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Golf equipment: cause for concern?

It's been a peculiar period for TaylorMade, with oodles of good news interspersed with ample amounts of the 'less good'. This was perhaps best summed up just before the Players Championship a fortnight ago, as they confirmed a $100 million equipment deal with Rory McIlroy on the Tuesday, only to announce the following day that their brand - which falls under the Adidas Group’s umbrella - had been sold as part of a relatively cut-price $425 million fee to a private equity investor.

The sum may appear eye-watering, but compared to the current market capitalisation of Callaway ($1.24 bn), and the going rate for Titleist's parent Acushnet ($1.2bn in 2011), it appears to be a bit of a snip.

Yet, apparent fire sale aside, TaylorMade have quietly assembled an awesome battalion of brand ambassadors on the course, with six of the world's top 12 players currently under endorsement. Throw a certain Tiger Woods into the mix, along with Kim Si-Woo, victor at the Players Championship, and it’s clear that TaylorMade’s share of voice in the professional game is pretty resounding.

It did, however, add fuel to a question I have always attributed a fair degree of thought to: does it make an iota of difference to consumers what type of club the pros use? Or at least enough of a difference to recoup the extortionate amounts of money splashed out on player endorsement contracts?

I don't command a significant enough Twitter following to initiate a survey that could meaningfully tackle this conundrum. But one person who does is Golf Channel Equipment Insider Matt Adams, who last week asked his followers what influence tour pro endorsements had on their purchasing intentions.

Out of 6 227 respondents, just seven percent said tour pro endorsements were "very important" to their decision. Some 28 percent responded with "somewhat important", while a staggering 65 percent dismissed it as "not important at all".

Now a Twitter sample such as this is hardly an iron-clad dataset from which to make watertight declarations and decisions. But these numbers are nonetheless a strong indication that TaylorMade may not be putting all their eggs in the best possible basket.

Bear in mind too that Adidas’s golf equipment division has been absorbing losses of $75-$100 million per year. True, this figure also comprises other brands such as Ashworth and Adams, whose levels of performance of late have been particularly poor. But it doesn't reflect well on TaylorMade either, and one has to question the wisdom of throwing money at the world's best players, rather than channelling it on issues closer to home.

The flip side of the coin is that TaylorMade's drivers, woods and balls are indeed market-leading, and a natural magnet for the likes of McIlroy and Co anyway. And after a difficult few years, TaylorMade's financials from this year's first quarter showed sales have risen by four percent year on year, so no one should suggest anything outlandish about their status as a going concern.

The firm who purchased their golf equipment division, KPS Capital Partners, also know what they are doing, given that they manage more than $5 billion worth of assets in various sectors. In that sense, the fact that private equity firms are being drawn in could be seen as a stamp of approval for the future of both TaylorMade and golf equipment manufacturing and trading as a whole.

But after Nike's decision to get out of dodge in the golf equipment game last August, along with bankruptcies of the likes of Golfsmith in 2016 too, seeing Adidas jump ship begs further questions about the future of the equipment industry. Questions to which I, for one, simply do not have the answers.

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Michael Todt
Golf equipment: cause for concern?
It's been a peculiar period for TaylorMade, with oodles of good news interspersed with the 'less...