Golf Equipment Industry Paradox, Part III

The Paradox of the Golf Equipment Industry PART III: Columbia Sportswear’s Solution

Portland, Oregon is the Silicon Valley of the global sports footwear and apparel industry.  Portland’s flagship brands stimulated the development of a powerful infrastructure of lawyers, venture capitalists, supply chain managers, designers, ad agencies and other experts able to create and protect intellectual property.

Why is Oregon the home of Nike, Columbia Sportswear, Adidas America, and, with the recent addition of its design and development center, Nike’s upstart rival, UnderArmour, which has made great strides in the sale of its golf apparel and shoes over the last several years through an endorsement deal with Jordan Spieth?  Oregon has splendid natural resources, it’s true—rain, rich soils and forested mountains.  It’s America’s leading lumber producer, the world’s leading supplier of grass seed for golf courses, and enjoys a wine industry celebrated for its award-winning pinot noirs.

But none of that explains Portland’s rise to world prominence in sports shoes and apparel.  There’s a simpler explanation: it’s the home town of Nike’s founder, Phil Knight.

Adidas relocated its North American operations to Portland in 1993, hoping to keep an eye on Nike.  Columbia Sportswear was still a private company in 1996, when it took its first tentative steps into the golf market.  In 1998, Columbia went public, and its backstory was a strong element in the success of its initial public offering.

Columbia is the oldest of Portland’s sports apparel brands.  It’s worth a brief detour to look at its origins and the importance of its founding family to Portland.

Columbia CEO Tim Boyle’s mother arrived in Oregon in 1937 with her parents as a refugee from Nazi Germany.  Her parents started the Columbia Hat Company the next year; in 1948, Gert Lamfrom married a WW II veteran named Neal Boyle.  Tim is the oldest of Gert and Neal Boyle’s’s three children.

In the early 1960s, Gert Boyle designed a fishing and hunting vest to expand Columbia’s product line.  The vests were sown in Portland and sold mostly in the Northwest.  In 1970, when Tim was a senior in college, Neal Boyle died of a heart attack at age 47.  When Tim left school to help out, the prospects for Columbia Hat were bleak.  The company’s assets were Gert and Tim and lots of grit.  Tim remembers going to a trade show with two sample fishing vests, sitting at a card table hoping someone would at least stop to say hello.  Two guys from New Jersey, feeling a little sorry for him, placed small orders.  I know that story because those guys from New Jersey told it to me nearly fifty years later, when Tim invited them to play at Gearhart, the course the Boyles own on the Oregon coast, and paired me with them.  Tim may be great at selling apparel, but he’s a genius at making friends.

At its nadir, Gert and Tim rejected an offer to sell the company for $1,400!  Rather than liquidate, as their bankers advised, the Boyles chose to expand their product lines, and by 1978 sales exceeded $1M for the first time.  Nike’s success helped point Columbia toward the future.

Nike designed its shoes in Portland, but made them overseas.  The global supply chain is a commonplace now, but it was a revolutionary concept fifty years ago.  China was not open to the west yet, so Columbia’s first foreign suppliers were Korean.  By the early 1980s, Columbia had shifted from manufacturing to brand building, focusing on creating attractive designs and durable outdoor wear to build a loyal consumer base.  Its breakthrough product was a layered jacket, a clothing “system,” which consumers—especially skiers–loved.

A series of amusing ads demonstrating the durability of Columbia’s products debuted in the 1980s.  Tim endured “Mother Boyle” putting him through increasingly more ludicrous product tests.  He wore Columbia outerwear while strapped to the top of a car as it drove through a carwash.  He was tumbled in Columbia gear inside a concrete mixer.  Mother Boyle shot Tim in the neck with a tranquilizer dart and left him on a mountaintop, confident that his warm, reliable Columbia gear would keep him alive.  Produced by a Portland agency, these ads were a huge hit, and Gert Boyle gained world-wide fame as “one tough Mother.”  By 1992, the company had sold a million Bugaboo ski parkas, and Tim was predicting that Columbia would reach a billion dollars in sales by 2000.

Columbia started making boots and hiking shoes, too.   Tim, whose candor distinguishes him among prominent CEOs nearly as much as his generosity, noted that footwear was an attractive product to sell because “they wear out, while our parkas and jackets last forever!”

By the time Columbia went public, its long-term strategy was in place: build the brand with innovative products, market them with imagination and flair, and expand through acquisitions as well as through the development of new product lines featuring high-tech fabrics: clothes to keep you warm in winter, cool in summer and dry year-round.   In 2000, Columbia acquired the bankrupt Canadian boot brand Sorel for eight million dollars.  Sorel’s uninspiring Caribou boots were in every Canadian’s closet, but Columbia put its flair for design to work and by 2016 annual sales of fashionable Sorel footwear reached $220M.

