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Financial fallout
Turf industry representatives and researchers seek the few remaining handholds in a plummeting economy.
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The long-held idea that golf was recession-proof has proved to be greatly exaggerated. It’s been banged and bruised as the global economic calamity reaches the start of the second quarter of what’s shaping up to be one of the most fateful years in domestic history.
Golf has fallen then bounced back to unprecedented heights before, but this time the comeback will be more trying, the lines of those left behind longer and the scars much deeper. The game entered the year with more golf facilities going out of business than new ones being built. Private golf clubs are struggling with declining memberships and golfers everywhere are assessing their commitment to the sport.
Golf equipment manufacturers, as a whole one of the nation’s most successful business sectors over the last decade, have been scrambling amid layoffs and corporate restructuring. The game’s biggest symbols of success, the professional tours, have been sidestepping fleeing tournament sponsors.
But there have also been a few glimmers of hope of late. Tiger Woods’ return to competitive golf in late February was a major boost to the PGA Tour, even as it coincided with the news that the title sponsor of the Tour’s most popular event in terms of attendance, the FBR Open at the TPC Scottsdale, was calling it a day. The foreboding attempt by California Gov. Arnold Schwarzenegger to impose a golf tax as part of that state’s efforts to buoy its sinking budget deficit failed, thanks largely to the efforts of the California Alliance for Golf, which includes golf course superintendent associations.
Another somewhat positive sign, and one not overlooked by the industry’s golf course management sector, is that while golf isn’t recession-proof, golfers apparently are. The bright side to the fact that the number of golfers in America has remained stagnant in recent years is that it’s been only minimally affected by the economy. Moreover, the number of rounds played across the country seems to have stabilized despite all the turmoil.
The notion is that U.S. golfers — possibly to the detriment of private clubs and to the advantage of public and municipal venues — haven’t stopped playing but are changing the way they play and where they play as they pursue more value for their dollars.
“I think people are still going to invest in recreation. To me, that means that golf facilities must sustain quality turf and conditions,” says Scott Welge, director of marketing for Bayer CropScience. “The golf course must be appealing to the golfer because they do have choices.”
Last October and again in January, GCM featured articles on how superintendents were trimming budgets and adjusting maintenance programs for the challenges ahead. Their stories reflected Welge’s comment — golf course conditioning, generally the main reason golfers choose to play a course, can’t be shirked even in hard times.
This issue of GCM explores how some of the golf course industry’s major providers, manufacturers and the research arm of the golf turf business are likewise positioning themselves to produce the wherewithal to help superintendents meet that challenge.
Equipment sector accentuates the positive
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Photo courtesy of Syngenta |
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Photo courtesy of Jacobsen |
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Photo courtesy of John Deere |
| Manufacturers of golf course maintenance equipment and products — from the “Big Three” represented here to smaller, specialty companies — are counting on superintendents to continue preserving conditions at their facilities with practices such as aerification and mowing despite tightening budgets. |
Leading golf course management manufacturers — those making equipment and turf-care products — are spinning a positive outlook in troubling times. Their take is that the health of the golf course is integral to the success of the facility in particular and the survival of the industry in general.
The approach already has been difficult. Most companies have pared staff, cut budgets and otherwise reorganized or refined the way they do business. Many say it’ll be a good thing over the long haul.
“We will all be better managers because of this,” offers Bayer’s Welge.
The overriding theme is that the industry is going to continue to do what it does best and, not unlike many superintendents today, do more with less.
“The signal we’ve got to send to our customers is that we’re serious about the golf business,” says Gregg Breningmeyer, director of marketing and sales for John Deere Golf.
Considering the eccentricities of research-and-development timing and company-wide cutbacks to the contrary, the Big Three in maintenance equipment manufacturing — Toro, John Deere and Jacobsen — went into 2009 pretty much in upbeat fashion, introducing almost two dozen new products between them at the Golf Industry Show in New Orleans.
