Prince Sports Group, Inc. Business Information, Profile, and History

History of Prince Sports Group, Inc.

Prince Sports Group, Inc. is the leading global manufacturer of tennis rackets. Renowned for its innovations in the tennis equipment industry, Prince also manufacturers Ektelon racquetball gear, footwear and sports apparel, ball-stringing machines, sports bags, tennis balls, and other goods. The company has retained its dominance of the tennis racket industry through innovation and savvy marketing.

The growth and success of Prince Sports Group is primarily attributable to the efforts of American inventor, sportsman, and entrepreneur Howard Head. Head, a consummate tinkerer and inventor, was an aeronautical engineer by trade during the 1940s. It was in the workshop of his Baltimore home that he staked his claim to fame. In 1950 Head invented the aluminum ski. Light and flexible, the innovation took the ski industry by storm and virtually revolutionized the sport during the 1950s and 1960s. In 1964 a pair of skis built by Head's ski company were used to capture a gold medal in the Olympics; the Head name was instantly imprinted on the minds of skiers around the world. Head capitalized on the popularity of his name by forming Head Sportswear International in 1966. The clothing line was an instant hit with the big-spending baby-boom generation, and Head Sportwear was quickly thrust to the forefront of the surging sports apparel industry.

In 1971 Head, then a 60-year-old multi-millionaire, was ready to retire from his business, and he sold the company to AMF, a maker of sports equipment. Thereafter, Head decided to take up, among other pursuits, the game of tennis. Head found the game of tennis frustrating, partly because he found it difficult to hit the ball squarely with the small rackets that were used at the time. True to his nature, he went back to the drawing board and designed a better racket. Head spent two years perfecting the first all-metal, oversized tennis racket to replace the traditional small, wooden tennis racket. He patented the racket in 1975 and decided to try manufacturing and selling the invention himself, as he had his aluminum skis.

In 1976 Head purchased Prince Sports Manufacturing Co. Prince had been founded in 1970 as a small manufacturer of tennis ball throwing machines and had enjoyed some degree of success in its niche. Head planned to use the company to make and market his new design. Critics were initially amused with Head's new racket. Big, metal, and apparently unwieldy, the racket looked silly and out of place among tennis traditionalists. Just as Head's aluminum skis had changed the sport of skiing, however, the new racket was destined to change forever the game of tennis. Importantly, 16-year-old Baltimore native Pam Shriver used Head's unusual racket to become one of the youngest players ever to advance to the U.S. Open Tennis finals. That achievement renewed Head's international fame and established the credibility of the oversized racket.

Sales of Head rackets exploded during the late 1970s. Amazingly, by 1980--less than four years after introducing the new design--Prince was in control of a whopping 30 percent of the entire tennis racket market. Leading racket manufacturers gasped as they watched Prince rocket to the top of the global tennis racket industry. Suddenly, the key to Prince's success seemed incredibly obvious: a larger racket head made it easier to hit and control the tennis ball. Indeed, the face of the racket that Head sold during the late 1970s proffered 108 square inches of surface area, which was a full 30 square inches larger than standard racket faces. Its larger 'sweet spot,' or prime hitting surface, gave both recreational and professional players more control, power, and flexibility. The result was that the game of tennis was forever changed as more players adopted the oversized weapon and adjusted their playing strategies.

Prince captured its 30 percent U.S. market share and nearly 25 percent global market share during the late 1970s and early 1980s by selling its line of 108-inch rackets. Besides generating more sales from rackets than any other manufacturer in the world, Prince was able to generate some of the highest profit margins in the industry because its rackets were protected by a patent. In addition to its aluminum racket, Prince was able to boost profit margins by introducing 108-inch rackets made of exotic materials like magnesium (selling for $115 in the early 1980s), graphite ($250), and high-strength boron ($450). By 1980 Prince was generating revenues at a rate of more than $30 million annually. Sales for 1981 topped $35 million before vaulting 60 percent to nearly $57 million in 1982. In 1983, Prince's revenues stabilized some, rising 13 percent to about $64 million.

The slowdown in Prince's sales growth in 1983 reflected general deterioration of the tennis equipment market. Indeed, encouraged by Prince's market share gains, Chesebrough-Pond's, a massive consumer products conglomerate, had purchased Prince Sports in 1982. Chesebrough hoped to use its deep pockets to finance Prince's rapid expansion. The downturn in the tennis industry turned out to be worse than expected, however, as evidenced by Prince's sluggish sales gains in comparison to the increase in 1982 (Nevertheless, Prince's performance during the mid-1980s was impressive when contrasted with that of its peers). Prince had hopped into the tennis industry just as it was hitting its peak. 8.6 million rackets were sold in the United States in 1976. But that number began to decline substantially. By 1983 Americans were buying only three million rackets annually valued at about $170 million.

To make matters worse, U.S. tennis equipment manufacturers came under pressure during the early 1980s from foreign competitors. Specifically, low-cost Taiwanese manufacturers invaded the U.S. market with inexpensive knock-offs of popular rackets. To combat the market downturn and evade the onslaught of low-priced imports, Head began to expand its product line to take full advantage of Howard Head's original patent. The patent had covered racket head sizes ranging from 85 to 130 square inches, while the standard face was roughly 70 square inches. Late in 1984, Prince, for the first time, introduced two new racket head sizes: a 90-inch head and a giant 125-square-incher. The 90-inch head was tailored for long, hard shots more typical of singles play and was thus designed to compete in the burgeoning market for 'mid-size' rackets that had become popular with veteran pros like John McEnroe and Jimmy Connors. That segment was expected to offer the most growth through the mid-1980s.

