Adidas wants to Sell Golf Division because China
Stepping away from computer hardware for a moment with a story that addresses global market conditions and how it is changing the way big businesses think.
In this Bloomberg story Adidas is seeking buyers for the Taylormade Golf brand. They are planning to abandon the golf equipment industry so they can focus on their clothing lines. This may seem like a shock to avid golfers who use Taylormade products but when it comes down to making money it would seem the golf industry isn't working for them.
The businesses on sale could fetch 470 million euros, John Guy, an analyst at MainFirst Bank AG, wrote in a note. Adidas shares fell 1.5 percent to 111.70 euros as of 11:46 a.m in Frankfurt.
Outgoing Chief Executive Officer Herbert Hainer is cleaning up Adidas’s operations as he sets the table for Kasper Rorsted, who takes the reins in October. Adidas got into golf when it bought French ski and skate company Salomon in 1997, but younger consumers are staying away from the game, and it isn’t popular in emerging markets like China and India. Sales plummeted 13 percent last year as the industry has been beset by discounting.
‘‘The golf market is not growing at the moment but it’s also not falling further,” Hainer said during a call with reporters. The portion Adidas plans to keep is producing solid returns and the company is cutting labor and manufacturing costs, the CEO said.
I want to call attention to something in the Bloomberg article that explains why they are selling off Taylormade, China. Yes it would seem that golf isn't popular with young people in China and with sales neither going up or down in the world market they have determined that the segment is dead.
Thing is in Asia, golf is considered an elitist sport instead of a hobby sport like elsewhere in the world so it would seem strange that they determine the worth of an entire segment on a region where it doesn't apply.
Of course the opposite is true when it comes to the Adidas clothing where sales in China are growing. Let’s see if we can figure out why. Oh ya.
- Golf Clubs: $1100 USD can only play if a club member
- Adidas workout shirt: $50 USD can run around outside.
I can understand the draw, China is big for everyone but just because sales are bad in a certain region doesn't mean you give up, you change your focus. For instance Hardware vendors make the majority of their profits in China and even change the design to better match what the Chinese want. (Ever wonder why there is so much gold on a motherboard?) This is also why enthusiast level gear is so difficult to get in the States.
Sadly, this might mean the end of Taylormade as we know it. Sure some large equipment manufacturer may pick them up. My guess would be Spalding or Wilson but unless they dedicate similar effort into development and marketing the sales will decline and eventually fade away.
Related Web URL: http://www.bloomberg.com/news/articles/2016-05-04/...