That done, the next step is to correctly assess customer needs and buying trends in a time when almost all bets are off.
Winds of change
“We have a sense that on the capital side superintendents are definitely either delaying or reducing some purchases. We know operating budgets are down and capital spending is down,” says Bob VandenBoom, senior marketing manager of golf in Toro’s commercial products division, adding that while the economic crisis was expected, many were still caught unaware by the speed and severity of the cuts.
In mid-February, Toro, coming off a robust 2008, announced that it had reduced its company-wide workforce by 100 employees, among other cost-saving measures, a move that VandenBoom describes as a company with a strong balance sheet nevertheless positioning itself for the future.
In another announcement a week later, Toro added three new financial service partners to assure its customers access to capital at competitive rates.
Because Toro’s November-to-November fiscal year has offered an early glimpse of the road ahead, VandenBoom notes some logical outcomes, or trends, such as a likely increase in parts sales as superintendents try to keep equipment running longer and a corresponding reduction in whole goods sales. Some superintendents are seeking lease extensions. Also, he sees a spike in priority products, both for high-profile areas of courses and to accommodate labor cuts.
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Anticipating that superintendents will be pushing equipment to run longer before replacement, manufacturers are gearing up for the likely increase in parts sales. Photo by Seth Jones |
He also expects facility ownership and management to assume increased decision-making in budgeting for the maintenance department.
“They’re going to take a much closer look at how capital is being spent and being allocated,” VandenBoom says. “It means more due diligence for superintendents.”
Most important, the Toro executive believes that an industry aura of optimism, however guarded, is vital for all concerned and that a bunker mentality would be the worst kind of customer service at this point.
“We don’t want to be pessimistic,” VandenBoom says. “The thing you always fight is you don’t want to do what the media does, which is create a pessimistic frenzy. We had a very good year last year. We’re just trying to go into this year with a cautiously optimistic view.”
Trimming the fat
Quinn Derby, a product manager for Jacobsen, says the golf market has been contracting for some time, resulting in the manufacturers fighting for a larger piece of a smaller pie, which in turn has resulted in an influx of better, smarter products that focus on customer needs and make the best business sense.
“You have to be cautiously optimistic, make the right and fiscally conservative moves without impacting your ability to continue going forward,” he says, noting that Jacobsen, a pioneering company in promoting hybrid and electric equipment that promotes less expense and less maintenance, has refined its business approach in recent years in anticipation of a change in the economic climate.
Jacobsen’s parent company, Textron, made headlines recently when it discontinued its financing of golf course mortgage loans, with plans to trim $8 billion from its total $11.4 billion loan portfolio. The company retained, however, its business of financing Textron-manufactured products, including Jacobsen equipment.
Derby says that as the industry moves into the spring buying period, some tendencies are emerging.
“From a sales point of view, on the dealership level, the talk is it may not be off as much as expected,” he says. “From a rational standpoint, you would expect that superintendents may try to turn over equipment for another year or so.”
Moving forward
Both Derby and Toro’s VandenBoom stress that the industry must continue to unveil innovation in the marketplace as evidence of its optimism and its commitment.
“We’ve worked a lot on our product planning to try to position ourselves to help grow some share, even though the market is down now,” says Derby. “Research and development drives market share growth. Long term, you can’t afford not to invest in R&D if you plan on staying in the game over the long haul.”
Adds VandenBoom: “We’ve strengthened our position to maintain our investment in new product development for our long-term health. Research and development is a priority for us because golf course conditions continue to be a priority among golf facilities.”
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The industry’s creators of turf-care products link their success in the marketplace — even in an economic downturn — to developing “smarter products” for superintendents to apply to their courses. Photos courtesy of Syngenta |
Seizing opportunities
Likewise, the importance of R&D has not been lost on Deere’s Breningmeyer, who points out that the company introduced seven new products at the GIS that had been in development for three to four years.
