2002: Uihlein: Addressing golf’s challenges

As chairman and chief executive officer of the Acushnet Co. – manufacturer of Titleist, FootJoy and Cobra products – Wally Uihlein is one of golf’s most thoughtful observers, which makes the 53-year-old executive a compelling subject in these turbulent times.

Golfweek senior writer John Steinbreder recently talked with Uihlein at the company’s Fairhaven, Mass., headquarters to get his thoughts on a wide range of issues, beginning with the proposed COR compromise between the U.S. Golf Association and the Royal & Ancient Golf Club of St. Andrews, Scotland, and continuing through the brutal price wars in hard goods and what some industry watchers believe is a dearth of leadership.

Golfweek: Why does an enterprise as large as the U.S. golf industry seem to have such difficulty mobilizing any kind of unified action to address issues such as absence of growth and the aging of participants?

WALLY UIHLEIN: Is there leadership in golf, or is there a leadership vacuum? I happen to think there is leadership, but it is important to understand the leadership makeup today compared to what it was 15 or 25 years ago. If you go back that far, you’ll find you had the same usual suspects. You had the equipment companies; the institutional forces such the USGA, the PGA Tour and the PGA of America; the channels of distribution; and the media. And not much has changed from a perspective of who’s who. But it really was a fractured fairy tale, a tribal situation of one-man/one-half-vote, and 30 or 50 or 70 or 90 disparate parties in the business, with no one party having enough power and influence to really emerge from the pack.

Then there was an evolution, or revolution, of how golf was going to be marketed, and how broad a reach it was going to have, largely due to the efforts of the PGA Tour under Deane Beman and the USGA under Sandy Tatum in making it more of a spectators’ sport through television. Golf became a balance between a participation and a spectator sport, and subsequently, TV rights became more important. And subsequently, those who had TV rights watched their balance sheets get augmented, all of which resulted in a power concentration in golf, with that concentration going to the guys who held those TV rights and took in all the money.

Now, if there has been a change in the leadership landscape, the next question is, how are those guys carrying out their leadership responsibilities? I think (PGA Tour commissioner) Tim Finchem has done a pretty good job. World Golf Foundation, 20/20 and First Tee are representative of a guy and an organization that are trying. They understand their role as golf’s Chamber of Commerce. They have also taken some initiatives and are willing to put their money where their mouths are and address the demand gap that is one of the industry’s challenges. And I think Finchem and the Tour deserve some credit for trying to go forward and mobilize the forces that have historically been fractured.

In this industry, you are often dealing with tribes that have long-standing warring relations, and we are not just talking Acushnet and Spalding. Consider, for example, the PGA of America and the PGA Tour back in the late 1960s. If anything, we have gone from a League of Nations mentality over the years to one today more like the United Nations, where some factors and forces do represent a kind of Security Council, and the rest of us just have to understand that’s what has happened to the landscape of our industry and where power is concentrated today. And we have a concentration of power among these institutional forces, who have a lot more mojo than before.

Golfweek: What can be done to get manufacturers involved with more of the regulatory decision-making processes, especially with regard to something like COR?

WU: I think the spring-like effect resolution, and the resulting compromise, came a lot from pressure from the PGA Tour, with the players saying that the USGA and the R&A had to bring this issue to a head. The touring pros felt everyone should be playing by the same rules, and at that Augusta meeting, the organizations were pushed to get things resolved, especially with so many events now having their qualifications based on world rankings.

Relative to the larger issue of regulatory body and manufacturer relations, once again I need to put things into historical perspective. In my 26 years at Acushnet, those relations have ranged from the chilly to the cooperative. There was a period when Frank Hannigan was the executive director and Frank Thomas the technical director, and our relations were very good. In fact, they probably could not have been better. Hannigan and Thomas worked at interfacing with the manufacturers and discussing the topical issues of the day. They tried to get their input in advance of decisions and contemplations being made and considered by the USGA. So there has been past evidence and precedence of good working relations. But what happened along the way, and what was certainly the first tear in the fabric, was the Ping boxed (square) groove debacle, which never should have occurred. Action was levied against a product that had the most momentum in the marketplace, and there was no attempt to work it out beforehand.

Since then, there has been a different relationship. While there was not necessarily an activist mindset from the regulatory bodies coming out of that time, things were better. But what you had coming after the Reg Murphy and Judy Bell eras was the arrival of an activist mindset and this idea that the horse had left the barn. People like Frank Thomas kind of became personae non gratae. They were considered the guys who lost Red China, and it suddenly seemed that there was no way those guys in manufacturing could ever share the USGA’s concern and care for the game. The association felt that was their license exclusively, and they decided to adopt more of a strident tone. Relations got very formal, and that is the situation we have today. I certainly think the front end of that era was the 1998 spring-like effect experience, and the low point in history was the town hall meeting in Far Hills, N.J., which was Kafka-esque.

Actually, it was a joke. Manufacturers make a presentation with no opportunity to rebut or interface with those making decisions at the time, and that led to a protocol, which to this day is a moving target.

Golfweek: Is there anything the manufacturers can do to unite themselves, say, in the form of an industry

association?

WU: There are serious discussions afoot, and we are working with counsel of various equipment companies to resurrect an industry association. Every other industry in this country is capable of having and supporting an association to represent itself, especially industries that have to deal with regulatory bodies. There are serious discussions afoot and I would expect those to come to fruition in the next 12 to 24 months.

Golfweek: What has been the impact of the USGA/R&A proposal on COR on your driver sales?

WU: It has had an impact on the market. Golf Datatech numbers show that average prices in retail from 2002 vs. 2001 are down 10-15 percent. The evidence shows that retail prices are down, that margins are being depressed, and one can only conclude that confusion from the May 9 announcement on the COR compromise has contributed to that.

Golfweek: You mention depressed prices. What has been going on in that area?

WU: Let’s not forget, golf is a discretionary income industry. Where goeth discretionary income spending, there goeth the golf industry, and from the fourth quarter 2000, the U.S. economy has been headed south.

We have also had a contraction of discretionary spending, and when you couple that with new entries in just about every category, the tremendous manufacturing capacity out there, and then throw in the regulatory confusion in a product category like drivers, and that sort of tells the story of how everyone is doing and where things have been going. Every day, companies announce they are pulling out of different categories. There are very few encouraging signs.

Golfweek: What is the future of Acushnet? There has been talk in the past of a spin-off from its parent company, Fortune Brands, or even of a buyout.

WU: Clearly, Acushnet could not have achieved what it has the past couple of years were it not for the Fortune Brands relationship. For example, we spent $75 million to retrofit and upgrade our facilities to support our urethane ball capacity, and while that was something we could have done on our own, it was certainly easier doing as part of Fortune Brands. The fact is, we have had excellent support from the parent company during this transition time. And we think that in the context of a company that has four separate and distinct businesses, as is the case with Fortune Brands, we’ve benefited when some of the other businesses there have done well and relieved us a bit of financial contribution and expectation. That’s after a lot of years of kicking in more than anybody else might have kicked in on a compounded annual growth basis. So right now, it’s working out pretty well. And I am mature enough to step back and say that a lot of things we’ve done would not have been possible without the support of our parent.



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