Callaway Golf has emerged during the last 20 years or so as the nation's leading producer of professional-quality golf equipment. Ely Callaway founded the company in 1981 when he bought the manufacturer of the hickory-shafted golf club with which he played. Callaway's big break came ten years later with the introduction of Big Bertha clubs, which became the market's top sellers by 1995 (Note: revenue from Callaway clubs exceeds that of its next four competitors combined). Thanks to the huge size of its sweet spot, Big Bertha revolutionized the golf club industry and spawned countless imitators. Best known among the Big Bertha line are its metal woods, which account for over 60 percent of the company's sales. Callaway has continued to churn out innovative new products, including Big Bertha X-12 irons, Big Bertha Steelhead Metal Woods, and its latest release, Great Big Bertha Hawk Eye Titanium Metal Woods (constructed with something called a Tungsten Gravity Screw). The company also made its first foray into the golf ball market, founding the uncreatively-titled subsidiary Callaway Golf Ball, at a cost of $140 million.

In the rough

But despite keeping millions of duffers around the world happily swinging, Callaway found itself playing out of the rough in 1998. Sales for the year fell sharply as a result of increased competition, discounts offered by the 5000 U.S. retailers that carry Callaway clubs, and a general softening of the market (golf club sales fell about 4 percent overall in '98). After a $132.7 million net profit for 1997, the company lost over $36 million for the year.

Back to par

Due to this loss, Callaway was forced to undergo a restructuring process at a cost of between $70 million and $85 million. Once again under the leadership of Ely Callaway, the company consolidated its core operations, discontinued certain side ventures, and cut 700 jobs (24 percent of its workforce). With the moves, the company is expected to save about $40 million annually. Thus many analysts predict that in the future, as long as golfers keep using its clubs, Callaway should stay in the green.

Making the rules

Expansion is the trend at Callaway in the new century, evident in its new high-tech Callaway Golf Ball plant where $170 million has been devoted to the production of the comapany's first line of golf balls. The new product, Rule 35, cleverly named from the official 34 Rules of Golf, is already available and is another great example of Callaway's "demonstrably superior and pleasingly different" products.

The deal with ERC

Ely Callaway's initials created the name for the company's $1,000 (retail) ERC driver. This club, not available in the U.S., has been the cause of much controversy. The USGA ruled the club out after tests, because it exceeded specifications with its springy club face. As a result, the driver cannot be used in any official U.S. golf events. Sales in Europe and Japan have been successful, however, and have led to discussions over bringing the ERC into domestic hands. Scotland's Royal and Ancient has not prohibited the use of the ERC in tournaments outside the United States, but has plans for a testing procedure before October 2000, due to issues with distance standards. Nevertheless, the 2000 European Tour brought a sporty appearance of the Callaway driver by Colin Montgomerie, a Scottish pro under contract with the company.

Counterfeiters beware!