“In fact, it was the largest single new product introduction in our 21-year history,” he says. “It was fortunate for us in uncertain economic times … it gives us something exciting to talk about instead of sticking our heads in the sand.”
Breningmeyer says events over the last year and a half have positioned John Deere Golf well for the ongoing economic downturn. The company solidified its standing in the agronomic business with its acquisition of Lesco, it got into the golf course irrigation business and it underwent a timely reorganization of its total golf sales force.
“Revenue in 2008 wasn’t as bad as people might have thought; it was relatively stable,” he notes. “Going forward, there’s some concern with private courses losing members. We don’t know what impact that will have on their budgets or their ability to sustain themselves.
“That said, however, I believe golf clubs are going to try to compete for the golfers who are available out there. To do that, the last thing you want to do is jeopardize the primary attraction for those golfers — the golf course itself. I believe that probably the last thing you’ll see significant cuts in is the area of golf course maintenance.”
Breningmeyer says there is too much uncertainty in current buying trends, but he expects they will be according to need. It may also come down to the strongest will survive and the manufacturers will have to cater to them.
“Superintendents are going to have to make decisions, and it’s up to us to be able to provide for their needs,” he says. “Over the course of the coming year, we’ll probably call some audibles and make some adjustments on the fly. In the meantime, we’re going to be engaged with our distributors to stay abreast of opportunities and keep an eye on our schedules so we don’t produce more than we need. It’s kind of a tightrope — if you cut too much you could find yourself missing opportunities. You’ve got to balance that with having too much inventory, which would be bad business management.”
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Photo by Scott Hollister |
Chemical R&D holds steady …
for now
For the industry’s creators of turf-care products, research and development of new formulations or active ingredients — and new ideas applying to both — is a multiyear, multimillion-dollar commitment. It’s also much more than that.
“It’s our lifeblood … that’s what we do; that’s what superintendents expect from companies like us — that we deliver innovation. We won’t make big changes to that. We have to be sustainable,” says Toni Bucci, business manager of BASF Turf & Ornamentals, which has two new products out this year, a pre-emergence herbicide and a fungicide, that made it through the rigorous approval process plus golf course demonstration trials.
Because it’s so long-term and so expensive, the development of turf-care chemistries is strongly linked to a company’s success in the marketplace.
“The thing is, profits generated from today’s sales are recycled back into our R&D,” Bucci says. “We have to continuously have an input of revenue in order to finance product development for the future. We can withstand a couple of down years, but long-term depression could have an impact on our R&D efforts.”
Bucci says BASF learned important lessons in a topsy-turvy 2008 and now has strategic plans in place for the near future — myriad budget cuts that, not surprisingly, revolve around product planning. She points to the increased use of webinars, teleconferences and company Web site training modules for product launches instead of the traditional national and regional rollouts.
The BASF strategy also is laden with contingency plans, as well, in its efforts to create products that meet expectations in the marketplace. “Products used on golf courses have to be smarter products,” Bucci says.
“That’s probably the biggest thing right now,” she adds. “This is our budget as it stands today, but as we get into the second or third quarter and things aren’t moving as we expect them to, we have a number of things we can do, such as cut down on travel by our personnel, scale back on local and regional advertising … planning ahead and staying in touch with reality.”
Lean and mean
Sticking to his premise that the corporate side will land safely from the nation’s economic freefall, Scott Welge says Bayer has directed a two-pronged assault on the murky near-term — a more intense internal demand for the best return on the resources expended and a budget based on customer perspective … quality products, quality representation, quality results, quality developmental pipeline.
“We’ve been positioning ourselves for this for some time,” he says. “We have some key indicators on the overall health of the industry. We keep track of those. They allow us to assess what the viability is today and also tomorrow.”
