News broke Wednesday that Nike Golf is exiting the club and ball business. What does Nike's exit mean for the equipment industry, Tour pros currently under contract with Nike, and you? For some perspective, we looked to Casey Alexander, the Senior VP/ Research Analyst at Compass Point Research and Trading. Alexander’s been tracking the golf equipment business since 1996. Here are some excerpts from our wide-ranging discussion.
GOLF.com: Is this a good opportunity for others or the beginning of the end?
Alexander: It's a good opportunity for the 'core four' [Acushnet, TaylorMade, Callaway and Ping]. In fact, we've already seen these companies take advantage this year.
Have you seen signs of this day coming?
Four years ago, I had discussions with Nike Golf's then-president Cindy Davis, who told me that they make equipment for the best athletes in the world. Three years ago, she said Nike makes equipment to support their apparel and shoe businesses. Nike has continued to de-emphasize clubs and balls in 2016. Have you seen a single ad this year for Nike balls or clubs, and Nike's presence at the PGA Merchandise Show was minimal. So, clubs and balls have had a supportive role, not a featured role for awhile now.
I see some beneficiaries to this announcement. Once TaylorMade is sold, they're no longer tied to Adidas footwear and apparel. Callaway has a footwear license deal and they outsource apparel, and they have a flexible interpretation of what’s required of their equipment-contracted players.
Does Bob Parsons [PXG] care if someone's wearing Nike shoes or apparel? I don't know if PING has a flexible enough interpretation of the world to sign players who serve two masters. Pros that endorse Acushnet [Titleist] clubs are required to be in their apparel and footwear…it wouldn’t surprise me if Tiger plays PXG clubs. I could also see someone play Callaway clubs, Nike apparel and a Titleist ball.
Nike never had that one model that truly captured the buying public's imagination. What product could it have been?
The ball. Tiger was the first proponent of the solid-core ball. [He won the 2000 U.S. Open using the Nike Tour Accuracy.] But Titleist and Wally Uihlein snuffed out Nike’s opportunity to produce that one product to drive the business. In October 2000, at the Invensys Classic at Las Vegas, Phil Mickelson held up a prototype Titleist Pro V1 ball on camera and said, "The harder I swing, the less it spins and the farther it goes." The Pro V1 took off the following spring. It's hard to compete if you don’t create a message of straighter, longer, better. Heck, many people felt Tiger won despite the inferiority of Nike clubs.
What does Nike's exit mean for the equipment business in the short term?
It’s a slight negative in 2016 that Nike equipment has to get flushed out of the market. It's an opportunity for the guy who plays three to four times a year to buy something real at a low price, which takes away from the efforts of the rest of the biz.
What does it mean long term?
The equipment business has held pretty steady over the years in the $4 to $4.5 billion range. Having a 5% market share company get carved up by others doesn’t signal the end. It used to be that there were secondary competitors and tertiary competitors. Now, the secondary competitors are being flushed out. But it’s not a sign of the end of the business.