A swing and a miss

31 August, 2016 Share socially

But what does this mean for Nike’s overall brand strength, the company’s bottom line and golf as a consumer category?

Taking data from the FutureBrand Index and other sources, we’ve looked at the implications of this recent news.

Nike brand

Nike is a staple of ‘best brand’ lists and Business Management text books, it is a brand in strong health, there’s no doubt about it. We know that Nike hasn’t been afraid to drastically change its direction, reduce its investment in categories or completely close practices in the past (see the development of their digital offering, the reduction of sponsorship in soccer and closing the Fuelband division, to name a few), they make bold decisions. Many of which have paid off.

But has it made the right choice when it comes to shuttering it’s established Nike Golf brand?

Drawing on data from the 2016 FutureBrand Index, we can see that Nike is well perceived across measures that really matter in a case like this; they score highly in moving ahead, both today(61%) and three years from now(65%), and also score very well for perceptions of the brand ‘falling behind’ both now(10%) and in three years time(15%). People also perceive them to be an innovative brand and a thought leader which would suggest that their previous bold moves haven’t affected consumers’ perceptions of Nike’s ability to make positive decisions that affect their future.

Nike’s profit fell 2% [for the first time on home soil]
Wall Street Journal

The bottom line

In June, the Wall Street journal reported that ‘Nike’s profit fell 2% [for the first time on home soil] and sales were flat in North America, as the company continued to clear excess inventory and battled increased competition from Under Armour and Adidas.’ With declines in some of its major categories, including Basketball, Nike could do worse than to offload a business unit whose profit fall of 8% this year was its third year of declining sales* in a row, in a sport that is losing its commercial appeal.

Get rid of the crappy stuff
Steve Jobs

In 2010 Nike CEO Mark Parker cited a meeting with Steve Jobs where Jobs told him Nike 'do too many things' and should seek to ‘get rid of the crappy stuff’.

It would appear that whilst Nike still cover a lot of ground, Parker is attempting to act on the advice of Jobs, with the streamlining of some of Nike’s services (including Golf), back to its core offering which is now tied to its more profitable and scalable digital-commerce business. All positive signs for the company’s bottom line.

Lydia Ko is the LPGA’s #1 ranked golfer

The long view

When not one, but two big players pull out of a category within a matter of months (Adidas included) it doesn’t say great things for its future. Coupled with the widespread media coverage of the ‘death of golf’, as TV revenues continue to decline in a potential post-Woods era, the signs aren’t great for golf and brands within the sport.

That said, Golf as a sport has a great heritage and tradition as well as a core of loyal fans. It can build and prosper, as can the brands within it, but they all have to adapt.

Now I’d be remiss to not connect the dots between the decline of Tiger Woods’ performances and the decline in Nike’s Golf brand. In the same way that Nike built its basketball brand around Michael Jordan (now a $2bn per year business), it built its golf brand around Woods. The difference is Jordan remained the talisman of both the NBA and Nike portfolio and retired with his legacy intact, something Woods is still hoping is possible. The fact that Tiger isn’t anywhere close to his magnificent best and that there seems to be no-one with the same blend of brilliance and crossover appeal for Nike, is surely playing a part in the company’s decision. The silver lining for other brands in the category —  if there is one  —  is that no single brand is as closely tied to one single player as Nike was to Woods, potentially lessening the risk of performance-based revenue delicne.

It’s worth mentioning that Nike are keeping their apparel and footwear brands for golf, areas which are much more closely linked to their core business**. This may mean that they still see a future in the category.

In addition there are new, up and coming, charismatic players across the PGA an LPGA as well as the rise in populatority of women’s golf as a whole. This means that all is not lost in the sport and there is still opportunity for brands trying to break through and maintain relevance, at least for now. Who knows, Nike’s withdrawal from Golf may be a positive in paving the way for new, disruptive brands to enter the fray, giving Golf the kind of shake up it actually needs.

Watch this space…

What do you think? Are Nike right to pull away from Golf, do brands have a future in the sport? Tweet us your thoughts using the hashtag #futureproof.

*(perhaps because these products are often line extensions of other Nike products and don’t cost as much in RND investment)