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A Different Spin

Bob Penicka, the new president and COO of Top-Flite Golf Company, has a difficult assignment: reversing the company’s fortunes at a time when golf equipment sales are declining and industry analysts don’t know when they’ll bounce back. He believes that by refocusing some marketing efforts and tweaking already-efficient manufacturing processes, the company can drive higher sales — and profits.

Bob Penicka says the building blocks are in place for a turnaround at the Top-Flite Golf Company.

They have been for some time, said Penicka, 41, who was introduced last month as the new president and COO of the Chicopee-based institution. But some of these blocks — including winning brand names, state-of-the-art technology, and a versatile workforce — haven’t always been structured properly or utilized to their full potential, he told BusinessWest, adding that it will be his job to reverse that trend.

This won’t be an easy assignment, given the ongoing sluggishness in the golf industry and forecasts for more of the same, as well as growing competition across all lines of equipment — balls, putters, irons, and woods.

However, Penicka, who has spent the past several years working his way up the ladder at Top-Flite’s new parent company, Carlsbad, Calif.-based Callaway Golf, firmly believes that, with better utilization of the company’s assets, a return to profitability is possible — and sooner than many people think is possible.

He says that a combination of solid products and efficient manufacturing processes (foundations that have been in place), coupled with a debt-free existence as well as the pressures and incentives that come with being a publicly held company, should be a winning formula for Top-Flite.

"We’re a large enough wholly owned subsidiary to have our own P & L posted separately every quarter," he said. "You will find that having that public scorecard coming out every 90 days is a huge motivator to run your business effectively."

Saddled with heavy debt in recent years, Top-Flite, formerly Spalding, was placed under a great deal of pressure when it introduced new products and brands, said Penicka, adding that the company was forced, in effect, to try and hit home runs. Under the umbrella of Callaway, now the largest golf equipment company in the world, Top-Flite can score with doubles and even singles.

"Without the huge debt load that we’ve had for the past several years, this company doesn’t have to worry about hitting a grand slam every time it steps up and does something," he said. "Our goal is to build on a number of smaller successes, and not try to hit the jackpot with one franchise-winning or franchise-establishing product.

"Callaway Golf is in this for the long term," he continued. "We don’t have to return to profitability in one year to make this a go. That’s a goal of mine — I would like to achieve a profit next year — but we have a longer-term vision."

In a wide-ranging interview, Penicka talked with BusinessWest about Top-Flite, the golf market and its future, and his challenging assignment — to reverse the fortunes of a company that has been underachieving for several years.

Course of Action

Penicka says the Top-Flite name remains one of the most respected in the golf industry — especially within the golf-ball market — and he told BusinessWest that it’s his mission to use that name to drive profits, not merely sales.

To achieve that end, he’s putting together a multi-pronged strategy that will involve everything from revamped marketing to new product development to changes on the factory floor.

He’ll also make full use of a varied business background, one that is grounded in science, not sports, and manufacturing processes, not sales and marketing.

Indeed, upon graduating from Ohio State University in 1984 with a degree in chemical engineering, Penicka went to work for General Electric and its lighting division, where he held a number of engineering and management positions. From there, he went to Harman International Industries in Indianapolis, a maker of branded audiophile equipment, where he served as vice president of Manufacturing for the Automotive OEM Division.

He then joined Chicago-based putter maker Odyssey Golf in 1996, and was serving that company as vice president of Manufacturing when it was acquired by Callaway in 1997. He was subsequently promoted within Callaway to vice president of Manufacturing Technology, senior vice president of Golf Club Manufacturing, and, in 2001, executive vice president of Manufacturing in the golf club and golf ball operations.

He was serving in that capacity when Callaway began its pursuit of Top-Flite this past summer. Penicka told BusinessWest that he understood early on that if Callaway survived the bidding war for Top-Flite, he would be packing his bags for Chicopee.

And as the bidding process for the company continued, Penicka started to scrutinize the company he had watched from 3,000 miles away. While he was not able to talk directly with employees and managers at Top-Flite until the deal actually closed on Sept. 15, he was able to make observations and begin the process of plotting a new course of action.

One thing he and others at Callaway noted was that Top-Flite needed to refocus some marketing dollars. In recent years, Penicka explained, the company invested heavily in marketing its Strata lines of golf balls and its Ben Hogan lines of irons, at the expense of what has historically been the company’s bread and butter — the value-priced Top-Flite golf ball models.

"The Strata and Ben Hogan brands are important to this company, but so is Top-Flite, and it has been getting the short end of the stick recently," he said. "I believe that if we spend some money on that brand, we’ll see an impressive return on that investment."

By focusing more marketing dollars on Top-Flite products, the company will likely regain some of the market share in the value-priced segment of the market that has been lost to a host of new competitors, including Nike, Titleist, Maxfli, and Callaway itself.

Top-Flite once owned about a quarter of the value-priced ball market, and has seen that share erode to about 15%, said Penicka, adding that the company can regain some of what it lost by pushing the brands that put it on the map.

Aggressive marketing will be necessary, he said, because the golf market is not growing at present — Callaway and other companies have created programs in an effort to involve more people in the sport for the long term — and that means equipment makers will have to take a bigger piece of the existing pie if they want to grow.

"I think stagnant would be a generous term to describe what’s been happening in the golf market," he said, adding that sales have been declining for several years for a number of reasons, including everything from the prolonged economic slump to the fact that many young people simply don’t have the time for a game that takes five or six hours to play.

While re-directing some marketing dollars, Penicka will also look to streamline some of the production processes, with the goal of making the company more flexible overall. He described the Chicopee plant as efficient and certainly current with new technology, but he believes there is capacity that is not being utilized.

"Top-Flite is the low-cost producer in the United States, and I think it can compete with some of the golf ball manufacturers in Asia that have very low labor costs," he said. "But there are some opportunities we can take advantage of."

Specifically, he believes the company needs to become more responsive and reduce its lead times.

"We’ve got a large, high-volume factory that is set up to run in big batches; the factory evolved over the years and wasn’t laid out with a lot of flexibility in mind," he explained. "Our product mix has become more complex, and our customer base has become more complex — and demanding. I think there’s some opportunity to go to smaller, batch-type production to where we can be much more responsive to our customers than I think we have been in the past."

Top-Flite has placed a great deal of emphasis in recent years on the quantity of golf balls it produces at its plants in Chicopee and Gloversville, N.Y. — about 1 million a day, according to recent counts — but in the future, more focus will be put on profitability, not sheer volume.

"That will be our priority," he said. "We’ll be happy if, in some categories, we have to sell less product, but can spend less against it and make it more profitable than it’s been. We need to stress profits, not sales."

Looking for a Bounce

Penicka joked to BusinessWest that there are some things about California he won’t miss — including the insanity of the gubernatorial recall vote. "I’m coming to a state where people don’t have to face the prospect of seeing an actor on the ballot," he said.

In making that move, however, he’s taking on a huge challenge, one he believes the entire company is up for.

"I see building blocks here that we can use as the foundation to return to profitability," he said. "There is a great workforce of knowledgeable, motivated people who are hungry right now.

"They want to build on their success and restore the image of the Top-Flite company to what it once was," he continued. "I don’t think it will take us too long to do that."

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