2001: Business - Cleveland targets $250M in sales by ’06

In the past four years, Cleveland Golf has tripled its revenues. The titan of the wedge category has become a major player in the irons market. Now, Cleveland is climbing its way into the woods market.

Its emergence as a top equipment company has been a remarkable feat considering Cleveland was a small, unprofitable $28 million business in 1997. Even more impressive, that growth was achieved in a flat market where many competitors fizzled out of business.

But for all of his company’s recent success, Cleveland president Greg Hopkins said he needs it to grow more. Hopkins is aware that in the Age of Consolidation, complacency kills.

“It’s more than a widening gap between the haves and the have-nots,” Hopkins said. “Soon, I believe the haves are going to have it all, and the have-nots are not going to exist.”

According to Hopkins, there are at least two prerequisites in becoming a significant survivor: a full arsenal of products and a critical level of sales – in the range of $250 million. And that’s the number he already has promised to deliver to Cleveland’s parent, Rossignol, the French sports equipment company, by 2006.

Talk about a tall order. Hopkins intends to achieve his goal in part through acquisitions; he’s even considering buying into the brutally competitive ball business. Another option: outsourcing ball production to a third party, a la Nike Golf.

“There’s no way to get to that number without it (acquisitions),” said Hopkins, who mentioned footwear and putter companies as other potential targets.

Some industry observers and retailers, however, said Cleveland’s expansion plans could derail the company’s recent success.

“Nobody is having any real success by jumping into the ball business. . . . If consumers didn’t jump at Callaway or TaylorMade balls, I can’t imagine that they would jump at Cleveland’s,” said Randy Morton, general manager of Pro Shop World of Golf in Skokie, Ill., outside of Chicago.

Hopkins, however, has a track record of proving industry observers wrong. He predicted years ago that he would grow Cleveland into a $100 million-a-year company.

“People think we’d be crazy to get into balls, and they’re telling me to stay put,” he said. “But everybody told me just to stay a wedge company, too, and if we had listened to them, we’d be out of business right now.”

Cleveland orchestrated the turnaround without a single blockbuster product. It achieved success by doing many little, yet critically important, things right, according to retailers. For example, they said Cleveland has delivered value by designing high-quality products and pricing them properly. That message has been underscored with consistent, if not flashy, advertising and by a victorious PGA Tour staff that’s frequently on TV.

“In the last couple of years, Cleveland’s been one of the surprise manufacturers,” Morton said. Added Jerry Whalen, manager and hardgoods buyer for Fiddler’s Green Golf Center in Eugene, Ore.: “The company has made the biggest sales gains at our store.”

Everything, of course, begins with products. And Cleveland has done a major overhaul with its lineup. Gone are clunky, purple monstrosities such as VAS+ irons. They’ve been replaced by sleek, classically shaped blades such as the TA1. The already popular TA3 line now is available in a stylish, gunmetal finish. Cleveland also has tapped state-of-the-art foundries in the Far East, capitalizing on that region’s inexpensive labor to price products affordably, while maintaining margins.

“So many golf companies are . . . demanding $700 (steel) and $900 (graphite) for irons,” said Morton. “But I’d say only the upper 10 to 15 percent of the income bracket of the golfing public can afford that. There’s a whole middle-income tier that’s just dying for a big brand to recognize them, and Cleveland’s tapping into them.”

Just as important, Cleveland has been quick to address miscues. When consumers failed to see enough of a distinction between the TA3 and TA4 irons, both for midhandicappers, Cleveland discontinued the latter and replaced it with the game-improvement TA5. As a result, Cleveland has climbed to fifth in unit market share at pro shops and off-course specialty stores.

Cleveland’s success branching out into other categories also can be attributed to its scouting abilities. The company has made timely additions to its PGA Tour staff.

“You can’t watch a tournament these days without seeing a Cleveland visor in the last hour of a telecast,” Morton said. “You can always count on Vijay (Singh) to be up there, and then they’ve got guys like Joe Durant who went on a tear.”

Tour usage is helping the company establish a beachhead in the woods category. Retailers gave Cleveland’s first major woods line, the QuadPro, high marks; the company plans to push into the driver market this summer with the Cleveland Launcher, a $399 club with a 330 cubic centimeter, titanium head.

Still, Hopkins hasn’t neglected his franchise. With new products such as the 900 series, Cleveland has increased its lead as the dominant wedge player, boosting its unit market share in pro shops and off-course specialty shops 20 percent to 34.3 in June from 28.5 percent in June 2000.

Such leadership, a platform for other ventures, gives Hopkins confidence that Cleveland will be among those left standing.

“The window of opportunity opened and closed, and we just got in,” he said.

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