2005: Business - Puma stalks golf’s green-grass market

Puma, the footwear company once associated with football legend Joe Namath and now the envy of teenagers for its stylish apparel, is entering the golf market.

Eyeing the nontraditional golfer as its target consumer, Puma is launching a golf division as part of an ambitious five-year, $620 million corporate initiative to expand into additional sports categories. The company has yet to specify all the market frontiers it is exploring, but golf and motocross are high on its priority list.

Puma Golf plans to make its debut in spring 2006 with an array of brightly colored, fashion-forward footwear, apparel and accessories. But as a precursor to its official launch, Puma will unveil in November its first golf shoe – a collaboration with J. Lindeberg. The deal also marks the fashion designer’s debut in the golf footwear category, and his endorsers Jesper Parnevik, Hank Kuehne and James Heath already are wearing the new J. Lindeberg Future Sports shoe in competition.

But much to the surprise of some analysts, Puma Golf intends to enter the United States via pro shops and specialty retailers rather than piggyback on the mainstream distribution channels it currently uses. Analysts also question the German brand’s attempt to win over tradition-bound golfers with its daring, if not outlandish, product designs.

Puma executives, however, are undeterred.

“There’s another way of doing things, and we’re going to do it the Puma way,” says Jay Piccola, president and general manager of Puma North America. “We think it will be a pleasurable change for the golf industry.”

Such confidence, in part, likely stems from the successes Puma has enjoyed of late.

In its heyday during the 1970s and early ’80s, Puma was a household name made popular by a stable of endorsers that included Namath, New York Knicks star Walt Frazier, soccer icon Pele and tennis great Martina Navratilova. Gradually, however, Puma went into a slide, and was eclipsed by rivals such as Nike, Adidas and Reebok.

But during the past decade, Puma has experienced a revival by acquiring former licensees around the globe and converting them into subsidiaries, enhancing managerial and local market control.

Puma also has worked diligently to define itself as the world’s top “Sportslifestyle” brand, a fusion of “the creative influences from the world of sport, lifestyle and fashion.” That eclectic blend has attracted young, hip consumers, new endorsers such as tennis star Serena Williams and baseball’s Johnny Damon, and propelled an increase in sales and net income every year since 1998.

Now, Puma officials say they’re ready to tackle golf.

Banking on brand recognition and reputation in footwear, Puma officials plan to make inroads first with shoes, which they then expect will trigger demand for “lifestyle derivatives” such as apparel. But in a crowded market, filled with dominant brands as well as plenty of alternative choices, Puma’s strategy may be overly optimistic, retailers say.

“When you’ve got market share like FootJoy has, then you’ve got Nike and Adidas, there’s not much of that pie left,” says Kerry Kabase, director of sales at Edwin Watts. “Your only hope is that you’re going to take away (market share) from somebody else. And that’s hard to do.”

But Robert Philion, Puma’s international business unit manager who will oversee the new golf division, contends that a “new space” exists. He says Puma’s unique positioning – with unconventional products catering to young professionals in “the jet-setter crowd” – will help avoid clashes with established competitors.

“I’d be extremely concerned if we were making the same stuff as some of the other brands, but we’re not,” Philion says. “How big is (the new space)? We’re not sure, but we’re excited about it.”

That anticipation may be premature, according to pro shop, or green-grass, retailers. They question whether Puma’s designs will resonate with consumers.

“Most golfers have two pairs of golf shoes – all black and brown and white. That’s true even for most of the young golfers who are playing twice a week,” says Kevin Taylor, general manager at The Member’s Club at Four Streams in Beallsville, Md.

Such skepticism from Puma’s preferred retail channel doesn’t bode well, drawing criticism from analysts who question Puma’s attempt to authenticate its products at on-course retailers.

Casey Alexander, a special situations analyst who covers the golf industry for Gilford Securities, says Puma would be better served to “take the path of least resistance” by leveraging retail channels that the company already uses for its other footwear brands.

“Establish yourself in other channels before you try to stuff yourself down a throat of a pro,” Alexander says.

But Puma executives have no intention of deviating from their game plan.

“We’ll approach it through a very disciplined distribution strategy,” Piccola says. “Volume expectations are not huge in Year 1. It’s positioning . . . that’s our goal.”

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