Your Guide To OEMs, Part 2

In the first part of this series, we took at look at the Big Three: Acushnet, Callaway, and TaylorMade-Adidas. This week, we look at a trio of companies jockeying for position and the chance to make the jump to join the Big Three atop the industry. I call these companies the Next Three, and they are Cleveland, Nike and Ping.

Cleveland Golf

Brands: Cleveland, Never Compromise, Quiksilver/Fidra
Strengths: Wedges, tour presence, great reputation
Weaknesses: Getting over the hump, driver sales

Cleveland Golf has undergone a striking transformation over the past decade. In the mid-90s, the company was known for founder Roger Cleveland’s neo-classic Tour Action wedges and for the even-funkier-than-Ping design of the VAS irons that Corey Pavin used to win the 1995 U.S. Open. After the high point of Pavin’s high-profile victory, Cleveland hit some hard times. The company was purchased by Rossignol, a French sporting goods giant. This led to Roger Cleveland’s departure (he’s been one of the lead club designers at Callaway since 1996). Meanwhile, the VAS irons and their more traditional-looking follow-ups struggled in the marketplace, and Pavin left the company for other endorsements. The founder leaves, the flagship new product stumbles and the pro tour face of the company bolts? Sounds like the beginning of the final chapter for a lot of companies.

But not Cleveland. The company regrouped by focusing on what it did well: wedges, and lots of them. The company kept pushing the Tour Action 588 wedges that Roger Cleveland had designed, adding new models with subtle twists along the way. Cleveland made its wedges available in nearly every loft from 45° to 64°, and with finishes from chrome to gunmetal to raw and rusty (the company’s Raw Tour Grind wedges were among the first commercially available unplated wedges that were meant to rust). These bread-and-butter products got the company through some lean years, and Cleveland has dominated both the tour and retail numbers for wedges in use and sold for several years. By the turn of the millennium, Cleveland had found its balance and was ready to move forward. The company wisely focused on better players in its marketing, and signed many tour players (Vijay Singh and David Toms among them) who have become extremely visible ambassadors for the company. Cleveland leveraged its great reputation with wedges into a series of solid, brisk-selling irons, and found its stride with drivers with the Cleveland Launcher Titanium Series over the past couple years.

In 2003, Cleveland acquired Never Compromise, a putter company from the founders of Odyssey that had good buzz but poor sales. This gave the company a strong line of golf equipment from tee to green, but the Cleveland still lacked the sales volume and non-equipment products to compete on a larger scale with the Big Three.

That may be changing. Cleveland has been purchased by Quiksilver, an extremely successful California-based outdoor apparel company. One of Quiksilver’s brands is Fidra, a golf apparel brand headed by the founder of Ashworth, John Ashworth. Look for greater integration between the Cleveland, Never Compromise and Ashworth brands in 2006. The big question is this: How big can Cleveland get? Does the company have the potential and products to get to the next level, or are they already at their max capacity? I have the feeling that Cleveland, backed by the aggressive management and marketing muscle of Quiksilver, can increase its sales significantly. Joining the Big Three is a big jump, but it isn’t out of the question for Cleveland.

Nike Golf

Brands: Nike Golf
Strengths: Tiger Woods, the Nike name, corporate power
Weaknesses: Perception as non-authentic golf brand, sales volume

Nike has been in the golf business since the 1980s as an apparel and footwear manufacturer. It wasn’t until the late 1990s that the megabrand decided to become a full-line golf company. It started with golf balls, then expanded to clubs. The results were similar to other sports (hockey, soccer) where Nike came a little late to the party. First, they made a big splash, but didn’t sell a ton of product. Then they learned their lesson, retooled the product, and started showing the chops that has made the Swoosh into one of the world’s most recognizable symbols. These guys play to win.

