Five Questions

Ron Drapeau
Callaway Golf
President, CEO and Chairman of the Board

Ron Drapeau joined Callaway Golf Company in November 1996 and less than five years later was named President and CEO upon the retirement of company Founder Ely Callaway. In August 2001, the Board of Directors elected Drapeau to serve as Chairman of the Board to fill the vacancy left by the July 5 death of Callaway. The Wire publisher Alex Miceli recently interviewed Drapeau about equipment technology, the U.S. Golf Association and, of course, Callaway Golf in this Five Questions session.

Q.: Let us start this interview by addressing the technology issues that are out there. You obviously have a strong opinion or feeling on technology and its application to the game today. Talk about Callaway's position?

RON DRAPEAU: Well, our position is very clear. We believe the amateurs, in particular, need all the help they can to enjoy this game; that most of us that are avid golfers do not have the time to practice, and many of us don't have the natural abilities to be very good at the game. And so, to the extent that we can bring some technology that helps players hit that occasional pleasurable shot, that's what we are all about.

And we think there's a big difference between players of the caliber of the PGA Tour, the so-called elite players, than the average golfers. And if you look at the USGA statistics, it bears that out. Of the 25 million golfers in the United States, there are only four million who have handicaps. Of the four million who have handicaps, there's less than 2 percent that have single-digit handicaps. So the vast majority of players are casual golfers or high-handicap golfers, and we just believe that they could use the help of technology and we might actually help grow the game or keep people in the game if they could enjoy it more.

Q.: Over the last 10 years, I think technology has played a pretty significant part in golf, yet golf has not grown considerably in that same 10-year period. So do you really believe that technology is going to be -- maybe not the be all and end all -- but one of the stakes that is going to grow golf?

RON DRAPEAU: Well, in particular, let's talk about the high COR drivers. Golf has not had a problem attracting new players. They get three million people a year, four million people a year try the game, but also that many drop out. I think the high COR drivers, in particular, would help some of the people that are not as strong as they once were stay in the game longer because they could get to par-4s, they could get to par-3s. I think that's where there could be a benefit to growing the game, by keeping people in it. So as the newcomers come in, golf could actually grow.

Q.: There is an argument made that by creating these type of clubs or these type of balls -- equipment in general -- you are making a separation in the game. If you keep creating equipment that the USGA does not approve or the R&A doesn't approve, then you are making a separation between the amateur golfer and the professional golfer and that, in fact, is probably not good for the game because this game is on a par of, everyone plays the same equipment. But I'm sure you would say that's not true, even today?

RON DRAPEAU: Well, there are a number of differences. First of all, the R&A has a focus of the average golfer, and that's why they have not made high COR drivers nonconforming. Their view is that driving off the tee is not a threat to the game, and they have statistics to prove it. They have five years of data they collected at member/guest tournaments, where they actually took amateur driving stats, and the driving stats went from 200 to 210 yards, so it's not a threat to golf. And I think that's a pretty reflective representative of what most of us amateurs, how we play the game.

The USGA is concerned about the elite players and they are very, very direct about that, and they are also very direct that it ought to be one game, and that's where the challenge comes in. The only point I would make is, if I can draw a parallel, 10 years ago in the NFL, there were 30 players that were over 300 pounds. Today there's over 300 players that are 300 pounds. The athletes have gotten a lot bigger and stronger, and they are better trained for their games, and that's true in golf.

So, there's a real distinction between the individuals playing the game at the pro level and the amateur level, and in golf, as there is in other sports. In other sports, we have accommodations for the elite players. The NBA plays a 24-second clock and the 3-point line is longer than it is at the collegiate or high school level. And I think the same could happen for golf, that we could have one set of rules as we do today. In golf, there are, for example, conditions of tournament play. And under conditions of tournament play for elite players, you can only play -- you must play -- the same ball throughout a round of golf. That's not true for everybody else. It's only in elite competitions. And you can't use range finders in elite competitions. Well, we could have a golf ball specified for elite competitions that were not as hot as the current golf ball technology and we could still be playing the same game.

Q.: Would you really want to do that? In the past, when I would see Jack Nicklaus using a particular putter winning the Masters in '86 or I would hear about somebody using a particular ball, maybe I would want to try that club or ball. Now what we are saying is, if he's using that ball, none of us as amateurs would want to use it because it's not going to go as far as he can hit it generally -- even if he was using my swing -- because it's not the same ball anymore. I'm going to be using some kind of other ball.

