Titleist to shift some ball production overseas

Gxgolfer · August 29, 2008

New Bedford Standard-Times

http://www.capecodonline.com/apps/pbcs.dll...28011/-1/NEWS11

By Steve Urbon New Bedford Standard-Times August 28, 2008 NEW BEDFORD - The Acushnet Co plans to produce its top-selling Titleist Pro V1 golf balls at a factory somewhere in Asia within three to five years, company officials told The Standard-Times yesterday.

The company's 1,500 local employees were briefed during today's shifts with a Power Point presentation about the plans to produce balls for the fast-growing Asian market. Local manufacture of the Pro V1 will continue for the American, Canadian and European markets. But local production of the Pro V1 will be trimmed about 20 percent, and an estimated 100 positions will be eliminated entirely through attrition, they said.

No decision on a location for the new plant has been made; the four prospects still being considered are China, Taiwan, Malaysia and Thailand, according to Herbert C. Boehm, executive vice president and general manager of golf ball operations.

Jerry Bellis, executive vice president for sales and marketing at Titleist, said a combination of factors led to the decision to break with company history after 75 years of making golf balls and locate a new plant outside the United States.

Energy, shipping and labor costs figured heavily into the decision, he said. The cost of shipping a sleeve of golf balls "halfway around the world" for the fast-growing and lucrative Asian market is eating into budgets for advertising and promotion, as well as profits, he said.

While Titleist remains the top-selling ball in golf, he said the company is facing unprecedented competition from large, deep-pocketed challengers such as Taylor Made, Bridgestone (which makes Nike balls) and the Japanese company Srixon.

Industry advertising is up 33 percent despite a slump in overall golf ball sales blamed on the economy, as brands compete to maintain their market share, all of them targeting Titleist, Mr. Bellis said. Total rounds of golf played in the U.S. are down 2 to 5 percent, and corresponding ball sales are down 5 to 10 percent, pitting major manufacturers against each other for more market share during a slump.

Titleist now enjoys 48 percent of the golf ball sales market by volume and 59 percent by dollar value. Its foreign sales in recent years have accounted for an ever-increasing portion of those sales.

In past years, Titleist's competitors were smaller companies that lacked the ability to finance an advertising blitz during a sales slump. Mr. Bellis said that has changed. Not only that, he said, but the performance edge enjoyed by Titleist is being encroached upon by other companies, and the game's governing authorities have set limits on performance that leave Titleist very little room for improvement while everyone else tries to catch up.

The Acushnet Co. needs to match the advertising assault and supply its products to the emerging markets at a price golfers are willing to pay to maintain Titleist's dominant position, Mr. Bellis said. The new plant "will be totally controlled and operated" by the Acushnet Co., Mr. Boehm said. He said the company in recent years has tested the idea of subcontracting for the production of lesser, low-profit products such as range balls.

Mr. Boehm emphasized that Titleist has invested $150 million in Ball Plant 3 in the New Bedford Business Park and has no intention of walking away from that investment. While the Asian plant will produce finished balls, the cores for those balls will be produced exclusively in New Bedford, he said. Some of those cores will be made in Ball Plant 2, where two-piece Titleist balls are produced, which is also in the Business Park and which has extra capacity.

Ball Plant 3, which recently was upgraded with more efficient equipment and the work force cut by 35, is now working mainly a weekday schedule and keeping up with Pro V1 orders, which had once swamped the company. The new added capacity will give the company flexibility, and since it has the ability to produce all the ball components, it will continue to be the place where new models are developed, and the local research and development facility will be unaffected, Mr. Bellis said.

Long term, Mr. Bellis said the expansion into Asia will preserve the future for Titleist in New Bedford, Dartmouth and Fairhaven. Failure to address the changing market in this way would threaten the entire company, he said.

Mr. Boehm said site selection is proceeding carefully, with an eye toward reliable electricity and water supplies, a stable political situation and access to a shipping port. The company plans to recruit and develop a new management team for the Asian plant; meanwhile, the expansion is being coordinated from its headquarters.