What do you get when you realign your business model, introduce some hot, new, critically acclaimed products and then proceed to go backwards in sales?

You get a new CEO, that’s what.

2015 was not a great year for Srixon/Cleveland golf in the U.S., as sales dropped 0.9% from 2014. That may not sound like a lot, but Dunlop Sports Co. LTD (a subsidiary of Japan’s Sumitomo Rubber Industries – the SRI in Srixon – and the parent company of Srixon, Cleveland and XXIO) says in its annual report the overall golf market in North America actually grew last year.

So not only did Cleveland/Srixon not get its share of that growth, it actually lost ground. That’s kind of hard to do, especially after hitting the streets with a full line of new and universally praised irons, woods and balls.

Apparently the Journey to Better took a detour.

Enter Matt Yasumoto, the new president and CEO of Srixon/Cleveland/XXIO – USA. His assignment seems straightforward: reestablish, reinvigorate and revitalize the Srixon and Cleveland brands in North America, while maintaining growth in the premium XXIO line.

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Tall orders, to be sure. And the obstacles are the same ones facing Wilson Staff, Bridgestone, Hogan or any of the other challenger brands: brand awareness, product availability, and overall excitement.

Changes At The Top

Matt Yasumoto is a Dunlop Sports veteran. He’s served as Executive Director of Srixon Sports – Asia, President of Cleveland Golf – Japan, and Director of Dunlop Sports’ Overseas Business Planning Group. In an exclusive interview with MyGolfSpy, Yasumoto says North American changes have already begun.

“As far as sales and marketing are concerned, we have a new corporate structure taking place in the U.S. office,” he says. “There will be significant changes in both of those areas.”

Dunlop Sports uses the Japanese management principle Genchi Genbutsu, or go and see. It says the best way to identify and solve problems is to get out of the boardroom and see for yourself what’s actually happening in your own organization and in the marketplace. Dunlop’s annual report says all three brands will be more present in local markets this year, in order to “thoroughly confirm the facts with our own eyes.”

Genchi Genbutsu

As a result, says Yasumoto, you can expect to see more local Cleveland, Srixon and XXIO events in the coming months.

“For example, the XXIO Experience Days are for a specific type of more affluent consumer, the Scoring Clinics may be for a customer more interested in scoring and the Cleveland brand, and the Srixon ‘Switch To Better’ allows us to be more aggressive with golf balls on a national level. We’re focused on creating unique and different experiences for all three brands.” – Matt Yasumoto, CEO, Srixon/Cleveland/XXIO – USA.

One fact plaguing the Srixon brand specifically is lack of retail availability. Yasumoto says the company is vowing to “go and see,” and be more present in the marketplace.

“One way to gain brand recognition is to use the PGA Tour, the Champions Tour, and the Web.com tour” says Yasumoto. “We’re also expanding the dealer distribution network for Srixon. We are trying to improve our service levels to both dealers and consumers, and we are striving to differentiate ourselves from our competitors in service.”

The $5.5 Million Man?

It’s one thing to say you need expanded retail presence, but it’s much harder to actually do. Every armchair golf industry expert with a computer will tell you challenger brands need to be in stores, because you won’t buy what you can’t try. But more retail presence is very difficult to pull off because shelf space is at a premium. The Big 6 dominate retail space, leaving precious little room for the challengers. As a result, it’s important that growth goals be realistic.

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Dunlop Sports has a 2016 sales target of just under $75 Million for North America. That number reflects an 8% increase, or $5.5 Million. To put sales into perspective, Wilson Staff reports annual worldwide sales in the $120 Million range, while Callaway’s 2015 worldwide sales approached $900 Million.

A $5.5 Million jump doesn’t sound daunting, until you realize the first half of 2016 will go by with no new product to help fuel the growth other than the Z 355 irons and woods, which debuted last fall.

“We’re adamant about maintaining product life cycles and not chasing sales numbers. We keep two-year life cycles. Consumers need to feel comfortable to make a purchasing decision, and dealers need to feel comfortable not suddenly having closeout or markdown product without worrying about their own profit margins” – Matt Yasumoto

New products expected later this year should provide a sales bump. Srixon is releasing a new low-compression ball this summer and a new full line of clubs this fall to replace the 2-year old Z 545 and 745 woods and irons. Cleveland is releasing new wedges and putters in September.

And speaking of Cleveland…

A Cleveland Comeback?

It ‘s been about two years since Cleveland transitioned away from a full line brand to instead focus on only wedges and putters. So far, not so good though, as Dunlop Sports’ 2015 annual report singles out the Cleveland brand’s performance in North America as “disappointing.”

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“In retrospect, it was too rapid to make that decision,” says Yasumoto of repositioning Cleveland. “It was a decision that should have been made over the course of three to five years. That rapid change caused a lot of conflict and confusion with dealers and end users.”

Is there a future for a full-line Cleveland? Is a comeback in the cards?

