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February 4, 2000
Marketplace
Callaway Golf Tees Up a New Ball;
Rivals Are Grinning Dimple to Dimple
By FREDERIC M. BIDDLE
Staff Reporter of THE WALL STREET JOURNAL
CARLSBAD, Calif. -- A better golf ball?
Ending several years of intense secrecy, Callaway Golf Co. -- whose Big Bertha golf club launched a national craze in oversize clubs -- is set to unveil its first new golf ball.
And the eyes of spectators, from the fairways to Wall Street, will be on the PGA Merchandise Show in Orlando Friday, where Callaway will formally tee up its precision-manufactured sphere, which it promises will be as revolutionary to balls as the Big Bertha was to clubs.
The price is $44 for 10, at the high end compared with some premium golf balls out there. Callaway says it will spend $8 million to $10 million on marketing the ball this year, with a blitz of TV and print
ads.
Callaway isn't offering many details about the crisp white ball itself, but says one big advantage is that it will perform consistently -- something sorely lacking from most other balls, experienced golfers say.
For decades, golf-ball makers have tried fancy fillings and dimple patterns, among other gimmicks. "The ball business is a commodity business," says Robert Erb, chief counsel and head of international marketing for Taylor Made-adidas Golf Co. "At most, I can talk about more spin off an eight-iron or less spin off a driver."
The new ball is a huge bet for Callaway, based here in Carlsbad. Two years ago, the company broke ground on a
$150 million golf-ball factory, though its total annual sales last year were only $715 million. And Wall Street is jittery. Callaway's share price has fallen more than 15% since Jan. 26, when the company
disclosed that large shipments of the new ball would be delayed until later in the first quarter, and the ball had higher-than-expected launch costs. "We're dealing with some unknowns here," Ely Callaway, the normally ebullient 80-year-old founder and chief executive, told analysts on a conference call that day.
Competition is ferocious in the $1.5 billion world-wide golf-ball market, dominated by Fortune Brands Inc.'s Titleist. And two big new entrants have started producing balls in the past two years, Taylor Made-adidas Golf and sports-marketing juggernaut Nike Inc.
Worth the Expense
But Callaway says all its expense and fuss will be worth it. A walk through the 200,000 square-foot factory shows some state-of-the-art technology. Balls move through transparent tubing from one machine, which mixes the rubber formula for the core, to a battery of diagnostic machines ensuring each ball is the same. Lasers measure the depth of each of the 382 dimples. In a crucial final step, Callaway says it uses an electrical process to make the white paint bond more evenly and securely to the ball.
Then there's quality control. Each ball is X-rayed and machine-inspected before being packed or rejected. Customized software controls every step, from the milling of the rubber used for the core,
to the centering of that core, which is the engine that stores and distributes energy from the swing. A boundary layer is injection-molded, before a top layer of a proprietary mixture, largely urethane, is deposited. An employee who spots a defect can stop the flow of balls from almost any point in the factory.
"Other companies are using old tooling and old equipment, with tolerances designed to make balls for the way the game was played in the '80s," says Chuck Yash, Callaway's chief operating officer.
But there's no getting around the laws of aerodynamics -- or the U.S. Golf Association. In the name of fair play, the USGA dictates size, weight, and shape -- even the "initial velocity," or how quickly
the ball can fly off the tee. It has no fewer than 34 subdivided rules of play, and governs everything from precise minimum diameter (1.68 inches) to whether or not a duffer may wipe or blow a live insect off a ball (you can). In a defiant nod, Callaway named its ball Rule 35.
Competitors scoff at Callaway's claims about superior production. Only the best players are sensitive to slight differences in golf ball performance, some say, and even then it is impossible to engineer a ball to compensate for the unique strengths and weaknesses of golfers.
Titleist, which dominates the high end of the ball market with about a 33% share, isn't talking. But Mr. Erb, of Taylor Made-adidas Golf, whose premium Inergel ball will be a big rival to Rule 35, has
this to say: "What I'm not hearing out of Callaway is, how do the balls perform better than what's already out there?"
Some competitors offer a half a dozen or more different balls, each supposedly suited to different players in different conditions. But Callaway has only two: firm and soft. Whereas other brands usually come in flat cartons cluttered with the minutiae of comparison tests, Callaway's will be packaged in plain red or blue ones. Instead of trying to dazzle golfers with technical details in its commercials, Callaway will use tongue-in-cheek spots with regular golfers marveling about the ball. "It's like a heat-seeking missile," says one. "It's got neat antigravity moon dust stuff," another says.
Among other catch phrases that will show up in TV commercials: "Firm or Soft? Is it a red day or is it a blue day?" and "This ball has got to be illegal." Says Jim Matthews, chief executive of Matthews/Mark, San Diego, Callaway's ad agency, "Heck, we'll make fun of the technology."
Callaway has targeted 10% market share for golf balls in the long run, a level that would offset any blow to Callaway's costly club business in a recession. "It's a consumable, not like buying a $500 golf club," says Mr. Yash.
Lynn
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