell the driver through existing channels to minimize “gray market sales.”

“Consumers are going to buy it anyway,” Drapeau said. “That’s the same problem we had with the (nonconforming) ERC II. They were buying it over the Internet, paying $1,500 to $2,000.” The GBB II+ and its conforming sister model are expected to sell at retail for $399.

Drapeau’s comments made it clear that Callaway’s misgivings about the USGA persist.

“The complaint we still have with the USGA, and I must say that it falls on deaf ears, is that we were asked to comment on one set of conditions, and another set was implemented without a comment period,” he said. “I talked with (USGA president) Reed Mackenzie at the PGA Champ-ionship, just to get a sense of what happened, because I thought he was really focused on getting a compromise and looking at data and hard information. I really didn’t get much satisfaction.”

Furthermore, Drapeau noted that some professional tours were not rushing to embrace the .830 standard as they were expected to do. The Japan Golf Association “has taken a position that they are not going to implement .830 until a couple of things happen, notably until there is not only a nonconforming list (of drivers), but also a conforming list,” he said. “We all know there are products out there with a blank soleplate that have never been sent to the USGA, and that’s just not right. There needs to be a test for all drivers.”

The PGA European Tour also has not yet endorsed .830, but it is expected to do so soon.

“We run co-sanctioned events with the Australian, South African and Asian tours, and there is no way we could enforce a rule on drivers in those events if those tours had a different policy on drivers,” said David Garland, European Tour’s director of tour operations. “We are pretty sure that the Australian and South African tours will fall into line on drivers. We’re not too sure right now on Asia as they are so close to Japan and that’s where most of the funnier drivers, if you like, come from. If the other tours did not decide to adopt the same policy on drivers, then we would simply wait and start the policy in Dubai.”

Last month, the British Open announced it, too, would impose the .830 driver standard.

These setbacks aside, Drapeau discussed another crucial issue: falling retail prices. He said Callaway will exercise pricing discipline rather than seek immediate sales gains and cautioned retailers about accepting tempting discounts from other manufacturers.

“If we (the golf industry) continue to behave the way we did this year, we will wreck the game,” Drapeau said. “We have responsibilities. We will take less quantity, if required, in order to stabilize market prices and margins – for you and for us. We are not going to change or abandon our NPIP (New Product Introduction Policy). It has weeded out the people who want to compete (sell at deep discounts) on price.

“When somebody offers the deal of the month . . . you’re going to have a decision to make. Depending on how much you support them, it will have a lot to do with what happens in the industry.”

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