TaylorMade Golf may be for sale but it also has more momentum than it has had in years. The company's revival can be traced to a new business model, improved club sales on the back of its popular M1 and M2 lines, and the success of its Tour staff, anchored by the world's top two-ranked players, Jason Day and Dustin Johnson, both of whom recently re-upped their deals with the Carlsbad, Calif.-based manufacturer.
David Abeles, CEO and president of TaylorMade-Adidas Golf, sat down with GOLF.com to discuss the brand's future, its drive to innovate, and why its current line of products is resonating with consumers. "Our allegiance is to performance," Abeles says. "We will not bring anything to market across any category unless we can prove to golfers on Tour and around the world that they're measurably better than the products that we had before them."
Here's what else TaylorMade is doing differently; why golf balls could be a difference-maker for the company; and why Abeles, a father of three young boys, is bullish about the game's future.
This interview has been edited and condensed for clarity.
GOLF.com: When we last talked, for a podcast in January, you spoke of Adidas' commitment to TaylorMade Golf. In May, Adidas said it's looking to sell off TaylorMade, Adams and Ashworth. Take us through what happened earlier in the year and whether anything has changed since the May announcement.
ABELES: At that time, I believe I said that, "We had never felt more support from our parent company than we did at that time." And that's absolutely true. Over the course of the spring months, we worked closely together with our parent company and took a look at the TaylorMade brand. And, we decided collectively, as a management team and with our parent company that given the interest in the TaylorMade brand as we explored the potential for selling it, that it would be a good idea to move forward with that. And what I meant and what I continue to mean is that through that process in support of our business, we've felt great support from our parent company.
They've been incredible in helping us build out our plans for growth in 2016 and ensure that as we work through this process we find the right partner. The right new ownership for the TaylorMade brand that believes in our future the way we do and believes in the strategic plan that we have put together to enable our company to continue to be the best performance golf brand in the world, have a meaningful impact in the game of golf, and support golfers around the world with the very, very best products from metal woods to irons to wedges, putters, all the way down through golf balls.
So no announcement yet as to whether you've been sold?
No, I'm not here to make any announcements other than talk about all the great things that have happened for us and hopefully in support of the game of golf. It's been an exciting process, and we're very excited about the future. There's been keen interest in our brand, as you'd imagine, given the significance of the TaylorMade brand in this great sport, in this great industry.
Back in January, you were excited by your 2016 product line, and in the first two quarters of 2016, you've shown some growth. What's driving that growth?
On the manufacturing side of things at TaylorMade, we have pretty good insights as to the products we're bringing to market. We'd done our testing and my excitement and energy came from the fact that I knew the product line we'd created through a great group of engineers and product creators at TaylorMade was one of the best, if not the best product lines I'd ever seen from top down from our company and certainly in my 20 years on this side of the business. That came on the heels of what was one of the greatest launches in our company's history -- the M1 in September 2015 -- that quickly became the number one driver on Tour and remains the number one driver on Tour. We knew we had a lot of momentum coming in. And when we completed the M family at the PGA Show in January and built out the M1 platform combined with M2 together in metal woods and irons, it's been explosive for us.
We've ultimately created a very, very strong leadership position in metal woods. The M family in metal woods is unequivocally the number one metal wood in golf, both in drivers and fairways. As we look at the entire M metal wood franchise in terms of what's being sold, what golfers are playing, and what's happening on Tour, it's absolutely fantastic for us.
So multi-material technology, starting with M1 and migrating into M2, with two different launch characteristics for each driver has been fantastic. What gets me excited about our metal wood business is watching golfers play M metal woods and seeing the exhilaration and pride that they have in seeing a real advanced performance breakthrough in multi-material technology that we've brought to the world of golf.
Our irons business. You may be aware we have the number one selling iron in M2 in the United States, which is very exciting. The irons technology isn't simply about distance, it's about distance and height. And that's really taken a very different approach to designing and developing irons.
Our metal wood business is very strong. Our irons business is very strong. We've seen growth across other categories as well -- putters and wedges and the golf ball. So from the top down, we knew coming into 2016 that we were going to have a very strong year because we had very strong technology.
