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Monday, November 22, 2010

Titleist Going Solo?

Rumors run amok that pressure from certain key investors in Fortune Brands is going to force the NYSE quoted company to split their business into several parts. Fortune owns many great brands like housewares maker, Moen, liquor brands like Jim Beam and also the number one golf revenue generator, Acushnet. The brands within Acushnet are Titleist, Pinnacle, Scotty Cameron, Vokey Wedges and Footjoy shoes.

As an investor I'm all for unlocking value in a share price. The question is ...Who will buy Acushnet?

The suitors would naturally include industry giants, Callaway, Nike and TMAG. Let's have a brief look at these and see if there is a fit.

Firstly Callaway. I don't see this one. As much as Callaway would like to buy their nemesis, their market capitalization of $450M isn't going to support an acquisition of Titleist's reported $1B plus sales.

Nike and Titleist together. In England, we like to say "like chalk and cheese". In America you say "oil and water".  It means the same thing! The culture clash would keep HR busy for an eternity. Not going to happen.

TMaG (TaylorMade adidasGolf) is another potential candidate who would be anxious to get their hands on Titleist's hugely profitable golf ball business. They certainly have the money as the German giant, adidas generates revenues that the golf business can only dream about. As well as facing US monopoly issues, rather like Nike I just don't see the cultural fit.

The natural suitor comes from the East - Japan, Chaina, Taiwan, Korea. They have the money, especially with the exchange rate the way it is and they like "blue chip" brands like Acushnet. The company throws off a good amount of cash and it would be a great story for a Far Eastern company to own this prestigious US brand.

It's all conjecture at this time but good fun to speculate. Titleist and Footjoy under the Acushnet banner remain one of the great legacy brands of the game of golf and a company with deep(ish) pockets will pay for the privilege of adding it to their assets.

Wednesday, November 17, 2010

Scotty Cameron - The Money Machine

Every couple of months, more during the season, I get an email from Scotty Cameron. Not actually from Scotty to me personally. I'm one of presumably hundreds, maybe thousands who are members of the Scotty Cameron Fan Club. We pay for the privilege - $100 or so for an annual membership to Club Cameron. Why do I do this? Well, I firstly like Scotty and what he does with putters and secondly I am a very interested observer in the business practice that essentially asks me to pay a fee to look at the merchandise. Great concept! Last time I looked Louis Vuitton, Hermes, heck, even Harry Winston on Madison Avenue let me walk into their shop for free.

Scotty has achieved the seemingly impossible. Make people join a club, put up the merchandise online and let the feeding frenzy begin. Members of the club, (who have 48 hour exclusive access) are literally fighting one another electronically to buy something with a Scotty dog embroidered into it. Amazing concept. Amazing execution.

Just for fun let's do some back of the envelope math. Let's say scottycameron.com launches a new headcover for $72 plus shipping plus tax. Well, he buys these from AM & E for, say $20, ok $25. He sells 2010, yes TWO THOUSAND AND TEN (the same number as the year) in one day! The gross for the day is a cool $144,720 (excluding the additional mark up on shipping). Net for the day, probably around $95,000. And, and it's a big AND, he does this 10 times a year. That's a Million Bucks a year, net from headcovers. That's not including golf bags, hats, even ladies tote bags and those pesky membership fees. Oh yes, he also sells putters and they are not cheap.

Today's offerings were sold out in a matter of hours and often with leather headcovers in limited quantities they sell out in minutes...minutes! The man is a marketing genius and no one has yet been able to replicate the model in the golf business. If  Titleist is indeed split up from Fortune Brands which is in the offing it will be interesting to see what happens to the money making putter maker.

Monday, November 8, 2010

10 Things We Love About The Game Of Golf (Part 2 - The Last 5)

Continuing with our Top 10 here are numbers 6 - 10.

6. The Masters Tournament. For me it is the Number 1 Major. Played each year since 1934 at Augusta National nothing will ever signal the opening of the golf season like The Masters. There are many vocal critics of the golf course, saying it's over manicured, too green, too long, just too much! I have had the good fortune to play Augusta on a number of occasions and in my opinion it is still the best golf experience in the world, bar none.
And none of the critics harping on matters come week 2 of April. The par 3 tournament featuring past champions and then 4 days of top drawer golf follow around Bobby Jones' place. The green jacket, the awkward closing ceremony in Butler Cabin, the schmaltzy music, Jim Nantz's "Hello Friends", CBS's coverage featuring actual golf (rather than ED drug ads) and a truly great golf course. It's the Masters.

7. Golf Literature. There are some great books written about the game of golf. History books, instructional books, architecture books, psychology books, business books, biographies. (we'll follow up some time with our favorite golf book list) Golf lends itself well to be written about -  a simple, yet incredibly complex game played for centuries all around the world by all ages. My favorite golf book is Golf in the Kingdom by Michael Murphy - enough of a favorite to name the company after one of Murphy's characters, Seamus MacDuff.

8. Caddyshack. "Gunga la gunga", "so I've got that going for me, which is nice", "Spalding!", "looks good on you though", "pool and a pond...pond would be good for you"....stop, stop, we could go on for the rest of the blog just dropping memorable lines from the one, the only golf movie. Is there a real golfer out there who hasn't done their Bill Murray impression of caddying for the Dalai Lama? I even have Al Czervik's brazen entry with car horn blarring across the tee to Bushwood in his red Rolls Royce as my ringtone - you know the one!
It's golfs Citizen Kane and essential viewing every 6 months. "Be the ball Danny"!

9. Lists. Can you name the Top 10 tennis courts or soccer pitches in the world. No, not the stadium, the pitch! Doesn't really work does it. But with the game of golf arguments about the best hole, course, resort, public course, private course play out each and every day. The Golf Magazines are at the forefront with their Top 100 lists and the bi-annual architectural articles create endless comments and equal scorn. ( I should declare that I am on the panel for one of the Magazines, but am simply a lone voice amongst many)
The lists are great fun - simply that. They are a great way to list great courses on 2 pages and hopefully sell some magazines. No one course is really the winner, there are many great courses in the world and each of us has a preference for one over the other. There is no "Best Course in the World". The best is purely a personal preference. If pushed I would list Cypress Point at the top of my pile, but I'll also tell you I have 11 in my Top 10 confirming that I am tad confused. You can see my list at the bottom right hand side of the Blog.

10. The Icons. Arnie, Jack, Bobby, Lee, Ben, Byron, Tom, Sam, (yes, Tiger too!). Who did I miss?

Friday, November 5, 2010