The company’s golf business, which introduced two new fungicides this year and has herbicides due out over the next two years, enjoys an R&D program supported by the larger scope of Bayer CropScience. The agriculture business is thriving of late because of improved commodity prices and, in turn, there is more demand for new active
ingredients.
“We realize that our success is in innovation … the more proactive you can be, the less effect from the current challenges there really is, not only internally within the organization, but also externally,” Welge says.
Keep the faith
Dave Ravel, turf marketing lead for Syngenta, also believes in the golf course management industry’s ability to cope with and rebound from the current financial crisis, but says it will take a team effort based on trust.
“We realize that course budgets are tight, but we believe more than ever that now is not the time to take risks with product purchases,” he says regarding superintendents facing the challenges of ownership and customer expectations with fewer resources to work with.
“An immediate solution for superintendents is to consider sticking with proven brands from trusted companies with the technical support and staff to help deliver reliable results and create conditions that keep golfers coming back to the course,” Ravel adds. “Taking short-term risks with product choices may seem tempting when budgets are tight, but the course conditions could suffer.”
Syngenta, which recently reached the $1 million mark in giving to GCSAA’s philanthropic arm, The Environmental Institute for Golf, encouraged early purchase orders from superintendents this year when it held pricing and terms
at 2008 levels through the end of
February.
“Our standing in the marketplace, continued focus on research and development, global supply chain and access to other resources puts us in the best position during challenging economic times,” Ravel says. “We can quickly respond to the golf course industry’s needs and demands for reliable products.”
Research roots challenged
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Turfgrass research has felt the economic pinch as both the USGA and GCSAA have trimmed back on funding some of those projects for 2009. Photo by Teresa Carson |
The economical impact facing the turfgrass industry’s research network across the U.S. might have flown under the radar a while longer as financial flak raised havoc overhead, but the cat came screeching out of the bag a few months ago.
That’s when the news broke that two of the major funding sources for turf research, the USGA and GCSAA, had suspended their support of new projects through 2009. That not only was a setback for many university turfgrass science and research programs, but also shifted the funding burden — at least for the time being — to the grassroots level.
“This is a time when you don’t want to cut back on research because research helps superintendents do a better job, and that’s even more important during tough economic times,” says Bruce Clarke, Ph.D., director of the Center for Turfgrass Science at Rutgers University.
Short term, the news is more ominous than onerous. While the USGA is halting $300,000 in funding for eight projects this year, the association still retains a healthy research outlay.
“Many, especially in the media, tend to focus on the $300,000, but we’re still funding a million dollars for current ongoing projects,” says Mike Kenna, Ph.D., director of research for the Green Section, noting that in the last 25 years the USGA has funded 392 projects to the tune of nearly $29 million.
Likewise, when the GCSAA Board of Directors decided in early December to withhold between $70,000 and $80,000 for new projects in 2009 through its Chapter Cooperative Research Program, the association was quick to note that it had 22 projects currently in progress, 15 of which are scheduled to be completed within the year.
However, both organizations also put new research proposals on hold.
The USGA will not call for proposals for 2010, but will revert to those who submitted and were approved for 2009.
“We were fortunate that we were able to at least complete the process for this year, and they are in our books for future funding,” Kenna says.
GCSAA, on the other hand, called for new proposals last September. They were received, but never reviewed because of the board decision. GCSAA’s director of research, Clark Throssell, Ph.D., says all proposals will have to be resubmitted this coming August or September.
“Most have been very understanding of our decision. I think they understand the difficult financial times and the reality of the situation regarding funding,” Throssell says. “Some were disappointed that they had put in the time and effort on a proposal and then we announced that we weren’t funding any new projects.”
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The Carolinas GCSA is raising research funds for North Carolina State University and Clemson with an innovative online auction of rounds at a number of high-profile Carolinas courses, including Hilton Head’s Harbour Town Golf Links. Photo by Mike Klemme/golfoto.com |
An educated reaction
Rutgers’ Bruce Clarke says the university had submitted several of the proposals to GCSAA last fall. He adds that the school also depends on the USGA as a source for external funding for practical problem-solving types of research for the golf course industry.