The first quarter was very good for us. Year-to-date our business is up 16% for the TaylorMade brand, which is absolutely fantastic. I'm so proud of the work that we've done as a team in Carlsbad and around the world. And as you may have seen publicly reported, we had a very, very strong second quarter, up 23%, which is important because the second quarter represents the biggest quarter in golf. It's when more golf is played than other quarters and when more products are sold and purchased by golfers. So we've gotten off to a very, very good start in the first half of the year, and we're excited about that momentum building as we work into the back half.
One thing you've done during your tenure is stretch out your product lifecycles, veering away from releasing new models every few months. But obviously you still want to keep improving your technology. With the M1s and the M2s performing well, how do you top what you currently have? And how soon will you have a new line to top those?
I'm going to back into your question about lifecycle management. We made a commitment to each other inside our building and to golfers around the world. And we put a stake in the ground. This started with M1, saying, our allegiance is to performance in products. Our organization will not bring a product to market unless it's measurably better than the prior generation products that we've made or the competitive set in marketplace. And when we're ready to do that, we will do that.
We also recognize that we wanted to create real value for golfers in the products that we bring out, through advanced technology and insuring that when those products come to market we support them; that we support those who buy them; that we support those who play them. And so we've been able to really work with this great technology. It continues to sell very well and continues to be played by most of the best players in the world.
As a net result, it's delivered wonderful performance for our business, wonderful performance for golfers. And, we've been in market a lot longer with this product than we have other products. I think that's the most prudent way to run our business.
One of your staff players, Justin Rose, won a gold medal in Rio. Did TaylorMade or Adidas see any bump in sales as a result of Rose's performance?
The Olympics, I thought it was fantastic. The energy it brought to the game of golf. The spirit of competition, and athleticism, on one of the world's largest stages. It was wonderful to see golf back in the Olympics. And it was even more wonderful for TaylorMade to see our athlete take home the gold. Did we see an uplift? Sure. Every time we see our athletes perform well, we see more energy around our brand and more energy around our products, which ultimately manifests itself into our business.
But this year for us wasn't just about the Olympics. We've had arguably one of the best years we've ever had on the PGA Tour and the tours around the world. We've had 30 metal wood wins with M technology, which is incredible. I talked about it being number one on Tour. I think about what's happened starting in the spring when Jason Day, world number one player, who happens to be a TaylorMade-Adidas athlete, won at the Players Championship. Dustin and Jason subsequently won World Golf Championship events.
Then we worked into Oakmont in the summer. To see Dustin break through and win his first major as a TaylorMade-Adidas golf athlete was incredible. He played terrific golf in front of some controversy on that back side that could have gotten to anybody. And Dustin handled himself like the ultimate professional that he is.
Then leading up to the Olympics, in and around Justin [Rose] winning the gold medal. But woven in between every one of those weeks was 13 wins on the PGA Tour for TaylorMade. I'm fact checking it right now, but I think that could be an all-time high for us. So our performance and our athletes, we're so proud of the way they've played and what they've accomplished this year.
A report recently surfaced that Day has signed or is about to sign an apparel deal with Nike. Are you able to comment on that?
Yeah, Rob, you know better than that. You can't ask me those questions.
I can ask. You're not going to answer.
It depends what I'll answer, right? We don't comment on player contracts, terms or conditions. But I can say that Jason is an incredible ambassador for the TaylorMade-Adidas brand. And he's been that for a long time. We are very excited about our stable of athletes as we move into 2017. And it's not just Jason or Dustin or Sergio or Justin. [Ed. note: Day and Johnson recently re-signed with TaylorMade to continue playing the company's clubs and balls.]
I think about the amazing recruiting class going into '17 with the likes of Jon Rahm who earned his Tour card in really four starts. He was the low amateur at the U.S. Open. Two TaylorMade-Adidas Golf athletes on the podium -- one winning the event and another one being low-am was really cool. Watch out for Jon Rahm. He's going to be a household name in the real near future. We signed Beau Hossler to a TaylorMade-Adidas Golf contract. Beau is two-time player of the year in college and Haskins Award winner. Jordan Niebrugge, who's a wonderful athlete and player, was low-am at the British Open last year. And Romain Langasque out of France, who was the number-one ranked European amateur and is now a professional with TaylorMade-Adidas Golf.