RON DRAPEAU: I disagree with you. I think if we had a set of specifications for a golf ball, all of the manufacturers could be held to those specifications, as we are today. But we still compete with branding based on aerodynamics and on materials and construction. If we had a tournament ball, we could sell the current line of balls for the elite players who want to, on occasion, measure themselves against Jack Nicklaus or Tiger Woods. They could buy a sleeve of those balls when they want to test themselves against Tiger Woods. The rest of the time they could play the other ball for enjoyment.

Q.: From the ball standpoint, I guess that would sound great for someone like Callaway. But if you were, what I would say, the big daddy in the industry, Titleist, who has had the ball market for a long time, do you think they would want to buy into a single elite-ball type of philosophy?

RON DRAPEAU: Well, I can't speak for Titleist. I don't know what they would want to do.

They compete as we do today, and on the merits of our products. They have been in the golf ball business for a long time and they have a great brand, and I would think that they would have more knowledge and intellectual property and have the ability to compete with any of us probably better than most of us, especially us new start-ups.

If I were them, I would not be afraid if the roles were reversed on golf clubs. I would say bring them on.

Q.: The U.S. Golf Association. They definitely seem to be a great nut to crack. Your predecessor [Ely Callaway] tried to deal with that, and I'm sure you are trying to deal with that in different ways. Do you realistically believe that it is something the two parties will be able to get their hands around and that there is going to be some kind of agreement or compromise?

RON DRAPEAU: I do. I'm very optimistic that over a period of time -- I can't predict how long -- that the USGA, which has very intelligent individuals at the head of that organization, will look at data that we now have available that was not available in 1998 when they made the ruling. And Reid MacKenzie's most recent documents upon becoming president [of the USGA] indicated that at times they acted without data in order to be safe rather than sorry. And if you look at it in that light, you can't criticize. But now, four years later, we have data and I would simply ask them to visit the data that that's now been collected.

Q.: You believe both sides -- yourself, as well as the USGA ­ have the best interests of golf in mind?

RON DRAPEAU: Oh, absolutely. There's no question the USGA has the best interest of golf in mind. They want to protect what's wonderful about this game, and we want to bring as many players into it as we can. I would not want to see the spring-like rule abolished. We should keep the spring-like rule.

Q.: Going forward, Callaway has had a particular deal with Ashworth clothing. You have gone from the humble beginnings of a putter to a fairway wood, driver and have now gone completely to every aspect of the game. Are you comfortable with the way things are going, and where do you see Callaway in the next five to 10 years?

RON DRAPEAU: Well, I believe within a five-year time frame that the major companies in the business will offer everything for a golfer from head to toe, including footwear and products to play the game with. And our brand has been fortunate enough to gain the credibility of a quality product and deliver a performance to the consumer that I believe has a good opportunity to branch out into the apparel end as well.

Q.: What is interesting is that one of your larger competitors on the block right now -- Nike -- is really more a marketing company than they are a research and development company. You have spent a lot of time and effort in R&D with your clubs and your balls. On the other end, I'm assuming with the apparel line you have done a license deal with Ashworth, and that in footwear, you are not going to go out and buy your own plants? But is that the way you see a company like Callaway, that has such a good brand name, going?

RON DRAPEAU: Absolutely. The reason being is we have spent a lot in R&D and we know a lot about golf clubs and golf balls, and the interaction of players to products who play the game. We don't know anything about the apparel business. And so, it makes sense for us to partner with somebody who knows that business. For us to go out and try to come out with designs and colors and fabrics, we would be completely lost.

Q.: I guess the last question is about the economy, and it's somewhat difficult from our perspective to really know. From your standpoint, you see numbers that other people don't see. The economy had been reported over the last six to nine months as being not really that strong and robust. In fact, maybe it was deflating just a little bit. Then you start seeing numbers, saying, well, maybe we were wrong, maybe we were not in that kind of period and maybe things are much better than we thought they were. How are they really from your standpoint?

RON DRAPEAU: Well, from the inside of golf looking at the consumer, it's very interesting. While there may be a recession going on for golfers, golf is as important to them as eating. So all of the things that come with golf, whether it be green fees, whether it be apparel, whether it be equipment, whether it be balls, that's important to them and they have not stopped buying.

They stopped doing some traveling and I think that was more because of the dangers and concerns about getting on an airplane. Seems to be coming back now, as well. But thank God for the resiliency of the consumers in this country, because they are the ones that are driving us out of this recession.