Breaking Down R&D in the Golf Industry
Hundreds of millions are spent annually on research and development.
Every Monday, I write a newsletter breaking down the business in golf. Welcome to the 71 new Perfect Putt members who have joined us since our last newsletter. Join 5,861 intelligent and curious golfers by subscribing below.
Pictured above is Gaillardia Country Club in Oklahoma City, Oklahoma — a Concert Golf Partners Golf Club.
Concert Golf Partners is the leading boutique owner-operator of upscale, private clubs nationwide. Since its founding in 2011, Concert Golf has developed a reputation as the buyer of choice for private club owners seeking to pass the torch to a high-quality operator.
Concert Golf has a portfolio of 29 boutique golf clubs in the United States — below are a few.
Country Club at Woodmore— Washington DC
Golf Club of Amelia Island — Amelia Island, Florida
West Lake Country Club - Augusta, Georgia
Concert Golf is actively seeking to add to its boutique portfolio. If your club or you know of a club looking to explore an acquisition — reach out to the Concert Golf Team below.
Hey Golfers —
Just a couple of decades ago — the new product life cycle in the golf industry was two to three years.
Today — the new product life cycle is down to a year. And in some cases, it is less than a year.
So how much money is spent in the golf industry to develop new products?
Lucky for us — Acushnet and Callaway are public companies and disclose their research and development expenses. Research and development spending has been on the rise in the last decade.
Callaway has stated they have committed $50 million annually in research and development in their 2021 annual report.
The above chart shows us a nice trend — but it doesn’t tell us the whole story. In theory — as revenue increases, research and development expenses should also increase.
Let’s look at research and development expenses as a percentage of revenue.
Acushnet and Callaway had solid revenue growth from 2013 to 2021. Acushnet grew 45% in that period, and Callaway grew 270% in that period. Callaway has made significant acquisitions to bolster that revenue, while Acushnet’s growth has mostly been organic.
From 2013 to 2021, Acushnet spent between 2.56% and 3.12% of its revenue on research and development. Over that same period — Callaway spent between 2.17% and 3.91% of its revenue on research and development.
Here’s a more detailed look at Acushnet.
It would be a fair assessment to state that most golf companies spend between 2% and 4% of their revenue on research and development.
I was curious to see how the golf industry stacked up against other industries.
Below are the top five industries where research and development are spent as a percentage of revenue.
Biotechnology — 30%
Software — 19%
Interactive media and services — 19%
Semiconductors — 17%
Communications equipment — 17%
Here are a couple of research and development examples of well-known companies.
Amazon spent $43 billion in research and development in 2020 — about 11% of its total revenue in 2020.
Apple spent $19 billion in research and development in 2020 — about 7% of its total revenue in 2020.
Moving back to golf.
Callaway breaks its revenue into three segments.
Topgolf
Golf equipment
Apparel, gear, and other
Acushnet provides more clarity in its revenue segments.
Golf balls
Golf clubs
Golf gear
Footjoy golf wear
Research and development may not be a one-to-one segment expense — but it provides us with a good idea of where Acushnet is spending its money on research and development.
Since the new product life cycle is closer to a year for companies, do golfers buy new equipment every year?
I conducted a Twitter survey. While a Twitter survey is not the most accurate way to gather data and information — it provided interesting evidence and anecdotes.
The most purchased golf equipment appears to be drivers — 12% of golfers in the survey buy a new driver every other year, and 25% purchase a new one every three years.
The least purchased golf equipment segment is putters. With 88% of golfers in the survey purchasing a new putter every four or more years.
According to the R&A global golf participation 2021 study — there are 66 million golfers worldwide.
If we look at golf drivers being purchased at an annual rate of 2.6% — that would mean that around 1.7 million golfers buy a new driver every year. And this number is just the base — it doesn’t include the golfer that purchases on a three-year cycle.
Callaway is thought to have a 20% to 25% market share of the golf driver market. Depending on the purchase price — Callaway would sell around $200 million in drivers to the golfer that purchases every year. New product launches are essentially recurring revenue. For reference — Callaway did around $1.29 billion in golf equipment revenue in 2021.
Hundreds of millions of dollars are spent on research and development between the large OEM golf companies. And we didn’t even get to look at private companies like TaylorMade and Ping.
The expense is paying off with a positive return on investment.
Have yourself a great Monday. Talk to you next week!
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