Growing Pains
The latest golf boom has given the game a new set of problems
If you want to understand what’s happening with the golf industry in the midst of its biggest surge since before Arnold Palmer was endorsing motor oil, you could look everywhere: from an iron-finishing factory outside Ho Chi Minh City; to the 100,000-steel-shafts-a-day plant in Amory, Miss.; to every golf retail store in every little corner of the world; to a golf equipment company president’s schedule book that included time in the club-assembly department checking the lofts on custom-ordered iron sets.
Or maybe you could just talk to Nate Bertram, assistant manager at The Golf Center in Grand Forks, N.D. It may snow more months than it doesn’t outside Bertram’s 5,500-square foot store, but he still conducts more than 2,000 club fittings a year. It’s been more in the last year and a half as new golfers who first bought boxed sets have sought to upgrade to premium clubs and regular customers are fighting to keep their places in line. Doesn’t matter, Bertram said, because they’re all waiting for clubs.
“This has been a year unlike anything I have seen,” he said. “We laid it out from the beginning that there would be delays. What we said and what we saw were two vastly different things. Delay of heads turned into delay of shafts, and open purchase order from open purchase order. We have waited for four or five months for some product that is still not here.”
That waiting isn’t just for customers. Bertram’s own order is still waiting on a 9-iron. From February.
And therein lies golf’s critical moment. At the height of all this popularity, if golf consumers’ enthusiasm turns into frustration, where does the game go? Demand, whether it’s tee times, drivers or push carts, is in many cases not merely outpacing supply but decimating it.
Turns out, what could go wrong is the result of all that’s going right.
In the midst of a global pandemic, golf has thrived by nearly all metrics. More new players coming to the game, rounds played on a roll, equipment sales setting a historic pace. What could go wrong?
Turns out, what could go wrong is the result of all that’s going right. It’s already showing up at retail, and it just might mean even longer waits than we’re already experiencing as well as likely across-the-board price increases, too. That driver you’ve been eyeballing. It’s not only going to take longer to get that custom shaft, you might not even find one available in your loft and flex in a stock shaft, either. That pair of size 10½ golf shoes that all the pros are wearing? Only available if you can squeeze into a 9. Irons? Maybe six weeks. But we can’t get you the matching gap wedge.
These product delays and price hikes aren’t a sales tactic like gouging rain-soaked shoppers for the price of an umbrella. Rather, it’s a case of rising costs of manufacturing and distributing products in the current COVID-19 environment that has led to shortages, frustration and uncertainty as to when the business might settle back into a more familiar rhythm—or if it ever will. In short, is the golf boom breaking golf?
“The system wasn’t prepared for any kind of a boost like this,” said John K. Solheim, president at Ping. Solheim and plenty of his front-office staff and team of engineers even found themselves installing grips, checking head weights and bending lofts to keep up with the incredible demand of the last year and were still falling behind, largely because of issues of labor, manufacturing shortages, grip and shaft shortfalls and inventory that forever has been a moving target. “It could be that we’re out of Stiff flex but we’ve got R flex so a guy who just ordered R flex two days ago gets his driver sent out but the guy who ordered the Stiff flex is waiting multiple months.
“That’s why we take it so personally because we worked so hard for the last 30 years to get rapid delivery. Our motto has been ‘get custom fit and get it built in 48 hours and out to the customer within a week.’ And to not be able to do that, and to not even be anywhere close to that, is really hard for us to deal with.”
Forty-eight hours in some cases for some companies was turning into six weeks. For others it was six months, and now golf retailers across the country find themselves doing something that probably hasn’t happened in the golf equipment business’s modern era. Instead of dropping prices on some of the most popular products in the game—something that often happens later in the year as product life cycles start to wind down—this summer has seen prices rise for a few existing products including golf balls and drivers. Several other products are moving in the same direction, including gloves and shoes. Again, these aren’t new versions but existing models that one week were selling at one price and the next began selling for as much as $50 more.
According to Craig Zimmerman, the general manager of RedTail Golf Center, which is home to a huge golf complex that includes a golf course, driving range, retail shop and club-fitting center that features 14 fitting bays, the average wait time for a set of irons from any manufacturer in 2019 was 8.3 days. This year it is 53.2 days, he said, “and getting worse right now.”
We hear tales of players being told to not give out so many signed gloves or even have a back-up set built because supplies are light and factories are shut down.
Zimmerman says he has some customers who’ve been waiting since last January for sets he’s now been told likely won’t arrive until next February. He’s already refunded the money but will still deliver the clubs when and if they arrive.
Prapass Pulsub
“Maintaining our customers’ goodwill and confidence in our business is my No. 1 priority during this very challenging time,” he said, noting that since 1995 he had a two-week standard delivery time for custom orders. This year he’s changed it to 12 weeks. “This is our most significant problem. We are constantly looking ‘bad’ to our customers. We cannot get accurate quote times on orders—both too long and too short. As such, it makes us look like we either don’t know what we are doing, or we are trying to mislead our customers by telling them dates that are sooner than the clubs will actually arrive.”
