"Clearly it's not in either company's interests for that situation to endure," admits TaylorMade adidas Golf Europe's managing director Ben Sharpe. "Callaway is actively seeking an alternative licensee, but until one is found we will service the licence."
So, why did TaylorMade push through the purchase? One consideration has to be the price; that $72.8 million may have included $46.3 million of debt, but TaylorMade's offer was still lower than Ashworth's book value - the worth of equipment, inventory and other assets in the event of liquidation. Clearly, they were able to take advantage of a company that was haemorrhaging cash. Ashworth reported a 9% fall in revenue to $45.2 million in the third quarter of 2008, posting a net loss of $9.6 million for the same period compared to $5.6 million from the previous year.
Sharpe steers clear of the hard figures: "We have admired the Ashworth brand and business for a long time," he says, "and saw it as an ideal fit for our current stable of brands and product offering.
"If you think of Ashworth, you could say it is the world's most authentic golf apparel brand. You have others that are doing well in golf - adidas, Nike - but they have a heritage in other sports. Ashworth was born out of golf and has stayed in golf. With Ashworth, we can offer the market products that adidas possibly couldn't: natural fibres and relaxed comfort and the more lifestyle look that some golfers want.
"Adidas is very much a performance, technical product. It is all about making sure
it helps in terms of your body in different climates and areas. Now we can continue that story with adidas - we don't need to go into the likes of woollen sweaters, which isn't true to the adidas brand."
Yet Ashworth has clearly moved closer to the adidas core values in recent collections. The Ash33 range of contemporary clothing with a younger cut, which debuted at the Orlando show last year, gave the brand a more edgy, urban feel.
Third Groove was a performance range featuring a Pima cotton/Polyester that is moisture wicking, breathable and lightweight, or in other words, ‘technical'. Add in Callaway Apparel's high performance X-series, which blends weather-beating technologies with contemporary design, and there are three brands under one roof competing on the same pitch.
"We'll have to rationalise both brands (Ashworth and adidas) to make sure they're relevant," Sharpe counters. "We need to re-establish the cache of the Ashworth brand, go back a few years to when it was the dominant apparel player on the market. Since then they have perhaps gone into too many capsule ranges. We want to get back to a range that is true to Ashworth and is something customers can buy into."
The TaylorMade portfolio now also includes outerwear brand Sunice, previously a wholly owned subsidiary of Ashworth.
"The Sunice product offers great margins for retailers and targets all golfers," Sharpe confirms. "Rain suits range from £99 to £299. There's a Gore-Tex license on the upper end suits and a huge amount of features in the entry-level suits. We're very excited about it."
"We are the fourth distributor of Sunice in four years, so there's been uncertainty and service issues. We need to give retailers confidence that when they order the product, we're going to deliver it on time and in full, and then back it up with stock. With the product quality and pricing, we see a huge opportunity for Sunice across Europe."
TaylorMade will be pushing its apparel brands through an integrated sales force. "That's exciting for us," adds Sharpe, "because we'll have double the number selling all brands, so our coverage will be much better."
The acquisition has, though, added 500 staff to a company that already employs around 1500 worldwide, and TaylorMade has already announced its intention to cut up to 170 jobs through the coming year.
Though Ashworth's European MD Jon Camp has already departed, three key sales team members have been retained. Giles Birkhead will work with Ben Sharpe on integrating Sunice and Ashworth into the TaylorMade machine; Richard Burn transferred to TaylorMade as an area sales manager before the acquisition, while Ian Fergie is now area sales manager for the East Midlands, carrying adidas, Ashworth and Sunice.
Still reviewing
And the rest? "We're still reviewing where we are," Sharpe says. "Ashworth had a sticky time at the beginning of 2008, as they were implementing a new ERP system. Prior to that they were reckoned to be the best service provider, so we need to understand how they achieved that, and if there's something we can use then we will. We are in the process of reviewing facilities and people, and where there is talent we will retain it. It's a significant acquisition for us, and we need to make sure we resource it accordingly."
In the meantime, TaylorMade can't take its eyes off the key hard goods lines, hence the introduction of the new R9 driver. Blending moveable weights with an adjustable hosel to give 24 shot profiles, the R9 is billed by TaylorMade as the next generation of ‘adjustability'. An RRP of £349 will also be a bill to remember in today's market.
"Market forces dictate what things are sold for," argues Sharpe. "We will see over time what that level is. If you look at what is on the market at this price and slightly below, we believe the R9 is the best on the market."
Not all retailers are convinced by the strength of adjustability as a sales pitch. There is, after all, not just an education barrier to be overcome, but also the question of necessity before a customer parts with his cash. Mid to high handicappers will ask whether they really need 24 more options on the tee.
"Adjustable weights were introduced in 2004 and it took a while for people to understand the technology and its benefits," says Sharpe. "Now, they've been accepted by the majority of the industry. The R9's benefits may take some time to sink in but when they do I'm sure people will be blown away by what it can do for their game.
"The average golfer generally has a way they shape the ball, mostly left-to-right, and we can straighten those people out. With more lessons maybe their bad shot changes; but movable weights can cater for that without having to buy another driver and start again.
"The onus is on us to communicate those benefits, and we are training the sales force accordingly. They must be able to take (the benefits) to the guys on the shop floor, who must in turn inform their consumers. We'll also have sales aids and video loops to explain the technologies further. We need people to understand how adjustability can improve their game."
Across the board, TaylorMade adidas Golf is showing confidence that it will not simply survive the credit crunch, but perhaps come out ahead.
"It's important in difficult times that people are positive and act with conviction," adds Sharpe. "People are concerned about what the future holds, but we should still be confident there will be a market out there. The size we may not be sure about - but people will continue to play golf and continue to buy product. It's a challenge we are up for; working more closely with our retailers, understanding their challenges and finding solutions for them. We're in this together and we'll succeed together. In difficult times some people retrench and some people are positive. We are in the positive camp."
