Callaway is first and foremost a golf equipment company, the second-largest in the industry behind Acushnet. But as Callaway has steadily grown in recent years, it’s also evolved -- positioning itself as an active lifestyle company.
The company originally made famous by the Big Bertha driver raked in net sales of more than $1.24 billion in 2018, a 19% increase from the previous year and a noteworthy trajectory in a competitive industry. Callaway’s sales total included $717 million worth of clubs, a healthy revenue stream led by the performance of the brand’s Epic line and Jailbreak technology, and $196 million worth of golf balls.
Revenues also included $330 million in apparel and other accessories, a robust figure attributable in part to the acquisitions of the TravisMathew and OGIO brands in 2017. The most recent addition was a $476 million purchase of the premium outdoor apparel company Jack Wolfskin, a move completed this year that positions Callaway for further growth in the soft goods category. While Callaway’s net sales of irons (+26%) and golf balls (+20%) both enjoyed noteworthy increases, the upward trajectory in its gear/accessories/other category was even more significant: +36%.
Investment and innovation have Callaway eyeing continued growth in 2019.
“We have strong brands and strong positions,” noted Callaway President and CEO Chip Brewer. “We see further opportunity and so we’re growing in that space as well. There will be some shared resources, but mostly behind the scenes, not from a consumer perspective. We’re not going to co-brand Callaway and OGIO and TravisMathew and Jack Wolfskin. Those are separate brands from a consumer perspective. But there will be some nice synergies from a business perspective. It certainly augments and adds to the overall scale of our business and its growth potential.”
Brewer said Callaway is excited about its evolution and the future opportunity it presents, but at the same time the company isn’t trying to blur its message to consumers.
In addition to its growth outside the premium equipment category, Callaway continues to invest aggressively within its golf club and ball space. Callaway is putting $35 million into its golf ball facility in Chicopee, Massachusetts, looking to further its double-digit growth trend over the past five years. Similar investment on the research & development side has yielded advanced club technologies such as Jail Break and the artificial intelligence platform used to create the new unconventional face in the Epic Flash Face driver.
By incorporating “machine learning,” Callaway’s new supercomputer cycled through 15,000 iterations of face design, learning from each version while taking human influence out of the equation for the Epic Flash. A typical driver face design takes eight to 10 iterations.
“This artificial intelligence technology is going to give a nice advantage in the driver category and I think it’s going to set as a technology platform that will permeate the rest of our product line going forward,” Brewer said. “We’re very excited about that.”
The technological advances come with an associated cost. The retail price for the Epic Flash is $530, notably higher than most other drivers on the market.
“We’ve been able to deliver innovation that the consumer has valued,” said Brewer. “So, you can’t raise price unless you deliver a benefit that the consumer gets excited about.
“We deliver product that we think has an edge in the market and the consumer has been willing to pay a slightly higher price for higher performance,” he added. “Will that taper off? I think it’s a cost benefit, to a degree. If you don’t deliver enough performance, you probably can’t raise the price. If you do, you probably have some opportunity there. We’re continuing to invest back into the business, into the R&D to be able to deliver product that sets itself apart and then we worry about what the price might be at that stage. But the product leads it.”
Whether its equipment or outdoor apparel, Brewer says he’s bullish on Callaway’s continued growth potential. The brand is more global than ever, with almost 60 percent of projected revenues for 2019 expected to come from outside the U.S., including particularly strong positions throughout Europe and Asia in addition to the formidable domestic base.
“All of those positions can help each other,” Brewer said. “We’re not immune from whatever the headwinds are that always exist around the world. But from a big picture basis, the business world is in a good spot right now globally. We’re cautiously optimistic on all that.”
RELATED CONTENT:
Callaway's New $530 Epic Flash Driver Used AI to Design Club Face
Can Clear Become the PXG of the Golf Ball Business?
Annika's Golf Apparel Line Keeps Delivering, Just Like She Did on the Golf Course
Why TaylorMade's $250 Million Spider Putter Line Changed its Look
