Golf-industry consolidation is set to continue, according to the head of Adidas AG (ADS)’s TaylorMade brand, as weaker equipment sales and a slowdown in course openings lead smaller businesses into the arms of larger competitors.
“It’s a very challenging industry to find success,” Mark King, chief executive officer of TaylorMade, said in an Aug. 2 phone interview. “In some parts of the industry, like retail, we’ve seen not only consolidation, but shrinking. We’ve seen the reduction of some of the golf courses. We’ve seen plants disappear. So there’ll still probably be some consolidation.”
Sales of golf equipment in U.S. on- and off-course shops shrank by 17 percent to $2.41 billion from 2007 to 2011, according to figures provided by Golf Datatech, while the number of courses opening in the country declined by more than 80 percent in the same period, the National Golf Foundation said. That hasn’t stopped the biggest suppliers from getting bigger. TaylorMade increased sales by 27 percent in those five years and Adidas this year agreed to buy Adams Golf Inc. for $70 million.
The German company isn’t alone in wanting a larger slice of an industry that research institute SRI International estimates is worth $76 billion in the U.S. alone. Dick’s Sporting Goods Inc. bought the Top-Flite brand this year, while Canadian golf retailer Golf Town Canada Inc. acquired Austin, Texas-based Golfsmith International Holdings Inc. for about $97 million.
Buyers may be encouraged by signs of a rebound in the industry this year. Sales of golf equipment rose 9.9 percent in the first six months of 2012, according to Golf Datatech, while the National Golf Foundation estimates that the number of course openings in the U.S. this year will stabilize at 20.
For TaylorMade, whose sales exceeded 1 billion euros ($1.24 billion) for the first time last year, one of the biggest opportunities for growth may be in China, according to King.
In as few as five years, China “probably has big opportunities,” King said, cautioning that it could be as many as 20. As Chinese migrate from rural areas to cities and the middle class increases, “golf will boom in China,” he said.
The number of “golf enthusiasts” in China rose 22 percent to 51.8 million from 2006 to 2011, according to Barry Johnston, a spokesman for Cologne, Germany-based market researcher Sport+Markt AG. In Europe and North America, interest during the same period “remained pretty stable,” he said.
Golf’s importance to Adidas was highlighted when divisional sales overtook the Reebok brand in the first half of this year. While golf revenue rose 29 percent to 788 million euros on a currency-adjusted basis, Reebok sales fell 16 percent to 787 million euros. Adidas posted total sales of 7.3 billion euros.
The increase in TaylorMade’s revenue was driven by “fast- growing” sales of RocketBallz fairway woods and gains in the U.S., King said. The CEO said he plans to boost the brand’s share of the global market for iron clubs to 30 percent from 25 percent in the next few years, while aspiring to increase its share in balls to 15 percent from about 8 percent.
To help achieve the former goal, TaylorMade has built performance labs that allow players to purchase customized clubs after having their swing analyzed with highspeed cameras. There are about 20 centers in the U.S. and the brand plans to double that number in the next three years, King said.
“It’s obviously going be a wonderful celebration of golf to be back in the Olympics,” King said. “We plan to really be a part of that. We’re going to take the opportunity over the next four years to talk about it a lot, to support it a lot.”
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