Callaway to Roll Out Line of Golf Balls
Callaway Golf Co., which took the golf world by storm by proving that casual players will pay hundreds of dollars for a club made of space-age materials, is taking a swing at golf balls.
But the Carlsbad-based company is expecting a more modest reaction to its entry next year into the highly competitive market for premium-priced golf balls.
“We don’t have any expectations of suddenly knocking the leaders, Titleist and Spalding, out of the box at all,” said Chairman Ely Callaway, the 79-year-old founder of the company.
“We do not expect to be an overnight sensation,” he said. “We’re going in it for the long run.”
Callaway said the company plans to introduce the balls in January at golf’s giant PGA Merchandise Show--where rival premium club maker Taylor Made debuted its first ball this year.
Callaway has plenty of company in the market for premium-priced golf balls from longtime leaders Spalding Sports Worldwide, which makes the Top-Flite brand, and Titleist, made by Fortune Brands, along with newcomers Taylor Made and Nike Inc.
The difference, Callaway said, is that his company has started its ball from scratch and will have spent some $125 million before the first ball lands in the shops.
“We wanted to create our own product and our own identity, Callaway. We went a very slow and expensive route,” he said. “It’s the way we built the golf-club business.”
The U.S. market for premium golf balls is worth $700 million to $800 million and the worldwide market about twice that, Callaway Chief Financial Officer David Rane said. He estimated the worldwide market for golf clubs at $2 billion to $3 billion, about half of that in the U.S.
The move into golf balls comes as Callaway is still feeling the chill from a rapid cooling of the golf-club market in 1998. In November, the company announced layoffs of 700 workers and a restructuring aimed at keeping tight control of costs.
Last week, Callaway posted a 17% rise in second-quarter net income to $24.8 million, or 35 cents a share, despite a 2% decline in sales to $229.7 million.
On Monday, Callaway shares fell 63 cents to close at $10.94 on the New York Stock Exchange.