If you were to ask all of them, "Why do you prefer to TaylorMade-Adidas Golf?", it's because they believe that the products we make for them are the best performing products in the world. And they trust their games to those performance attributes that we bring to them. As a net result, the groundswell of youth coming into the game and their connection to the TaylorMade and Adidas Golf brands is very, very good.
In light of the report that Jason Day is signing an apparel deal with Nike, I imagine we could we see more of that type of scenario, with players playing TaylorMade clubs but not wearing Adidas apparel. How does that affect how you're looking at players and trying to sign your players?
Our commitment right now is we are TaylorMade-Adidas Golf. So we execute against a strategy on behalf of TaylorMade-Adidas Golf. But you're right. We will take a look at different options. It may provide us, whether you're TaylorMade or Adidas Golf or both, opportunities to partner with Tour players moving forward -- opportunities to explore other options that would be beneficial to these two great brands.
It remains to be seen as we work through this process. But one thing is for sure -- we'll be very thoughtful, very respectful, and very diligent to ensure the decisions we make on behalf of both of our great brands and our athletes is in the best interest of the athlete and ultimately in the best interest of golfers that want to play our products.
What do you think about Nike stepping away from the hard goods side of the business?
I'm sure it was the right business decision for Nike. On a global basis, the Nike equipment in ball business represented roughly less than 2.5% of global sales. So their position in golf equipment and golf ball was not a real strong position in terms of overall size. So, again, I'm sure they made the right decision for them. And I'll leave it up to their team to make the decisions that are best for their business. What's exciting for us is some of the Nike athletes that are expressing interest in potentially playing TaylorMade moving forward. They've recognized that without options with their existing brand in Nike that they have other options. I'm very proud that many of them are thinking about TaylorMade as their equipment of choice and their golf ball of choice. So we'll begin to explore those options with those athletes as we move through the course of the fall. And see whether or not some of those players will ultimately end up in the TaylorMade brand.
The Tour is obviously a big part of your marketing and promotion, and Tour validation has always been a big deal. Has it become even bigger and more important to drive sales and what your brand is about?
Sports marketing across all categories, whether you're in golf or other sports, is critically important. It's a validation point at the highest level. In our game, because we're in such an aspirational sport, the top of the pyramid in terms of performance is the PGA Tour and the worldwide professional tours. When those players choose to play your golf equipment is what we're proud of. We're humbled, but we're proud of that. It validates, in our opinion, to most golfers around the world that we make really, really great products. So it's critically important for us. What's more important than just the Tour is that we make products that really serve the playing needs of all player profiles around the world.
What we've experienced with M technology in 2016 is that this product performs for everybody at every level. And the M.O.I. [moment of inertia] properties are higher in this product than any product we've ever made. So the stability around the product is good, the ball speeds off the face, how we optimize launch conditions, whether it's ball speed, launch or spin. And how you can personalize that through M1 or M2 is something that we had never seen in golf before.
Golfsmith, the largest golf retailer, recently filed for Chapter 11 bankruptcy. TaylorMade is listed as one of the largest unsecured creditors with Golfsmith and Golf Town. How does that affect your business? And what do you think about the news that the country's largest golf retailer had to file for Chapter 11?
Yeah, Golfsmith and Golf Town, here in the United States and up in Canada. They've been very good partners of ours for many years. I hope they work through this in the best interest of their business and, importantly, their people. I think they've got real solid brands, and I think they do a great job servicing many golfers that visit and experience what they have to offer in their stores. As it relates to us, we're looking forward to them working through their resolutions. Contingent upon what those resolutions are, we adjust our business moving forward, as it relates to how we manage the distribution of our products. As it relates to our unsecured debt, given our size, and the sheer magnitude of our business because we're one of the larger companies in golf, those are some of the public reports that you're probably seeing. But we're very responsible in terms of how we manage our business.
One thing that bit Golfsmith was they tried to get larger stores and increase the number of stores themselves as the number of golfers has decreased. What's your greatest growth opportunity, given the market has contracted in the last few years?
We are very bullish on our ability to grow our business. When I think about the strength of our metal woods business, we have the number one metal wood position in terms of overall market share, which is something we're very proud of.
We believe we can continue to grow that business with new technologies and be even better in that business in the eyes of golfers. I think about the growth that we're experiencing in our irons business, having the top-selling iron in the marketplace today. Knowing what I know for 2017, we're going to be able to address even more golfers with better technology in irons.
