The Smile of the Tiger might have been the title of Nike Golf's sprawling exhibit at the late January PGA Merchandise Show in Orlando. Upbeat images of Nike's star endorser were everywhere, mirroring the sunny mood in Swooshland. After five years of erratic shotmaking, the golf division of the $9 billion-a-year shoe and apparel manufacturer seems to have found its groove.
When Tiger Woods switched last year to Nike's Tour Accuracy, the golf ball caught fire. In the year ending November, 2000, Nike Inc.'s share of the $750 million golf ball market soared from 0.9% to 3.9%, posting gains in eight straight months. Its ball sales leapfrogged entrenched companies like Callaway (ELY), TaylorMade, and Slazenger. Now, the buzz is about equipment Nike isn't even selling--clubs. Nike (NKE) has agreed in principle to buy designer Tom Stites' firm, Impact Golf Technologies in Fort Worth, and prototype irons are already showing up on the PGA Tour. David Duval played with a set in the Jan. 25-28 Phoenix Open--though not for long (he failed to qualify for the last 36 holes of a tournament for the first time in almost two years).
Nike officials aren't saying when the clubs will go on sale, though speculation is that it won't be before 2002. One reason for the wait: Nike is unlikely to sell the clubs before Woods begins playing them on the Tour. Nike Golf President Bob Wood maintains there is no timetable for that. "This is Tiger Woods we're talking about...," he says. "We're going to work with him."
Despite the rapid growth of Nike Golf, revenues of about $200 million last year make it an also-ran compared with Acushnet Co., which owns the Titleist brand ($965 million), and Callaway Golf Co. ($840 million). But when Nike clubs begin appearing, the company might vault into the top tier. "Nike could be the biggest company in golf in five years," says analyst Casey Alexander of Gilford Securities Inc. in New York. "Tiger is...the lightning rod in this business."
WARNING SHOT. Not everyone sees Nike as a future dynamo, though. Ely Callaway, the 81-year-old founder of Callaway Golf, cautions Nike Golf against trying to replicate Tiger's success in selling golf balls. Customers may reach for a $4 golf ball because Woods uses it, says Callaway. But he doubts they'll cozy up to an $850 set of irons for the same reason. "A ball is looked upon as more of a commodity. With a club, there's a very emotional attachment. People go to bed with their clubs," Callaway says.
"I have a lot of respect for [Nike CEO] Phil Knight, so don't let this come out as flippancy," Callaway adds. "But the best thing he can do is listen to me and stay out of the golf club business.... And we're not scared of him." Such talk brings a shrug from Nike's Wood. "There were skeptics about [Nike's] ball venture, too," he says. "Mr. Callaway is just trotting out the same thing."
It's not only Nike's golf club plans that have competitors on guard. The company's aggressive marketing tactics are rankling rivals, too. Last month, Acushnet, which holds nearly 40% of the golf ball market, filed a federal lawsuit against Duval and his agent, International Management Group, alleging breach of contract. Duval wants out of his five-year Titleist deal, and Titleist officials protest that Nike has encouraged his exit.
There have been other clashes between newcomer Nike and old-line Titleist. During the 1999 U.S. Open, sparks flew over a Nike commercial that gave the impression that Tiger not only wore Nike clothes but used its golf balls. At the time, Titleist was paying Woods $4 million a year. Then last year, Nike drove the bidding for another of Titleist's top endorsers, Davis Love, to $50 million before Titleist re-signed him to a 10-year contract. Duval claims in a countersuit against Acushnet filed on Feb. 7 that the Love deal clouded his status as one of Titleist's most promoted players. Clearly, elbows are getting sharper, but these may be mere skirmishes compared with the fight ahead. And in that one, Nike will be swinging clubs.
By Mark Hyman in Orlando
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