2004: Cleveland ascends leaderboard

Every TV set tuned to the 2003 PGA Championship flashed the same image: Shaun Micheel, Chad Campbell and Timothy Clark dueling down the stretch. Cleveland Golf staff players finishing 1, 2, 3.

It was the highlight of highlights for Cleveland, but in the big picture, it was more priceless TV exposure during a year when the company’s players seemed permanently plastered on the tube.

Not once, but twice last year, PGA Tour events featured playoffs between Cleveland staffers: Jonathan Kaye vs. John Rollins, and Steve Flesch vs. Bob Estes. And displaying the company cap nearly every week were Cleveland’s big guns, Vijay Singh and David Toms. Singh notched four of the company’s 10 PGA Tour victories while capturing the money title.

The Cypress, Calif.-based clubmaker rarely gets mentioned in the same breath as heavyweights Acushnet, Callaway, TaylorMade-Adidas and Nike Golf. But the truth is, Cleveland is becoming a major player – and not just on TV.

Though a perennial power in the wedge category, Cleveland was a money-losing $28 million company in 1997. That’s when Greg Hopkins, a former TaylorMade sales executive, stepped in as president and began the company’s expansionist ways. By leveraging Cleveland’s status as the No. 1 wedge brand and creating Tour-quality clubs that were a notch less expensive than the mega-brands, Hopkins drove Cleveland into the irons and metalwoods markets – where it barely had a presence.

Now, Cleveland is profitable, exceeds $100 million in sales, ranks fourth in market share in irons and woods, and still holds the top spot in wedges, according to November sales tracked by research firm Golf Datatech LLC. And with its recent acquisition of putter company Never Compromise, Cleveland seems poised to wedge its way into another category, taking, perhaps, another step toward joining the Big Four.

But will Cleveland’s ambitious chase catch the leaders – or cause it to tumble?

“There’s no question they’ve separated themselves from the second pack,” says Ken Morton Jr.,

director of retail at Haggin Oaks Super Store in Sacramento, Calif. “And they’re in better position to make it happen because of Rossignol, but they still need a lot of stars to align.”

Indeed, even with the support of Skis Rossignol, its $500 million French parent company, Cleveland’s road ahead is bound to become more difficult. In a flat or declining market, new sales can only be had by stealing share, and the Big Four will be reluctant to cede any more. In fact, Callaway is striking back by introducing new products at multiple price points – to deter Cleveland and others from undercutting its premium sales. The re-emergence of Cobra and discounting tied to hastening product cycles also will challenge Cleveland’s pricing strategy.

“They had it all to themselves for a while, but it’s a lot more crowded now,” says Pete Line, general manager of Carl’s Golfland in Bloomfield Hills, Mich. “We’re selling Callaway’s new Big Bertha titanium driver for $240, Cobra clubs are $299, and you have TaylorMade’s R580 selling for $250. That’s all in Cleveland’s range.”

Achieving Cleveland’s self-imposed sales goal of $250 million by the end of 2006 won’t be a simple task. Industry observers say such a target cannot be reached without Cleveland stretching into

additional categories. But forays into balls and footwear – which Cleveland is considering – will be daunting.

“Look at TaylorMade. They’re a more

prominent brand, but couldn’t make it on their own in the ball category and had to buy Maxfli,” Morton says.

More acquisitions or partnerships seem likely for Cleveland, but such deals don’t guarantee growth.

Yet Hopkins – who seems to ignore naysayers and relishes operating outside the equipment industry’s incestuous capital of Carlsbad, Calif. – insists ample opportunities lie before him.

The first, he says, is Never Compromise.

Entering the putter business at a time when Odyssey, fueled by the phenomenal success of its 2-Ball putter, is dominating the category with nearly a 40 percent share, seems, at first glance, to make little sense. Hopkins sees things differently.

“It’s a vulnerable market,” he says. “When a brand gets so big, it gets difficult to protect all of its market share. And we think there are other brands that are pigeon-holed on the very expensive side, and some other competitors are aging and losing momentum.”

Which, according to Hopkins, means there is room for an up-and-coming putter brand, aimed at serious players seeking better prices. In other words, Never Compromise.

“It’s a perfect fit for us,” he says.

In its quest for growth, Cleveland likely will not stray from what has proven to be a winning

formula. Aside from its pricing strategy, Cleveland has prospered from steady leadership, an obsession with product design and shape, and Tour exposure.

The latter, obviously, is Cleveland’s most visible success – and it is the result of a dedicated effort to build a formidable Tour staff. In 1997, Cleveland had just one staff member, Andrew Magee. Today, it has under contract 35 players – all of whom are required to play, at minimum, the company’s irons and wedges.

But more impressive is Cleveland’s ability seemingly to find relatively unknown players who blossom into stars after joining the company’s staff. For example, Micheel, Campbell, Kaye, Rollins and Flesch are among staff players who notched their first PGA Tour victories after teaming with Cleveland.

“We help our players discover their needs, and we work closely with all our players, not just the big-name stars,” says Cleveland vice president Randy Romberg. “I’m sure every company will tell you the same thing, but we’re clearly doing it better. You want proof? Look at all our first-time winners.”

Romberg refused to discuss the company’s scouting methods, but said Cleveland has 10 tour representatives servicing the PGA, Nationwide, LPGA and Champions Tour. A special emphasis is placed on the Nationwide, which is handled primarily by John Flannery, a former PGA Tour player.

And as corny as it sounds, Cleveland officials insist they’ve cultivated a sense of family among staff members, diminishing defections at a time when lucrative deals often tempt players to switch allegiances.

“For an additional $400,000 or $500,000, it’s not worth it for some of our players who have reached a certain stage in their careers to trade in the service and the equipment they’re getting from us,” says Cleveland’s Tour chief Rodney MacDonald, citing the company’s success in renewing contracts with Jerry Kelly this year, and with Toms and Singh in 2003.

But, ultimately, any company’s success comes back to its products – and consumer acceptance of them. Cleveland officials and retailers agree that the company is winning more of them with its combination of fair price, performance and aesthetic appeal. Cleveland has aggressively used foundries in China to contain clubhead costs, added to its R&D staff and integrated shaping into every phase of product development.

Unlike some manufacturers that rely heavily on a principal designer, Cleveland seeks input from its product marketers, R&D staff, tour players and tour representatives.

“We design by committee,” Romberg says. “Some people say that gets you nothing but vanilla, but it works for us.”

Operating in its own unique way seems to suit Cleveland just fine. And it appears the company will either catch the Big Four or fall short sticking to its guns.

“I know the formula that makes Cleveland Golf tick,” Hopkins says. “And there’s no reason to deviate from it.”

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