2003: Business - Callaway dips feet into new business

Can Callaway Golf be all things to all golfers?

Ron Drapeau, Callaway’s chairman and CEO, believes so, which is why the company known for its metalwoods and irons has attached its name to a line of golf footwear that will reach retail stores in March.

Tour Golf Group, an ad hoc collection of shoe veterans who hail from Nike and elsewhere, developed the line under a license from Callaway.

“We see over the next decade the requirement for major players to provide everything from head to toe for players,” Drapeau says.

He notes that licensing is a “risk-averse approach” to a new category, drawing a contrast with Callaway’s troubled golf ball business that continues to eat at the company’s bottom line. Tour Golf will make and market the product and pay a royalty to Callaway, which has the rights to buy out Tour Golf if it wants total control of the shoe business.

Callaway also reentered the apparel business via licensing in 2001, partnering with Ashworth, a leading golf apparel brand.

Though Callaway’s risk in the footwear venture is minimal, this is not a tepid introduction.

It is an expansive shoe assortment for a launch, and not an inexpensive one. There are four men’s collections, with suggested retail prices ranging from $130 to $190, and three women’s collections priced from $105 to $130.

Tour Golf president Kyle Weiner acknowledges that the shoes are “priced above the kill zone,” which will limit initial retail interest. But he says he wanted to make a statement by incorporating premium components such as Pittards leather, Comfortemp climate-control materials and the proprietary Big Bertha cleat, which is 25 percent larger than any cleat on the market.

Several retailers say the quality is exceptional, but the question remains whether broad acceptance of Callaway hard goods can translate into a successful footwear line.

Jack Dillon, retail director for Meadowbrook Golf Group, a large green-grass operator, has passed on Callaway apparel and footwear because he doesn’t believe in such brand extensions.

“If you want to buy shoes you go to FootJoy, if you want to buy shirts you go to Cutter & Buck, and if you want to buy drivers you go to Callaway,” Dillon says.

Weiner’s goal is to reach the No. 4 market-share position within 2 to 3 years. That should put Callaway’s shoe business on pace to generate more than $20 million in worldwide sales in 3 to 5 years, according to Drapeau. Weiner, however, won’t be able to lean on Callaway’s powerhouse sales force; Drapeau wants his troops focused on selling the hard goods that pay the bills.

Footwear is arguably the most difficult category in which to compete. Long-dominant FootJoy and sneaker giants Nike and Adidas have a chokehold on nearly 85 percent of the U.S. golf shoe business. Upstarts entering the business must be prepared to ship one or two pairs on short notice (FootJoy’s average retail shipment is just two pairs), compete with brutal discounting and accept returns of shoes that retailers couldn’t sell.

“It’s a tough business,” Weiner says, “a down-and-dirty business.”

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