Dominance Replaces Debits at Taylor Made Golf
A metal “wood” makes a distinctive sound when it hits a golf ball, a metallic ping completely different from the sound of a traditional wooden-head club. To the people at Carlsbad-based Taylor Made Golf Co., the special sound of metal wood meeting ball sounds like the ringing of a cash register.
Since its acquisition four years ago by Salomon, a French sporting goods company specializing in ski equipment, Taylor Made has gone from near-devastation to market domination, and this year is expected to do more than $80 million in international sales, primarily in the metal wood market.
When Taylor Made was founded in 1979 as an individually owned company--with a set of metal woods as its sole product--the clubs were considered nothing more than a gimmick, a novelty. Now metal woods are close to becoming standard equipment among golfers. More than 70 companies are producing them--and Taylor Made is the dominant force in the metal wood market.
A Favorite of Pros
“Now Taylor Made is synonymous with metal woods,” said John Boykin, publisher of Golf Industry magazine.
At the men’s Georgia-Pacific Atlanta Golf Classic in June, 49.3% of the pros used Taylor Made woods, according to a report by the independent Darrell Survey company. The runner-up was MacGregor with 15%. Of the pros using only metal woods, 91.5% used Taylor Made, according to the survey.
As Taylor Made discovered years ago, golf consumers echo the tastes of the professionals. In fact, both Taylor Made officials and industry sources attribute much of the company’s success to its aggressive marketing efforts on the pro tours. All of Taylor Made’s print and video advertisements tout its tour successes--complete with pictures of a smiling Lee Trevino and other pros holding trophies overhead. Taylor Made even has custom vans following the men’s, women’s and seniors’ tours to repair clubs for the pros.
“There are other companies with clubs as good as Taylor Made, but they’re just not marketed as well as Taylor Made,” said Mike Doris, club salesman for the San Diego Golf Mart store.
Taylor Made sales surged from $2 million in 1981 to almost $12 million in 1982, thanks primarily to its participation on the pro tour. Jim Simons and Rod Streck were the first professionals to use the clubs. When Simons won the prestigious Bing Crosby Pro-Am tournament, Taylor Made sales took off.
And it wasn’t the Sunday hacker buying the clubs. Taylor Made products are priced in the high range. Its metal woods retail for $90 to $200 each, depending on the material used in the shaft. Irons sell for about $630 a set.
Not Aimed at Beginners
According to the Darrell Survey, 51.4% of the players using Taylor Made have handicaps of 5 or under. Thirty-two percent are under 30 years old, the survey found.
“If we targeted beginners, they probably wouldn’t care at all what we do on the tour,” said John Steinbach, Taylor Made’s director of marketing. “Golf’s biggest sphere of influence starts with the tour.”
Many professionals began using Taylor Made clubs even though they were under contract to other companies. Most equipment contracts require the pro to carry 10 or 11 clubs from the sponsor company, although they are allowed to carry a total of 14 clubs. Captivated by the possibility of hitting the ball farther, pros started carrying Taylor Made woods as extra clubs, at no cost to Taylor Made.
Not only did the pros use individual Taylor Made clubs, but also the company was one of the first to aggressively market and sell individual clubs to the public.
“Taylor led the way in selling individual clubs,” said John Minkley, co-owner of Darrell Survey. “They opened the door for everybody.”
This so-called “utility wood” market generated $20 million in sales in 1986, according to Golf Industry magazine.
Not a Novel Idea
Metal woods were hardly a novel idea when Gary Adams founded the company. They were commonly used on driving ranges, but they were considered too expensive to produce and too inconsistent to capture a mass market.
Adams, the son of the golf pro at McHenry Country Club in McHenry, Ill., mortgaged his home there to raise $30,000 to start the company. He correctly predicted that two factors would change the market for metal-head woods.
For one, the new two-piece balls (with a solid center and cover) seemed to fly farther than the then-standard three-piece balls (with a core, wrapping and cover) when hit by a metal wood. Second, a new investment casting procedure made it more economically feasible to mass-produce quality metal heads.
“Taylor Made was the first to do metal woods in a big way, and everyone else jumped on the bandwagon after that,” said David Barrett, associate editor of Golf magazine.
As the company started to expand, Adams established a production facility in Vista.
“The California market is really the leader in the industry,” he said. “What happens out here goes across the country.”
Bottom Dropped Out
In 1984, the bottom dropped out of Taylor Made’s business as the club business in general felt the effects of a heavy season of rains in 1983. In addition, the metal-wood market was suddenly flooded with companies.
For the first time in its short history, Taylor Made’s sales and market share dropped. There were delivery problems. The McHenry plant was closed and the production facilities consolidated in Vista.
“The company was clearly undercapitalized,” said Boykin of Golf Industry. “They didn’t have enough pros (under contract) to really establish the brand recognition.”
It was a classic negative scenario for a start-up company: Supply was far outpacing demand, driving down prices.
“There was a glut in the marketplace, and clubs were selling at ridiculously low prices,” Adams said. “Rumors in the industry said that, if we didn’t go public, we would go broke, which wasn’t true. We ended up with 60% of our accounts 90 days past due.”
Adams needed capital.
“It was a devastating situation,” he recalled. “I had something I had started that had created a whole excitement. It was hard for me to accept that a company worth $40 million--if we had gone public in 1983--was really in the hands of a buyer in 1984.”
A Paltry $400,000
Salomon stepped in with the needed capital, acquiring Taylor Made for what now seems a paltry $400,000 plus $2 million in debt equity, according to current President and Chief Executive Officer Jim Reilly, who took over Taylor Made in late 1987 after serving in other posts with Salomon. Taylor Made was Salomon’s first venture into a sport other than skiing.
The golf industry appealed to Salomon, Reilly said, because it was a worldwide market without a single dominant company. Golf Industry magazine showed sales of $91 million in woods alone in 1986. More than $172 million in irons were sold the same year, according to the magazine.
“It was an area of the sporting-goods business the least affected by industrial technology, in terms of building and maintaining quality goods,” Reilly said.
Salomon’s first goal was to expand Taylor Made’s operations.
“When Salomon bought it, Taylor Made was essentially an American company with poor international distribution,” Reilly said.
Taylor Made’s American production was moved to a plant in the Palomar Airport area of Carlsbad. The company recently moved its operations into a new, 80,000-square-foot plant.
Assembly and sales operations were set up in Japan and Great Britain.
In the most recent fiscal year, Reilly said, Japan accounted for more than $18 million of Taylor Made’s sales, Great Britain more than $7 million.
Line of Accessories
The company also has a new research and development facility in Annecy, France, Salomon’s home. There, a complete line of Taylor Made accessories is being developed.
“Salomon’s people are notorious for extensive research and development,” said Boykin of Golf Industry.
Despite increased competition, he said, Taylor Made will survive because “they’re one of the big boys now.”
Besides the woods and irons, Taylor Made will have a full line of golf bags, gloves and a new putter on the market within a year.
The staple of the company, however, is still the metal wood, which accounts for about 80% of Taylor Made’s business, said Steinbach, the marketing director.
The August issue of Golf will feature an article on the wood market titled “Dead Wood.”
“Woods made of wood are an endangered species,” said associate editor Barrett. “There will probably be a day when people will ask why they call them woods.”