I think about the diversity of our portfolio of products -- we're going to have some incredible putter technologies. In fact, we'll talk about them in the coming months. We've worked on a wedge technology and a performance wedge story that's being tested on Tour right now that we think is a real breakthrough in how you design and develop wedges and, ultimately, how they perform.
One of the growth drivers moving forward is our golf ball. The world's number one and number two players play a Tour Preferred X golf ball. And we have quite a few players around the world at not only the Tour level, but importantly, club professionals and better-playing amateurs that are in the TaylorMade golf ball. We believe we make the best golf ball in the business. That's a bold statement, because there's some wonderful players in the golf ball business and one in particular who does an exceptional job. I have a lot of respect for that. But in terms of overall performance, we believe we have a golf ball technology in Tour Preferred and Tour Preferred X that is unrivaled, and we're excited about that moving forward.
We're going to promote our golf ball and get it in play more often perhaps than we have in the past. And I think we'll look back 12 months from now, and say, "Boy, we haven't just grown our metal woods and irons business, but look at the continued growth across all of the categories in which we operate."
We also look at international growth and what Olympic golf could ultimately mean for emerging markets. We're not seeing it right now, but we think we will in the future. We're seeing signs of it in secondary markets that we compete in around the world. We're starting to see golf percolate to the top, which is exciting. And I'd love to talk to you about the youth initiatives that we've invested in that lead us down the path to believing golf is going to be just fine. Yes, we've seen some attrition in overall play over the course of the last decade or so. But when I think about the youth movement and what's happening, I get very excited about the future of golf.
What grassroots programs is TaylorMade getting behind?
Let me start with something that's very close to me and to TaylorMade. We made an investment a couple years back with the PGA of America in PGA Junior League Golf. I've got three young boys. They're 10, 9 and 5 years old. I've been so proud to watch them compete in PGA Junior League.
We have an incredible director of golf at my home course back in Southern California. His name is Shawn Cox and he does some amazing things with junior golf. He's dedicated like great golf professionals are to developing the game and introducing new entrants at a young level. He runs the PGA Junior League program for our club, and it's fantastic. When we started it off in the spring, we had a couple dozen players that were part of the teams that would compete at different clubs around the county. By the end of the season, we had two times as many players. One of the things Shawn did, and I would encourage every golf professional to do this, is don't limit it only to members' kids. Let this go out beyond that and bring other kids into the game that would ultimately enjoy it.
Golf is becoming very, very cool. I think about the youth on Tour, particularly Jason Day or Dustin Johnson or the likes of Rickie Fowler or Jordan Spieth or some of these individuals that are socially really engaged, not just in golf but also in building their respective personalities and brands. I watch my young kids connect in a very magnetic way to these guys.
And we're starting to see it in growth data in the game. The age group of 9 to 17, we've seen a 25% lift in engagement and participation in the game of golf over the past 12 months. The National Golf Foundation will report on quite a bit of that. These data points we'd be happy to share with the world. I think the game of golf in the future is going to be just great.
In addition, we've partnered with the American Junior Golf Association. We've entered into a long-term relationship with the AJGA working with some of the best playing junior amateur golfers around the country and, for that matter, around the world. It really is a global institution when you think about the different nationalities and personalities these young boys and girls that play in AJGA events. We're seeing growth and support there. So I'm very optimistic that over the mid- and long-term, we'll see younger players in the game. We're seeing it happen right now, and that'll ultimately manifest itself into a stronger business over time.
Topgolf has had success attracting the younger generation, and now TaylorMade is partnering with a golf entertainment company to launch a similar offering called Drive Shack. What can you tell us about it?
Topgolf has done a wonderful job. I was in Las Vegas and enjoyed the experience with my family a month ago. Anytime you can get golf clubs in the hands of people, whether they are current players or future players, that's a good thing. And it is a very different experience. There are targets that you hit to -- there's points and gamification.
We've had multiple parties come to us over the last 12 months. Some have technical differentiation and others have physical differentiation in their properties. Through that process, we decided to explore working with a group called Fortress Investments in a concept called Drive Shack. Fortress will announce their upcoming openings and where the first locations will be. But we're happy to be involved with it.