2002: Business - Interest high on Hogan Apex Tour ball

By JOHN STEINBREDER

It is no surprise that people at Spalding Golf are excited about their latest introduction – the Hogan Apex Tour.

But what about retailers who have to sell the four-piece, urethane-covered ball? And will consumers cotton to this premium product, which began shipping July 1?

There is speculation that the Apex Tour will go a long way toward reversing what have been difficult times for Spalding and help in building Hogan into a $200 million company, which is what Spalding CEO Jim Craigie hopes. But do industry observers truly believe both results can – and will – occur?

The early consensus is that the new ball will indeed create something of a stir.

“I’m excited about it, especially if it performs as well as touted,” said John Clouse, divisional merchandise manager for hard lines at Golf Galaxy, the Minnesota-based retail chain. “And a good golf ball will get our customers excited as well.”

Craig Stumpf, general manager for the Sun Golf stores in Jacksonville, Fla., feels much the same way.

“I think this will definitely generate some interest,” he said. “Positioning the ball as a Hogan product makes sense, because the name still means something to golfers. Plus, the company is putting us all on allocation, and that – combined with the hype surrounding the introduction – should certainly spike demand in the beginning.”

Pros who have played the ball, including several who are not under contract to Spalding, say it gives them distance and soft feel. But it is hard to predict whether the performance will be significant enough to prompt players to switch in droves, as happened when Titleist rolled out Pro V1 in fall 2000.

That’s partly because most pro and amateur players have already discovered the virtues of solid-core, multilayer technology. They are not only using that type of ball, but already have developed some loyalty to a particular brand. Getting them to change to Hogan may take some doing, no matter how well it performs.

There also is the fact that Pro V1 had much more extensive Tour use at its launch, which gave it a definite marketing edge. Consider, for example, that 47 players switched to Pro V1 the first tournament it was put in play, and it is now the dominant ball on Tour.

As for Hogan, only a handful of pros to date have decided to use it – though one of them, Len Mattiace, won the FedEx St. Jude Classic June 30 with the ball. In addition, Mattiace and Jim Furyk won tournaments this year with a prototype of the product, the Tour Ultimate G.

Retailers predict that Apex Tour will have an impact on the Strata line, which long has been Spalding’s premium offering.

“Spalding is making Hogan the ball for the better player, and that means Strata will fall somewhere between that and Top-Flite,” said Kerry Kabase, sales director for Edwin Watts Golf Shops. “If that’s the case, we’ll probably see fewer offerings from Strata, which I think is a good thing. That line is a little confusing because it has so many different versions, and this will give the company a good reason to cut back.”

Added Steve Friedlander, a member of Spalding’s professional advisory board and the general manager and director of golf for the Whistling Straits and Blackwolf Run courses in Kohler, Wis.: “I think the Hogan ball will do well, but it will take market share away from some brands, and I am afraid one of those brands will be Strata.”

Craigie believes Apex Tour will help Hogan become a $200 million business within the next three to five years, which is nearly half of what the entire Spalding company did for 2000. That would be a remarkable feat for a subsidiary that produces roughly $50 million in annual revenues.

No matter how good the ball is, it is not going to be easy thriving in a brutally competitive segment that does not have a lot of room for growth, especially in the premium sector, which only makes up between 15 percent and 20 percent of unit sales.

“Putting $20 million of marketing money behind it will help,” said one golf industry watcher, alluding to Spalding’s plan to promote Apex Tour heavily. “But if you look at the ball as being something that really boosts Hogan and revives Spalding, you may be disappointed. The company has to sell a lot of balls to get any share at all, and look who they are competing against . . . . Even if they take half a percent point of share away from all four of those, and maybe a point or two from Strata, they will still have only 4 percent of the ball business. That’s a successful ball launch, but it doesn’t necessarily make everything else bigger and better.”

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