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How the Best-Known Brand in Golf is Navigating the Global Economy

Callaway golf balls
Like a weekend duffer playing through a summer squall, the golf industry has weathered brutal conditions in recent years. Callaway, the Carlsbad, California-based golf equipment maker, has hardly been immune to the ill winds. After banner years in 2007 and 2008, the company encountered the economic storm that struck the entire industry in 2009, and saw an annual revenue drop of 15 percent.

Like any struggling golfer, Callaway has worked hard on recovery shots, and the company is now on the upswing, albeit a slow one. One way it has rebounded is by growing overseas. As it stands, Callaway generates roughly half of its roughly $951 million revenue outside the United States, in markets like Japan, Western Europe and Korea. That percentage is likely to increase as golf goes through a global demographic shift.

Like TaylorMade, Titleist, Nike and other competing brands, Callaway licks its chops when it looks to nascent golf markets in China and India, both of which are seen as having giant potential. In India today, there are around half a million golfers, a figure that is expected to quadruple in the next five years, according to the Indian Golf Union, the governing body of the sport in India. China's market is also swelling swiftly. A boom in course construction is just one indication of the country's burgeoning leisure class.

"When you look at the macro-economic climate in China, it's easy to see that many people have moved beyond mere survival mode," says Thomas Yang, Callaway's senior vice president of international business. "The standard of living has changed. People have different expectations. Golf is one of the important lifestyle status symbols."

Even before the crash, Callaway was well entrenched in Asia, having launched Callaway Golf China in 2006. Since then, its business in China has increased tenfold. It posted a profit after just three years. In early 2010, the company further extended its international reach with Callaway Golf India, gaining a foothold in a country where equipment sales are growing at roughly 25 percent a year. Both Asia divisions give Callaway control of sales and distribution in markets where it once relied on costlier third parties.

Taken together, China and India still represent less than five percent of Callaway's total business. But, Yang says, the possibilities are eye-popping. If golf in China achieves just a quarter of the market penetration it now enjoys in Japan, which would translate to 28 million new golfers—the size of the golf market in the United States.

"If the same thing transpires in India," Yang says, "you're talking about twenty-four million new golfers there."

To solidify its place in these emerging markets, Callaway has also inked sponsorship deals with some of Asia's leading players, including India's Jeev Milkha Singh, Thailand's Thongchai Jaidee, (and Momoko Ueda, a Japanese-born stalwart on the LPGA Tour.)

Of course, nothing is guaranteed.

But when Yang looks to the future, he sees promising signs for international golf. Among them: the 2016 Olympics, where golf will make its return to the Summer Games, after a more than 100-year absence. As the Games approach, and the International Golf Federation establishes rules for Olympic play, Yang says he expects to see a rise in junior golf programs and other government-sponsored enterprises that lay the groundwork for growth in the game.

"Obviously, trying to forecast the future is partly a theoretical exercise," Yang says. "But no matter how you look at it, these are key strategic markets for us and a very significant part of what we do."

Photo: Flickr/Justin Taylor

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