“We’re already feeling the effects of tight funding,” he says. “It’s a very big concern, especially if those sources would continue to be reduced or stopped for some years. We’ve been very appreciative of both associations. They’ve funded research that has had a tremendous impact on superintendents.”
Rutgers usually uses its external funding for six to seven ongoing,
multiyear projects each year. The university subsidizes more basic science, lab-based projects, mainly through funding from the USDA, National Science Foundation and other such entities.
But Clarke says the real boost each year comes from area and regional rank-and-file interests, such as GCSAA chapters, state turfgrass associations and their individual members. He adds that the GCSA of New Jersey and the Tri-State Research Foundation recently increased their research funding to ease the university’s crunch.
“They’ve been very forthcoming,” Clarke says of the grassroots support. “It shows some real commitment by the local organizations to continue to fund practical problem-oriented research that benefits them.”
For the last 14 years, the university also stages the Rutgers Golf Classic, which has raised almost $1 million for turf research for its golf, sports field and landscaping programs.
“You have to piece together funding; you just can’t rely on one funding organization,” Clarke says. “We never have and never will. I believe this is a really good time to find more innovative ways to maintain a level of research funding.”
Sweet Carolinas
Perhaps few have been as innovative as the Carolinas GCSA, which, on the heels of the news of the GCSAA and USGA funding suspensions, unveiled an initiative called Rounds4Research, an online project to benefit turfgrass projects at North Carolina State University and Clemson University.
Using a process similar to eBay, golfers can go to www.Rounds4Research.com for an auction of more than 250 tee times — about 1,000 rounds — at many high-profile courses in the Carolinas. The auction runs April 19 to May 6.
“These universities perform research that protects the health and the future of golf in our region, which delivers an annual economic benefit of $5 billion plus,” says Tim Kreger, the program director for the Carolinas GCSA. The program is his brainchild.
“Like so much else in today’s economic climate, these programs are struggling for funding. Rounds4Research gives the ultimate beneficiary of that research — the golfer — the chance to benefit golf and their game at the same time,” Kreger notes.
Stellar stalwarts
The struggle to maintain funding sources and honor commitments is most evident among the many turfgrass organizations around the country. Typical are the Michigan Turfgrass Foundation and the Florida Turfgrass Association. Both were founded in the 1950s and have long track records of devoted support of research and its benefits to the golf course management profession. And active superintendents Terry Poley and Matt Taylor, CGCS, are spearheading both organizations’ current fundraising efforts.
Poley is the Class A superintendent at Pine Lakes Country Club in Detroit’s northwest suburbs and president of the Michigan Turfgrass Foundation, the major funding source for Michigan State University’s turfgrass research programs — nearly $4.5 million thus far.
In recent years, the MTF has contributed around $125,000 annually, down from $170,000 in better times. Poley says the funds come from individual donations and benefit events, but most notably from many of the memberships of the state’s private club segment, which comprises 10 percent of Michigan’s 1,000-plus golf facilities.
“It’s on us superintendents at the facilities to show the importance of the research that’s being done,” says Poley, a 14-year member of GCSAA, who adds that the turf faculty at Michigan State is very active and often visits courses to help solicit funding. “I think the research can help shape how budgets are cut at golf courses. We’re able to utilize the educators to teach people the benefits of proper maintenance programs and how the research done at MSU has helped the game of golf in the state.”