The biggest name in the Nike Golf universe is, of course, Tiger. But the company has aggressively courted and assembled a large staff of tour pros to help establish Nike as an “authentic” golf brand, and not just a sneaker company trying to get its fingers in every possible pie. Nike outsources most of its golf ball production, allegedly to Bridgestone, but all the design is done in-house. On the club side, longtime Ben Hogan designer Tom Stines has brought some innovative ideas to the table, along with some very classic-looking blade designs.

The main question for Nike Golf is whether avid golfers will ever accept Nike as a true golf brand. Golf is a game of tradition, and companies coming in from the outside face a lot of resistance. Of course, it may not matter. Nike has the deep corporate pockets to back the golf venture at a high level for a long time, which is what it takes to change attitudes – and to become “authentic.” Nike’s not playing at a Big Three level yet, but it seems almost certain that they will be sooner or later. If Nike was really spoiling for a fight, they might be one of the only brands equipped to take on Titleist in a fight for golf ball supremacy over the long term. Nike’s still an adolescent in a world filled with mature competitors. But you can see the kid’s going to be a strong player before long.

Ping Golf

Brands: Ping
Strengths: Putters, irons, history of innovation
Weaknesses: Quirky corporate nature, driver sales, lost market share

Ten years ago, the Big Three was the Big Four. Ping was firmly established as one of the top four brands in the game. Acushnet, upstart Callaway and TaylorMade all were looking up at Ping as the leader in irons and putters, and Ping was also near the top in sales of woods (back when they really were wood). Heck, Ping even tried getting into the golf ball business in the mid-90s, though that effort was short-lived.

Ping had risen to the top from very humble beginnings. GE engineer Karsten Solheim thought he could build a better putter than what was on the market in the 1950s, so he went to work in his garage. By the late 1960s, his Ping Anser putter and its many, many siblings were established as the best-selling, most forgiving putters in golf. Solheim built Karsten Manufacturing into a huge business. His Scottsdale, Arizona, company had a golf side and an industrial side (which had a foundry for making aerospace parts and other industrial items, and which still exists). The golf side spawned some of the most enduring design ideas in the business. You know, little ideas like perimeter weighting, cavity-back irons, custom fitting, and putters and irons made out of non-traditional metals.

By the late 1980s, the Ping Eye2 irons had become the best-selling irons at that point in golf history, and Ping putters were the industry standard. The company’s homey ad campaigns and heavy usage on the pro tours drove big sales. But things started to unravel. A protracted lawsuit with the PGA Tour over the square grooves of the Ping Eye2 irons cost the company millions, and forced Karsten Solheim to perhaps take his eye off the ball. Subsequent Ping irons like the Ping Zing failed to hold onto the market share they inherited. Ping lost the considerable lead in innovation it once had, refusing to embrace big new trends like oversized metal woods and insert putters until other companies (like Callaway, Cobra, and Odyssey) had taken over those markets.

Ping had the luxury of being a privately held, family-owned business. Instead of having to please shareholders with an immediate turnaround, Ping spent the late 1990s and early 2000s rebuilding the brand. After ignoring titanium drivers, the company’s TiSI driver earned a reputation as the hottest driver in golf, as it was allegedly the driver the USGA used to set the 0.83 limit on coefficient of restitution (COR). This sparked a comeback that has led to Ping regaining market share in nearly every category. The company has always been quirky, but it is showing a willingness to listen to the consumer more than ever. Ping now has blade-style wedges with ferrules over the ends of the hosels. May not sound like much, but it’s a huge departure for Ping. And the company still cranks out some extremely distinctive, “gotta be a Ping”-type products, like the huge Doc putters. And the new line of G5 woods, irons and (gasp) hybrids shows great promise.

Ping does have some hurdles to making the Big Three a Big Four again. Like Cleveland, it doesn’t have a golf ball product to push, and there’s a lot of revenue in those easily lost little pellets. And the golf market has never been more competitive, making it even harder to regain lost market share. But for now, there’s no doubt Ping has stopped moving the wrong direction and is looking up, not down.

Next Week

Check back next week for my third and final installment in this series, where I’ll take a look at companies like MacGregor, Wilson, Bridgestone, Mizuno and Srixon.