The fourth generation of Boyles is now assuming a leadership role.  Tim and Mary Boyle’s son Joe and their daughter, Molly, both excellent golfers, are Columbia executives, and Joe was named President of the Columbia brand last summer.  He earned it by, among other achievements, signing a deal naming Columbia as the “Official Outdoor Apparel Partner of Manchester United.”  Joe and Molly’s ambitions are tempered by the reminder that Chairman Gert still goes to work every day, making Tim, in a way, the Prince Charles of global apparel.

Joe’s bio on the Columbia website notes that he worked at Robert Trent Jones II from 2003 to 2005.   It’s fair to argue that Joe discovered the best opportunity RTJ II ever had when he uncovered a request from a public agency in a small city south of Seattle for proposals to design a new golf course.  I was then the CEO of RTJ II.  Joe and I flew up to Tacoma on a very rainy day in the fall of 2003, and saw the site of a lifetime—acres of deep sand on the shore of Puget Sound with views of the Olympic Peninsula’s snow-capped peaks to the west.  RTJ II pursued the assignment with every resource it could muster, and was rewarded with the opportunity to design Chambers Bay, host of the 2015 US Open.

Golf apparel is now sold in Columbia’s retail stores, in sporting goods and variety stores and directly to consumers via on-line sales.  But even when Columbia was not selling golf gear as such, the comfort of its shirts, especially the PGF line designed for fisherman and hunters, attracted golfers.  Columbia had taken a stutter step toward selling in the green grass golf market in 1996, signing US Open champion Steve Jones.  But golf was not an integral part of Columbia’s strategic focus, so, as Joe says, “we took a twenty-year breather.”

By the time Columbia got back into the golf market two years ago, it was a different company: financially robust, cash-rich, managing multiple brands—Columbia, Sorel, PrAna, Mountain Hardwear—through its enterprise platform, and growing steadily.  It struck a deal with a company called Outdoor Custom Sportswear (OCS), which can add logos to Columbia’s shirts and jackets for private clubs, resorts, daily fee courses, or other groups.  It can provide five shirts or five thousand from its own inventory.  “It’s tough for small players to win market in soft goods,” Joe points out, so this is a smart alliance for both companies.  Columbia is known for high-value, differentiated products —that is, the proprietary fabrics which make Columbia’s shirts perform better—which OCS can leverage.  OCS can serve small clients, building on Columbia’s brand loyalty, but it also has licensing deals with major universities, as does Columbia.

Ten US PGA Tour players now wear Columbia apparel, but none are household names.  Still, when Boo Weekly or Ryan Palmer or Brian Harman play on Sunday, the Columbia logo will enjoy a moment on TV with them. And there will be plenty of fans in the galleries sporting Columbia gear.

The Boyles, meanwhile, continue to contribute to Portland, the city which welcomed Gert as a refugee eighty years ago.  Three years ago Gert contributed $100 million to the Knight Cancer Center at Oregon Health and Science University, a project initiated by Nike’s founder.  Portland’s global apparel brands are vital elements driving the region’s growth, and the Boyle family saga is an inspiration to immigrant families everywhere.

This article was authored by GGA Director John Strawn for Golf Business Monitor.

End Budget Procrastination

To the list of things we love to procrastinate on (exercising, dieting, organizing the garage and learning to speak a foreign language), we should add budgeting.

Experts on such matters tell us that we’re all guilty of procrastination. But we delay, defer and prolong for a number of different reasons. Maybe the biggest is that we see an important task as a daunting project, one that intimidates and practically immobilizes us. Another reason – although we don’t like to admit it – is that we worry that we might fail. Whatever the reason, budgeting brings out the best (and worst) in our fellow procrastinators.

Let’s dive into some strategies and tactics that can help break the budgeting process into manageable chunks and reduce the accompanying fear.

Standards of Excellence

Standards-setting must precede budgeting to ensure that club leaders and management are aligned in communicating expectations. At the highest levels, the standards should be affirmative, simply stated and realistic. These statements serve as Magnetic North to give departmental managers a clear-cut understanding of the desired destinations.

Superintendents use an agronomic plan to describe their intentions and methods. These descriptions identify the manpower required and the costs attached to that labor. Care and upkeep standards correlate to the activities required by the golf course staff to achieve the standards and frequencies required. Routine task planning, such as mowing, irrigation and fertility management, combine with special project needs to detail the number of hours and materials that will be consumed and the associated costs.

Superintendents know that most budget initiatives die because of a lack of understanding, not because the request is flatly rejected. That’s why those experienced in the budgeting process are among the most accurate and detailed in their descriptions, summarizing assumptions and providing calculations that underlie each line item. They make sure that decision-makers understand what is needed, why it is needed, and what the results and benefits will be if the costs are approved.