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The National Turfgrass Federation benefits from federal assistance for its research support. Pictured here in Washington, D.C., at the federation’s 2006 inaugural meeting are (from left) Brian Horgan, Ph.D., University of Minnesota; Clark Throssell, Ph.D., GCSAA; Bernd Leinhauer, Ph.D., New Mexico State University; Mike Kenna, Ph.D., USGA; Warren Bell, Biograss Sod; Tom Delaney, Professional Landcare Network; Kirk Hunter, Turfgrass Producers International; and Kevin Morris, National Turfgrass Evaluation Program. GCM file photo |
This year, though, Poley is feeling the pressure. The foundation has $120,000 committed to the university and as of March 1, had very little in the bank. While the MTF has three endowments and can use up to 5 percent of their available interest each year, that’s unlikely in current difficult times.
“We’re sweating it. This year about 100 percent of our contribution will be based on fundraising efforts,” he says. “We’ll stick with what’s been working and try to hit it a little harder, focus on more private clubs donating.”
Poley also is considering getting Michigan’s vast public golf sector involved, an imposing proposition, yet the blueprint is out there — the PGA of America’s Patriot Golf Day in which golfers at participating courses nationwide add a dollar to their green fees and raise millions of dollars for a charitable cause.
“A Michigan Turfgrass Foundation Day would sure go a long way,” Poley muses.
Promoting the common cause
Taylor, director of golf at Royal Poinciana Golf Club in Naples, Fla., has long been a supporter of Florida and GCSAA research and scholarship programs. He’s a past president of the Florida Turfgrass Association and a current member of its board of directors.
The FTGA, founded by a former GCSAA executive director, the late Gene Nutter, caters to the University of Florida and other state colleges and turf institutions while promoting continuing education and networking opportunities for superintendents. It also funds a scholarship program through the Florida Turfgrass Research Foundation.
That’s a lot to tackle in the current economic downturn. Taylor points out that memberships and vendor participation are on the decline among the state’s many GCSA chapters, and attendance at the association’s annual trade show is down — all indicators that funding is becoming harder to come by.
“Fewer dollars in the whole pot makes it tough for everybody. If memberships are down, then there’s fewer opportunities for research,” he says. “It’s a challenge right now and the look ahead doesn’t look too promising.”
While the FTGA has many funding avenues, its chief emphasis is on establishing partnerships with the likes of GCSAA, the Florida GCSA, the Club Managers Association of America and the Florida Sod Growers Cooperative. It’s a promising concept.
Taylor says the association is in the third year of a three-year, $250,000 commitment to ongoing research and scholarships. He notes that the largest project involves improved varieties of bermudagrass and took a $98,000 chunk out of the total commitment. But the bite was made more palatable through a three-way funding partnership among the FTGA, the Florida GCSA and the state’s sod growers. Still, the future is uncertain, and the 16-year GCSAA member says the days of just selling research are over.
“I think we’re going to have to have specific topics instead of a broad brush for research,” he says, adding that expanding the partnership program is the key. “We’re going to have to go to the industry organizations and companies and see if a project would be a benefit to them, and if so, would they contribute.”
Size counts
Among those research entities with wider reaches are the National Turfgrass Evaluation Program and the National Turfgrass Federation, two organizations whose work either directly or indirectly trickles down to the local and regional levels.
“It’s going to be slow until people regain their confidence and begin spending money again,” is the short and simple answer from Kevin Morris, who does double duty as executive director of NTEP and president of NTF.
The turf evaluation program’s funding comes from entry fees to test grasses. The funds have been declining for the past few years, due as much to industry consolidation and changes in companies’ business practices as the financial fallout. In turn, NTEP has had to cut back on what it pays university staff who do the turf testing.
The NTF reaps some federal assistance, but other sources are necessary. Morris says the federation is currently seeking funding for an ambitious turfgrass research initiative that includes more money for state and federal turf researchers; a national turf survey conducted by the U.S. Department of Agriculture to document the scope and value of the turf industry, which would probably cost $10 million alone; and a project aimed at the Environmental Protection Agency, among others, to further understanding of the turf industry and offer to work with agents on their respective programs.
“We’re trying to make the turfgrass industry more relevant on a national scale,” Morris says. “I think we’ve got a great story to tell why turf is important.”