Several retailers we contacted told us they have had to change a customer’s order based on what shafts or grips were available, sometimes even completely changing the head, too. It’s also been the case where customers have ordered an existing iron and waited so long that the club has been replaced by a new version. Customers ordering the new version started receiving their orders while the original orders were still waiting.
It is heady and somewhat heated times for golf, whether you’ve been waiting on a weekend tee time for the last year or that backordered wedge from Memorial Day.
“I’ve been in golf for 25 years and we’ve always had the saying that some scarcity is good,” said Dan Murphy, president and CEO of Bridgestone Golf, where he’s happy to report that the production lines at Bridgestone’s Covington, Ga., ball plant have never slowed once after a three-week COVID shutdown in the spring of 2020. “But while a little bit of scarcity is a good thing, a lot of scarcity can be a bad thing. It’s difficult to say where we are as an entire industry right now, but we’re probably closer to scarcity being a bad thing.”
Scarcity may be the result, but on the plus side, historic enthusiasm is the cause. Rounds played through June are holding steady with the explosion of play from 2020, which set quarter-century highs. While the National Golf Foundation indicates there’s been a slight dip this summer, the actual trendline shows rounds played this year could be plus-24 percent over the average from 2017-19.
All that play naturally—supernaturally, some might say—has spurred an unprecedented surge in equipment sales. Almost since the moment golf retail came fully back online early last summer, equipment sales have been rivaling and even surpassing the Tiger Woods boom of the late 1990s. As noted by John Krzynowek, partner at industry research firm Golf Datatech, the golf business in the U.S. hadn’t ever had a month with $400 million in sales until April of this year. But then it happened again in May. And again in June. In terms of revenue, the golf equipment business, which 18 months ago was in full panic mode, is literally selling everything it can make from drivers to divot tools.
—Seven of the 10 biggest months in the last decade for golf ball sales in dollars and five of the 10 biggest months in units have happened since last June.
—Five of the 10 biggest months in the last decade for woods sales in dollars have happened since last June, and that’s with average selling prices literally double what they were in January 2011.
—Seven of the 10 biggest months in the last decade for irons sales in dollars in the last decade have happened since last June.
—Six of the seven biggest months for putter sales in the last decade in dollars have happened since last June. Like woods and irons, average selling prices have essentially doubled since January 2011. By comparison, cars are at an all-time high average selling price right now but are only up about 33 percent over the last 10 years.
Krzynowek noted that July sales overall were about one percent down from a year ago, but that needs a little perspective: “That still makes it the fifth-best month we’ve ever recorded.”
But he knows trouble is lurking behind those numbers. “All segments of the golf economy continue to prosper, even in the face of supply issues, particularly for products made abroad,” he said. “Much of the industry still remains in a hand-to-mouth struggle to ship product in a timely manner.”
In an industry that has prided itself on increased customization and turnaround times that were often measured in days, right now weeks are turning into months. Indeed, while the golf equipment business has been very good at streamlining inventory and mainlining turnaround times, that leaner approach only works if there are no bottlenecks in the system. COVID and other elements have been a recurrent yet largely unpredictable bottleneck. Heck, the pain of this is even felt on tour. We hear tales of players being told to not give out so many signed gloves or even have a back-up set built because supplies are light and factories are shut down.
“Certainly we're very confident in our team's ability to adapt and manage these challenges, but the fact is, as we said earlier, that the challenges are changing and increasing,” said David Maher, president and CEO of Titleist/FootJoy parent Acushnet on the company’s recent second quarter earnings call, where first half sales for 2021 were more than $1.2 billion or 35 percent ahead of 2019.
Those challenges at the manufacturing level are across all brands and easily have filtered down to the retail level. Even for golf’s largest retailers, a customer might have to travel farther than 100 miles to find a stock set of a popular set of irons still in the store, and even then, only one set might still be available. Stressed by shortages in club parts, you’re seeing things at retail that have never been part of the business before: Earlier this summer, the top-selling wedge in golf, Titleist’s Vokey Design SM8, was being displayed in retail racks at some PGA Tour Superstore and Golf Galaxy locations without any grips. Part grip shortage, part consumer preference test necessitated by the lack of grips, the good news is that buyers got a free install of their choice of grip at the store. Based on availability, of course, that was limited and dwindling rapidly.
John Lamb
Those problems in many cases are outside of the control of any one club manufacturer. The difficulties of the COVID-19 pandemic have led to significant shutdowns in the shaft and grip component part of the industry. Factories that make everything from titanium driver heads to cabretta leather golf gloves in China, Taiwan, Malaysia and Vietnam have been shut down for several periods due to COVID-19 over the last 18 months, and many are shutting down again right at the moment when orders should be ramping up for the 2022 lineups. It’s a juggling act that’s left many club companies almost blindsided by a demand they so desperately want to meet and yet seem to have so little control over.