Strategic Goals and Objectives

Most successful courses and clubs operate with clearly stated goals and objectives, which are detailed in their strategic plan. Management is charged with executing the plan and achieving the goals. Their budget is a key element of their plan, forecasting revenues and costs that provide the financial roadmap to the intended destination. There are three guideposts along the way:

  1. Confirm that you accurately understand what is expected. If there is any ambiguity, it will show up in the budget.
  2. Explain what is necessary in order achieve the established goals and objectives. Show that you fully understand the fit-and-finish requirements of each goal and objective.
  3. Describe a path to completion that includes checkpoints so everyone involved stays updated on progress. Describe progress in terms of percentage complete, budget status and timeline. If progress is poor, say so. And describe corrective steps being taken to get back on schedule.

Communication

Open and honest communication is a key for successful budget planning and execution. That’s especially important to remember when preparing complex and potentially confusing course maintenance budgets. Here are three communications techniques to make your budget easier to understand and approve:

  1. Educate your audience. Most committee and board members are not agronomic experts. Therefore, superintendents and managers should educate them and club members in the art and science of proper course care so the budget reflects adequate funding to achieve agreed upon standards of excellence.
  2. Conduct field-day demonstrations. A part of the education process is taking decision-makers onto the course to show them what is working, lacking and needed. Show what is required to achieve the standards of excellence on which all have agreed.
  3. Provide monthly updates that show how the budget is being managed, monitored and achieved. Managers and members develop increased trust in superintendents who hold themselves accountable for the desired results. Provide visual updates to management, board and members so everyone feels invested in the outcome.

 

This article was written for and published by Golf Course Industry Magazine by GGA Partner Henry Delozier

Get Prepared for your 2018 Budget Cycle

Autumn is with us and indications are that as club leaders prepare to go into their annual budgeting cycle, most European economies are witnessing steady improvement and positive forecasts.

Goldman Sachs describe the outlook for continental Europe’s economy as “cautiously optimistic” as the housing economy continues to recover in most markets, credit is loosening, unemployment is improving, and in particular, consumer confidence is building.

The caution, reflects a strengthening euro and of course Brexit uncertainty. Nobody knows yet where that is taking the UK or Europe, but it’s going to be disruptive and it’s not going to be positive.

So, emerging gradually as we are from years of frugality and incessant cost reductions, while also looking to better position the club for any future headwinds, how should club leaders be approaching this upcoming budget cycle?

Here are five guidelines and questions to address.

1. Evaluate variances in the current budget. How do this year’s actual results compare to your budget? Variances of more than 5% should be evaluated closely. Maybe you were overly optimistic? Maybe your execution was off? Beware of line items that were not accounted for in the budget. The question to ask: “How will we generate different and better results next year?”

2. Review and refine your scope of operations. The scope of operations describes all that the club does, including which days and hours the club is operational and which services are offered and on what schedule. In most clubs the scope of operations remains untouched from year to year. But it should be evaluated at the launch of each budget cycle. Refining your scope of operations is one of the easiest and most effective ways to improve performance results. The questions to ask: “What do our customers and members really want?” And “How can we operate more efficiently and eliminate waste from lightly used or inaccessible services or service times?”

3. Take a zero-based approach. Don’t rely on a simple calculation of a percentage increase on all expenses. Start with a clean budget sheet and plan each line item for a precise method of operation. Zero-based budgets are built brick-by-brick, with one assumption added to the previous. Any flawed assumption weakens the foundation. Understand and document each assumption in each line of the budget. To build a budget from scratch one must be organised and thorough. It will take more time to ask the questions and to find the answers.

While zero-based budgeting isn’t easy, it’s the sign of a real professional. The result is a budget that is more thorough and reliable than one produced by any other method. The question to ask: “Are my assumptions realistic and based on facts/data?”

4.  Increase revenue expectations. Revenue growth has been slow or stagnant for several years. Many managers continue to try outdated programs that did not work in the first place. Customers and club members seek value. Price increases in importance in their eyes when value is lacking. So before you budget for improved revenue, make sure you’re maximising value. Revenue increases originate in the following ways:

  • Sell the worst – least desirable – tee (or court) times first. The best inventory sells itself. Revenue growth comes when attention is given to selling what doesn’t readily sell itself. This increase in utilisation is like finding new money.
  • Bundle services to provide greater value for members and customers and to support price increases. Can you bundle services that give your members greater value and improve operational margins at the club?
  • Make popular goods and services available to your members and customers ahead of the demand curve. Do you use virtual retailing options to expand access to new and popular products?

The question to ask: “Am I thinking like my customers and members. Am I giving them what they want – recognition, respect and courtesy?”

5. Attack and reduce overhead and administrative costs. Most clubs accept increases in products, services, rates and premiums as the cost of doing business but as a club leader don’t give up so easily. Be committed to the hypothesis that there is a lower cost alternative and to negotiation. Even if you are proven right just 10% of the time this diligence will impact your budget parameters. The question to ask: “Have I thoroughly explored and negotiated the possibility of a decrease in property taxes, utilities, insurance premiums, professional services and supplies?”


The summer is only just behind us but your planning for 2018 should be well underway. That process starts with the budget.

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