Golf equipment sales out of the bunker?
The golfing world is watching to see if the outstanding shotmaking and putting that propelled Phil Mickelson to a win at the Shell Houston Open last weekend will continue, and allow him to capture a fourth Masters tournament title.
A memorable back nine in Houston from Callaway Golf Company's highest-profile endorsed player might now help generate enough interest in its RAZR Hawk driver and Tour i(z) golf balls, that Mickelson will use in Augusta this week, to help return the firm to profitability.
That is something it hasn't enjoyed since 2008 when it earned $66m on revenues of $1.1bn.
Callaway Golf's 2009 and 2010 revenues were about 15% less than in 2008 and it recorded losses of nearly $21m in 2009 and more than $29m in 2010 as the recession hit the golf equipment industry hard.
New $400 drivers were easily-identifiable "discretionary expenditure" for golfers more concerned with solidifying their personal financial situation than gaining three-to-five yards off the tee.
And the economic downturn affected Callaway Golf Company's chief rivals, TaylorMade and Titleist, equally badly.
Both brands have suffered volume and revenue declines since the onset of the recession in 2008.
In fact, industry-wide equipment sales - as compiled by Golf Datatech - have declined by about 18% since 2007.
Revenues from high-margin drivers and metal woods fell by nearly 30%, sales of iron sets declined by 20%, and putter revenues dropped 24% between 2007 and year-end 2010.
Ban gives boost
Indeed, the only equipment category to grow since 2007 has been wedges.
Their sales enjoyed a boom after the USGA (United States Golf Association) and R&A's (Royal & Ancient Golf Club) 2008 equipment ruling banning the production of wedges featuring squared grooves after 31 December, 2010.
However, the ruling allowed high-spin generating wedges purchased before 2011 to be used in recreational play until 2024.
This generous accommodation for the 99-plus percent of golfers not involved in tournament play drove wedge sales up by 23% in 2010 alone.
Golfers rushed to stock up on Titleist Vokey Spin Milled wedges, Cleveland Golf Zip Groove wedges, and Callaway Golf Jaws Mack Daddy wedges before the ban went into effect.
The rush to purchase squared groove wedges also allowed the average selling price for wedges to reach a record $97 in 2010.
The USGA's 1998 limitation on driver performance set off a 32% decline in the average selling price of drivers and fairway woods since 1997, so 2010 could also well mark the high point for wedge prices.
Meanwhile, the decline in equipment sales has affected also bags, shoes, balls, gloves, as well as all types of clubs.
Year-on-year sales declines first appeared in irons, golf balls, and bags which began selling fewer units in mid-2006.
The 12-month rolling decline in golf ball sales coincides closely with the decline in rounds played, which according to the National Golf Foundation reached a peak of 532.3 million in 2006.
Golf Datatech statistics also show that mid-2009 marked the worst of the recession for the golf equipment industry.
At that time year-on-year sales declines hit 12% for golf balls, 16% for bags and footwear, 17% for drivers, irons, and putters, 22% for fairway woods, 24% for hybrids, and 4% for wedges.
However, since that mid-2009 point, the sizes of year-on-year sales declines have been gradually getting smaller.
In fact, some product categories were approaching an annual growth towards the end of 2010.
Growing categories in late-2010 were, of course, wedges with a 24% year-on-year increase, and fairway woods with a 4% improvement.
By the turn of 2011 sales of irons, bags, footwear, balls, and gloves had stabilised, although sales of putters, hybrids, and drivers continued to fall by 5% to 10% below sales levels a year before.
"It appears that all of the equipment product categories have bottomed out and sales are now recovering," says Tom Stine, co-founder of industry market research body Golf Datatech.
"In fact, nearly all have returned to positive growth on a rolling 12-month basis.
"The down economy slowed or delayed new equipment purchases, but now it would seem there is a real pent-up demand."
Equipment manufacturers are wagering that 2011 will indeed mark the beginning of a turnaround in their industry.
There were major product launches in January that included Callaway's RAZR Hawk driver, and TaylorMade introduced the all-white R11 driver that was used by Rory Sabbatini in his win at the Honda Classic last month.
As exciting a finish that we might see in the Masters, the overall economy must improve considerably before rounds played or equipment sales are likely to return to the 2007 levels.
Even though sales declines have stopped in some equipment categories and the rate of decline has slowed in drivers, the betting odds seem better that many golfers will continue to hold off on the purchase of an R11 or other new driver until signs of a vibrant economy return.
John Gamble is a Professor of Management at the University of South Alabama and has written extensively about the golf industry. He is also co-author of Crafting & Executing Strategy: The Quest for Competitive Advantage.