“I feel like our suppliers are kind of getting a bad name and take the brunt of the abuse on this for not being able to deliver, but they’ve all done a really good job of getting us more product than we’ve ever asked for in the past,” Ping’s Solheim said.
Even domestic operations like ball plants are fighting challenges in getting the ingredients to make their products. The deep freeze in Texas this winter took important chemical plants offline, slowing the delivery of a key polymer that golf ball companies need. Of course, that polymer is also used by bigger industries than golf who are more comfortable paying higher prices to hold their place in line, as it were.
But even without factory shutdowns or raw material shortages, shipping costs and delays have provided their own headaches. Some golf companies have seen container costs increase tenfold at one point. This is not a hidden problem, though. Both of golf’s premier publicly traded companies, Callaway and Acushnet, repeatedly mentioned supply chain challenges on recent earnings calls.
It’s a problem when one ship can’t get through, but when record highs of 30 or 40 are anchored outside the ports of Los Angeles and Long Beach waiting to get clearance to dock and unload (as has been the case in August), that becomes stifling for an industry that from every corner is, as Acushnet’s Maher recently put it, “selling everything we can make.”
Chris Wycoff, who runs the SwingFit custom fitting operations in South Carolina and Florida, even resorted to tracking cargo ships online on some specialty shaft orders.
“We checked in every morning to see if it had pulled anchor and moved up to be unloaded. It was tied up just offshore for over six weeks.”
It’s actually more dramatic than that. David Walker is the general manager of the golf division at True Sports, parent company of industry shaft giant True Temper. Walker says the company’s plant in Amory, Miss., which has been making steel shafts for six decades, is making more steel shafts now than, not only, when all iron shafts were steel, but so were all wood shafts. All that booming business sounds like the best of times until chasing demand 24/7 can make it feel like the worst.
“I think it’s somewhere in between,” Walker said. “It should be the best of times from a sales perspective, but half of our business is satisfying our customers and our customers’ customers, and we’re having a hard time doing either one of those right now. But we’re trying as hard as we can, and everybody knows we are.”
For perspective, Walker rightly notes that at the start of the pandemic, shaft orders almost instantly went to zero as big equipment companies scrambled in the midst of uncertainty. It was six months before True Temper’s shaft business could even adequately get back to a normal cadence. Trouble was, almost the instant retail came back, demand relentlessly became hyper-normal, compounded by local labor shortages despite paying higher wages. True Temper is basically one step removed from the steel mill, but in the current environment there’s just not enough raw steel to get a hold of to create the array of shafts it offers.
“My customers are still telling me that whatever you ship us, it’s going to get put into a golf club,” he said. “Just get us whatever you can because it’s going to turn into a sale. So it’s a balancing act.”
That’s certainly a better problem to have than the alternative, yet as another retailer put it, “Business has been historic, but on the other hand, you really think what could it have been?”
The simple truth, of course, is that the golf business as currently constructed never could have met any such demand. The capacity doesn’t exist.
“Steel shafts is really a great little microcosm of what’s happening all over,” Solheim said. “There are only a few companies that make steel shafts. And they’re all basically tapped out, and you can’t instantly increase capacity. It’s a long process. True Temper is a huge facility with big equipment where you can’t just say ‘Hey, let’s get another one of those,’ and Amazon Prime brings it over that afternoon. So it’s just a great example of when the demand is greater than all the capacity combined, something has to give. So that whole time you’re waiting for more capacity, you’re just falling further and further behind.”
It’s no surprise then that retailers are increasingly getting messages about delays or even unexpected price increases for new or even existing products.
“Business has been historic, but on the other hand, you really think what could it have been?”
“I cannot stress enough the concerns that we have regarding the availability of inventory,” said Jason Fryia, owner of Golf Exchange, a five-store chain in the Cincinnati area. “Timelines on custom orders have not improved, and I honestly think they’ll get worse before they get better. In the last week or two, we’ve all received similar phone calls and letters from the game’s largest and most popular manufacturers warning us of the issues they are experiencing, and I think everyone is hesitant to try to predict when it will end. I believe the issues facing the manufacturers will go well into next year.”
Callaway CEO Chip Brewer believes that his team has adapted well to the challenges but acknowledges that it’s a problem that will require constant flexibility and adaptation. Specifically, he noted how Callaway was having to make decisions at mid-summer on whether to devote the already-constrained manufacturing resources to meet the demands of current products or ramp up for 2022’s new products. The company also announced it had shifted some of its production in the third quarter out of Vietnam facilities that were suffering another round of COVID-19-related shutdowns. That move also helped to boost the company's projected revenues for 2021 to nearly $3.1 billion.
Brewer cited the strength of the company's "diversified portfolio but also our operational flexibility," but while he admitted "our visibility in the remainder of the year remains murky, we are excited about the strong growth embedded within our unique platform of businesses."
“We are using that past experience to estimate that,” he told investors during an earnings call in August. “But there's always a chance that there's more volatility than what we're projecting. But in today's day and age, anybody that tells you they know for sure is not being completely honest.”