SBJ/May 4 - 10, 1998/No Topic Name

Overseas markets in a world of hurt

The overseas market is typically a cash cow for American golf companies, but the recent financial turmoil in Asia is taking its toll, causing skittish developers to shelve plans for new courses and slowing the once blooming business.

"There’s been a bucket of cold water thrown on the Asian market," said David Yates, vice president for golf at Cleveland-based IMG, which helps run the European PGA Golf Tour and three tournaments in Asia and the Pacific Rim. "Maybe it grew too fast, but everything is cyclical and in a year to two there could be an upswing."

The overseas golf-equipment market is estimated to be a $2 billion business, made up of 11 major markets. In the past five years, much of the growth of the international golf market has centered on Southeast Asia, particularly in Korea, Singapore and Hong Kong.

"In Asian culture, golf is the commercial structure’s game of choice," said Fred Port, president of Callaway Golf International, where international sales at California-based Callaway Golf Co. are about $300 million, up 300 percent in the past five years. "The Asian people are fanatical about the game and it’s an important market for us."

Unfortunately for Callaway and other American golf companies doing business in Southeast Asia, golf is a sport that is directly linked to a nation’s economy. As disposable income grows, so do expenditures on luxury items like golf. When Asian currency markets crashed in 1997, so did the golf business.

AROUND THE GLOBE

The Number of Golfers, Golf Facilities and Golf sales

Outside the US

No. of

No. of

Wholesale Market

Market

Golfers

Courses

(in Millions)

Europe

5,440,000

4,714

$348

Japan

13,200,000

2,430

$820

Asia (excluding Japan)

1,950,000

701

$151

Canada

2,400,000

1,224

$100

Australia/New Zealand

900,000

1,308

$44

South Africa

300,000

358

$28

Rest of the World

220,000

578

$22

Total

24,410,000

11,313

$1,513

 

"The first thing that happens when a currency collapses is that luxury foreign products take a beating," Port said. "Buyers become more cautious and countries want to feed local-based products and governments look inward. But the golf business will come back in Asia, and our company as well as others will be just fine. We can’t abandon the market now."

Even in golf-mad Japan, which ranks second behind the United States in the world golf market with more than 13 million golfers, economic problems are affecting the international golf industry. According to AmerGroup, the Finland-based parent of Illinois-based Wilson Sporting Goods, the Japanese market represents 30 percent of the global market, Europe 10 percent and the United States a dominant 57 percent.

Although Japan has a large golfing population, American golf companies have a tough time cracking the market.

"Japan is a very difficult market to penetrate because of unique distribution channels that are very long," said Jean-Pierre Degembe, chief of Wilson Sporting Goods’ international golf business. "The Japanese have their own market with a large sales force."

Economic conditions in Japan also have hurt the Asian golf-course development industry.

"For years, the money came through Japan to build clubs all through Indonesia, but the Japanese economy went downhill five years ago and investors stopped funding projects," said Hal Phillips, president of Maine-based Phillips Golf Media, which tracks the international golf business. "No country outside of Japan has a playing population to support all these new courses and half of all Asian projects are dead in the water."

Underscoring the downturn in the overseas market is that most of the new courses built in the Pacific Rim and in Southeast Asia are private, resort courses aimed at the wealthy but land-locked Japanese player who in the past was eager to travel to other countries to play golf.

"In Southeast Asia, there are too many private clubs and there really aren’t that many golfers," Phillips said. "Taiwan is overbuilt and Singapore has 30 clubs without many people to play them."

As the once lucrative Asian markets ebb, golf developers and manufacturers continue to profit form the healthy European golf market, particularly in Britain, and are setting their sights on other emerging markets, including South Africa and South America.

"The world is a much smaller place and more people are exposed to world-wide golf," Yates said. "As countries emerge economically, they see what their counterparts are doing."

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Related Topics:

American Golf, IMG, Microsoft Corp.

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