Callaway: San Diego's Largest Golf Company
Topgolf Callaway Brands invests over $2 billion to become the modern golf company
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Founders,
Callaway Golf is one of the most recognized golf brands in the world.
Founded in 1982, by serial entrepreneur Ely Callaway, the publicly traded golf conglomerate continues to dominate in a slow-moving industry.
Launched over forty years ago, Callaway specializes in selling golf equipment, apparel and accessories — essentially any product or service that is golf-related.
Under Ely’s direction, the company grew from a four-person golf club startup into a multibillion-dollar corporation that generated $840 million by 2001.
Fast forward 20 years later, Callaway earned $1.1 billion in a single quarter, with revenues growing roughly 22% year-over-year, according to the company.
Company Leadership
“The San Diego area has been the proud home of Callaway Brands for more than 40 years,” said Chip Brewer, President and CEO of Topgolf Callaway Brands Corp. (NYSE: $MODG).
Brewer heads the iconic golf company and overseas its Carlsbad-based headquarters which employs roughly 2,400 staffers globally.
Under his leadership, Callaway has worked diligently to diversify its business model and refine its flywheel strategy. Most recently, he placed a multibillion-dollar bet, in hopes to accelerate the firm’s long-term growth.
“When you invest in Callaway, you are now investing in, what I like to call, modern golf, a combination of traditional golf with lifestyle apparel and the world's leading tech-enabled golf entertainment company,” said Brewer in a recent earnings call.
Golf’s Popularity
Golf experience massive growth in the last two years, in large part due to the pandemic.
A record 3.2 million Americans on a golf course for the first time in 2021. This growth was on the heels of 3 million Americans playing golf for the first time in 2020, according to the National Golf Foundation.
Making Golf Inclusive
Callaway’s goal is to make golf more accessible and inclusive, particularly for younger players and next generation of players. To serve this growing customer segment, Callaway invested $2.6 billion to acquire Topgolf in an all-stock deal.
As one of the largest acquisition in recent years in the golf industry, the deal is brings them one step closer to accomplishing their goal — to become a modern golf brand serving both traditional and amateur golfers across the world.
A major acquisition, Topgolf has become a significant contributor to Callaway’s revenue.
Revenue breakdown:
$700 million from TopGolf’s 70+ venues
$920 million from Callaway’s equipment sales
$510 million from Callaway’s apparel and accessories
Other brands under the company include: TravisMathew, Toptracer, Odyssey, OGIO, Jack Wolfskin, and World Golf Tour.
Backstory on Topgolf
Founded in 2000, Target Oriented Practice Golf was Topgolf’s initial name when founded by Steve and Dave Jolliffe. The entrepreneurial brothers sold their business in the late 90’s and launched their technology-focused golf business catering to amateur golfers.
Like many early-stage companies, the brothers struggled to get adoption at first. Golfers and equipment companies weren’t necessarily enthusiastic about the business. It was also challenging to find investors for their idea.
However, they persevered and would later opened three locations in the U.S serving amateur golfers in Virginia; Chicago, and Dallas.
Fast forward 14 years later, Topgolf’s began to boom — in 2014, sales exceeded $160 million and the company began to expand across the U.S. and internationally opening a total of 40 venues by 2017.
By the end of 2021, Topgolf had 70 venues and brought in $1.2 billion in revenues.
The Unique Value Proposition
Topgolf alone has three business units under its name:
Topgolf (branded golf venues)
TopRacer (proprietary technology)
Topgolf Media
The competitive advantage? Implanting an RFID chip in each golf ball to provide exact distance and location — a proprietary technology to Topgolf. This allowed Topgolf to gamify the driving range experience.
How is it different than competitors? Topgolf is best described as a “video-game” inspired driving range where amateur golf players can eat, drink and compete against each other for entertainment. It leverages technology to measure distance, height, speed, among other features.
Competition and Partnerships
Callaway’s competitors include TaylorMade Golf, Nike, PING, Adidas, among many others. What differentiates it from competition? — their booming golf entertainment division Topgolf and strategic partnerships.
For example, Suite Shots announced last year it is opening a golf entertainment competitor however it will be using Toptracer’s technology to operate.
Why is this important? Even as Topgolf competitors open venues, Callaway will recognize revenue due to its proprietary technology embedded in those venues.
Topgolf’s Toptracer business unit is expected to build 8,000 bays in venues this year alone. Callaway is betting this will be a key driver of the long-term growth as it will only help introduce even more players to the game of golf.
In addition, Callaway invested $30 million into Five Iron Golf, an urban indoor golf and entertainment business. The deal included a non-exclusive marketing agreement, meaning Five Iron players have the opportunity to demo Callaway clubs and balls.
Looking Ahead
The acquisition of Topgolf has proven to be foundational investment for Callaway, providing the industry-leading company additional market penetration while also educating new players on the game golf.
By the end of 2023, Callaway estimates that it will have a Topgolf venue within a 25-minute drive of 26% of the United States population, leaving a staggering 74% of the United States population for future growth.
In San Diego, Two Topgolf locations will finally be built in Sorrento Valley and Downtown. Exact construction for the local facilities is uncertain.
“While still in the early stages, we’re excited by the potential to bring even more play to the San Diego community,” said Chris Callaway, chief development officer at Callaway.
Flywheel strategy:
Invest in high growth golf segments: golf entertainment and indoor golf
Engage with future customers with its golf entertainment businesses, Topgolf and Five Iron Golf, to promote and advertise Callaway products
Callaway increases market share and revenue by selling its core business products; golf equipment, apparel, gear, etc.
Educate and retain customers through golf entertainment and facilities
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