“There is an opportunity to bring the Cleveland brand back into the market. We have no hesitation to utilize Cleveland’s long history of innovation, and we are not limiting ourselves to Cleveland as purely a short game and putter brand.” – Matt Yasumoto

So will we see Cleveland back as a full-line brand? Dunlop Sports isn’t saying yes, but it isn’t saying no, either.

“We know there is still a high degree of brand equity for Cleveland,” says Yasumoto. “And there are many golfers around the world who still appreciate the value of Cleveland Golf products.”

Dunlop’s leadership clearly believes there’s still life in the Cleveland brand, and that dismissing any remaining brand equity would be a mistake.

An interesting side note: Dunlop’s golf sales actually grew 4% worldwide last year, despite the disappointing performance in the U.S. However, Dunlop Sports reported an annual net loss, largely due to a one-time amortization of goodwill of the Cleveland brand of nearly $36 Million. It’s an accounting move used when the value of an asset has fallen below what the company originally paid for it. Dunlop/Sumitomo bought Cleveland in 2007 for $132.5 Million.

Market Specific Marketing

Yasumoto does believe the Srixon, Cleveland, and XXIO brands are sitting in an interesting position in North America.

“Our structure is pretty unique compared to our competitors in that we have R&D teams in both the U.S. and Japan, and also a marketing team in the U.S. and Japan,” says Yasumoto. “What makes that unique is we have Japanese technology plus U.S. marketing strength. If can we can capitalize on them together, we should be in a very unique position compared to pure Japanese brands or pure American brands.”

Srixon Japan 2

So what you’ll see is global branding with a twist. International corporations love global branding because, in theory, it creates a single global identity (which investors like) and it saves money (which investors really like). Global marketing, however, has limitations because what plays in Kobe or Osaka may not play in Amarillo or Dubuque.

“Advertisements that make total sense in Asia sometimes don’t make sense in Western Countries. The coordination between East and West will be very important for brand recognition. Every regional market will be strong in communicating new product benefits and field activity.” – Matt Yasumoto

That means the Srixon brand is being marketed somewhat differently in Japan than it is here. In Japan, Srixon is a market leader known for quality, innovation and craftsmanship. Brand awareness and availability are strengths, so marketing is from a leadership position. In the U.S. Srixon is a challenger brand, and brand awareness and availability are weaknesses, so the marketing plan must be more nimble, aggressive, and local market specific to support the company’s growth strategy.

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One tangible example is Dunlop’s collaboration with ThirdChannel, an independent market research and in-store merchandising specialist. ThirdChannel builds relationships and brand loyalty with retailers, conducts sales training, and holds in-store marketing events.

If you encounter a Srixon booth at a local golf course or store this summer, chances are you’ll be talking with what ThirdChannel calls a Retail Intelligence Agent. Dunlop says the initiative is ball-focused, designed to aggressively raise Srixon brand awareness in local markets.

XXIO – The Japanese PXG

For the record, Bob Parsons did not invent the premium golf equipment market. Dunlop’s XXIO brand has been selling $800 drivers, $550 Fairway woods and $80-a-dozen golf balls long before PXG was even a twinkle in GoDaddy’s eyes.

“We started XXIO in 2000 in Japan and went right to No. 1, and it hasn’t changed since,” says Yasumoto. “We just introduced the ninth generation of XXIO last December, and we’ve consistently dominated the market in both Japan and Korea for 17 years.”

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One can argue whether lines such as PXG, XXIO or the new Titleist C-16 actually provide premium performance in line with their premium price. But what can’t be argued is that there is, in fact, a sustainable market for these high end lines.

“When we started XXIO in North America, we didn’t know if it would go well or not. But having events like the XXIO Experience Days (high end, private demo events at high end, private courses), we became pretty confident there would be a demand for XXIO in this market. We think we have great potential for XXIO to grow, so we’re planning to put the foot on the gas to expand XXIO accounts throughout the country.” – Matt Yasumoto

Another Challenger?

So, can Matt Yasumoto lead the Srixon and Cleveland brands out of the market share doldrums, as well as grow the XXIO line in what is becoming a crowded high-end equipment arena? The trite answer is “time will tell.”

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The dollar growth target – $5.5 Million – is certainly modest and realistic. The old business adage “if you keep doing what you’ve been doing you’ll keep getting what you’ve been getting” most certainly applies. Don’t underestimate how disappointing 2015 was to the Cleveland and Srixon brands in the U.S., so more of the same going forward certainly isn’t an option.

Yasumoto comes to the U.S. with the clear task of implementing change. We’ve already seen changes in Dunlop’s P.R. department, and major overhauls are either coming or have already been made in the sales and marketing operations. Programs such as the ThirdChannel initiative are focused on creating brand awareness and presence in your local markets, and a new wave of Cleveland and Srixon products are coming this fall.

Genchi Genbutso is the new rule of the day.

Will it be enough to get you to buy $5.5 Million more worth of Cleveland, Srixon and XXIO? What are your thoughts of the Cleveland, Srixon and XXIO brands, and can the new leadership turn the ship in the right direction?