Prince's supersized magnesium 125-square-inch racket was designed for doubles players, and was specifically intended for players who liked to plant themselves at the net and block the ball. Even Prince admitted that the racket was less than ideal for ground strokes from the baseline. Described as a "garbage can cover" by one sporting goods salesman, the racket pushed the limits of the International Tennis Federation rules.

In addition to the two new racket sizes, Prince tried to beef up sales beginning in 1985 with a new line of tennis apparel. Spearheading the entrance into the apparel market was a tennis suit lined with polypropylene, a material used in paper diapers that was designed to carry perspiration away from the skin to the outer layer of the garment.

Prince's new product introductions were integral to its survival during the malaise that continued into the mid-1980s. The number of rackets sold in the United States plunged to 2.5 million in 1985 for a total of only $160 million in receipts. Many racket manufacturers left the business or were absorbed by their struggling competitors. Prince, by contrast, managed to sustain moderate growth by snapping up market share. During the first six months of 1986, for example, U.S. racket sales slumped six percent while Prince's racket sales jumped ten percent. Aside from new sizes and new composite materials, Prince sustained growth through savvy and efficient marketing. Prince had chosen not to hire big-name tennis players to promote its products. Instead, it had invested heavily in collegiate and recreational marketing channels. It had also emphasized advertising to hard-core club players, because they tended to stick with the game and therefore were more reliable than more leisurely tennis players.

In 1987, Prince Sports Manufacturing Co. was purchased by members of its senior management team along with Brentwood Associates, a Los Angeles-based management buyout firm that would later be credited with engineering buyouts of Mobile Technology, Graphic Controls, Educational Publishing Co., and Acme Rents, among other companies. Under management ownership, Prince continued to boost sales and profits during the late 1980s, despite lackluster growth in the tennis industry. To augment tennis racket sales during the period, Prince diversified its offerings to include footwear, various apparel lines, racket strings, sport bags, ball stringing machines, and other racket-related gear that could be marketed under the respected Prince name. Most notable was Prince's entrance into the racquetball equipment industry with its Ektelon line of rackets and related gear. Likewise, Prince penetrated the golf market with golf shafts sold under the Grafalloy brand name.

Although the private company released only selected financial data, it claimed increases in both revenues and profits during the late 1980s. In 1990, however, management elected to sell the company "to allow Prince to continue its growth and development as the world's premier racquet sports company and, equally important, allow Prince to enter other sporting goods categories," according to John M. Sullivan, chairman of Prince Holdings Inc., in the September 6, 1990, Business Wire. Management sold the enterprise to Edizione Holding SpA, the Italian company that controlled, among other companies, Benetton Group. Prince was set up to operate as a subsidiary of Benetton Sportsystem, itself a subsidiary of Benetton. Sullivan acted as president and chief executive of Prince until 1993, when Arthur Bylin was named as his successor.

Also in 1993, the company's name was changed to Prince Sports Group, Inc. The name change reflected Prince's increasing product diversity during the early 1990s. Indeed, erratic tennis equipment markets required that Prince expand into more prosperous arenas to sustain growth. To that end, Prince aggressively chased the global sports apparel market, drawing on Benetton's proven track record in the apparel industry to make its mark. By 1992 Prince had elevated itself to the fifth largest global manufacture of tennis apparel and the sixth leading producer of tennis sneakers. In addition, it was posting gains with its racquetball and golf equipment operations. Going into 1993, in fact, tennis rackets were contributing only about 60 percent of total company sales.

Prince expanded production capacity to keep pace with growth, and added distribution facilities in Holland and Singapore. All the while, it continued to lead the tennis racket industry. Prince controlled about 25 percent of the global tennis racket market in 1993 and about 35 percent of what was considered the high-end racket market. To help make up for an early 1990s downturn in the tennis industry, Prince introduced new products and initiated new marketing schemes. Early in 1993, for instance, Prince introduced the Synergy Extender, a monster racket with a head of 116 square inches and an extra-wide body for added power. It also brought out rackets composed of new ceramic, alloy, and synthetic materials. Also in 1993, Prince organized the first Prince Cup, an amateur tennis tournament sponsored by Prince. The event drew about 6,500 participants in the United States, and the company planned to follow up with a world tournament beginning in the mid-1990s.

Estimated sales for Benetton's Prince subsidiary were $200 million in 1994, representing marked gains since Benetton assumed ownership of the company in 1990. Going into 1995, the company retained its position as the leading global tennis racket manufacturer and remained active in golf, racquetball, and sports apparel industries. It served those markets through three divisions that were created in 1993: Prince Golf International, Prince Sports Footwear, and Prince Racquet Sports.

Principal Subsidiaries: Ektelon-Prince; Langert Golf Co., Inc.

Principal Divisions: Prince Golf International; Prince Sports Footwear; Prince Racquet Sports