Question is, can we afford it?
Thats the question looming over all recreational industries, not just golf. For years, Americans have been told that they should save more and spend less. Now theyre doing it, often in response to layoffs and real privation, and in other cases just because of nervousness. And the U.S. economy, usually lubricated by the oil of consumer spending, is beginning to seize up. Were in a situation where pulling back from our old reliance on consumer activity, especially in leisure pursuits, may ultimately lengthen the recession.
What a time to have a trade show.
Nonetheless, the 56th PGA Merchandise Show is ready to roll out January 29-31 at the Orange County Convention Center (with an outdoor demo day on the 28th). Its not the first time the industry has convened in tough times, but certainly the economic challenges to golf are sterner than they have been in generations.
The golf industry and all of its participants are going to have to face the right sizing required by these [economic] headwinds and the expected continued short-term contraction of discretionary income spending, said Wally Uihlein, chief executive of Acushnet, whose brands include Titleist, FootJoy and Cobra. Last year at this time we discussed the idea that the U.S. golf industry GNP, that is, the U.S. golf economy, was a $62 billion dollar industry. This number will now have to be reset.
Acushnet has talked about reducing work force; TaylorMade has already laid off 70 ' that trend is likely just beginning. But its hard to put the brakes on the development train once it gets rolling. Titleist not only has 2009 models of its Pro V1 golf balls coming out, it also is returning to the show as an exhibitor after sitting out for six years. Cobra will have new drivers and irons. Ping will celebrate its 50th anniversary.
Callaways Diablo driver, in its Big Bertha series, will compete $299 price echelon. Callaway also plans to offer the iQ, the latest in the geometrically advanced FT series, which is based on a clubhead technology that fuses titanium and carbon fiber. (A more traditional shape, the FT-9, will also be coming out.) Bridgestone hopes to continue the momentum of its B330-RX ball, which is designed to offer pro-ball performance to recreational-speed swingers. Adams Golf is ready with a new driver, the Speedline. Other companies are following suit.
Bottom line: The economy is on everyones minds ' but new gear has an irresistible allure and companies have to keep developing to stay in the race. It remains to be seen whether the golfing public will go for the new products, or whether they will decide to make do with what they have. But in the days leading up to the Super Bowl, it will be all about whats new and cool, spread over 10 miles of aisles and a million square feet of exhibit space.
Some of the annual optimism that always attaches to the PGA Show, justified or not, has at least one top exec smiling already.
This is only January, and I dont have a crystal ball. However, given the information we have, were very positive about our position both competitively and financially, said George Fellows, president and CEO of Callaway Golf. Our companys fundamentals are quite sound. We are virtually debt-free and our relationship with both the trade and the consumer is strong. Our position within the market is likely to strengthen given the trades focus on major brands during these uncertain economic times.
Internationally, emerging markets such as India, Brazil and Eastern Europe will provide opportunities for additional growth when macroeconomics becomes less of a headwind. Right now, our plan is to continue to implement the best-in-class plans we have in place and operate in a prudent economic fashion. The current economic situation will not stop us from developing, manufacturing and marketing some of the worlds best golf equipment.
Particularly telling in Fellows remarks are the hopes for footholds overseas. Aspirations for China are still alive as the middle class grows there. Fellows reveals at least three more grounds for possible economic fertility. What does that mean for the U.S. market? Part of the answer may depend on whether the changes expected to follow the last election actually take place, and in what form.
Here in the United States, which happens to be the world's largest golf market, we have to hope that the incoming administration's emphasis on stimulating consumer spending will help us avoid the collective paradox of thrift potential that (at the consumer level) can paralyze discretionary income-based industries during times of economic contraction, and thus further delay the renewal of spending and recovery, said Uihlein. These are indeed challenging times and they will continue to test everyone's ability to look long term while dealing with short term adversity.
And for companies who might not have the cash position and market foothold of a Titleist or Callaway, there may only be a short term. Hanging on until consumer spending flows more easily, making the recreational machine hum again, could be a tall task.
But for four days in January, at least, shiny new equipment will breed shiny, new hopes ' as it seems to do every single year.