Recent IPO Acushnet Holdings (NYSE:GOLF) is seeing an unlikely competitor in its most dominant segment, the golf ball. The high turnover soft good is one of the most profitable segments in the golf industry, and makes up 1/3 of Acushnet’s revenue with a dominant market share north of 50 percent.
Costco’s signature Kirkland brand recently released its own golf ball that has been seeing considerable demand on the value end of the golf ball segment. The timing of the release was notable, right around the time Acushnet prepped for its IPO in late October. While Acushnet’s Titleist has a stronghold on the premium ball market with its Pro V1 model that has dominated the sport for nearly 16 years, there is room for Costco to cut into Titleist’s market share.
The golf ball industry is one of the strongest in golf, and a key reason for Titleist’s decision to go public late in 2016. “Our highest margin of business is golf ball; (Titleist) business is heavily skewed to the golf ball,” said Callaway Golf CFO Robert Julian in an interview last year. The industry is nearly a $2 billion business worldwide.
Costco’s 4-piece urethane ball, which is considered premium in golf, is currently sold out online. Adding to the deal, the price is significantly lower than its competition, $29.99 for two-dozen, while the competition generally sells for around that price or more for just one dozen. Titleist’s Pro V1 is a urethane ball that retails for around $53 on Amazon.com inc (NASDAQ:AMZN). The Kirkland Signature ball makes it attractive for golfers to play a premium golf ball but pay less for more quantity, a much-needed reality for the weekend golfer.
With the recent bankruptcies of Sports Authority and Golfsmith, Costco is capitalizing on the fact that there are simply less outlets to buy golf products, making the retailer a go to destination for the sport. The company will have to up its supply to make a dent in Titleist’s business however, as it is currently limited members to buying two 24-packs.