Cobra Golf Inc. Business Information, Profile, and History

Company Perspectives:

From the very beginning with our first product, the Baffler, which grew to be a tremendously popular line of utility clubs, Cobra has always believed in the following fundamental principals: We have always been dedicated to building the highest quality golf equipment possible. We have consistently sought to provide the functionality players seek. Since our founding, our intent has been to make the game easier and more enjoyable to play and we have always offered our products at a fair price.

History of Cobra Golf Inc.

Cobra Golf Inc. is a leading designer, manufacturer, and marketer of high-quality golf clubs. Its clubs are targeted at the premium-priced market, with features like oversized heads and graphite shafts. The company also markets golf bags and other accessories that are manufactured by third parties. Cobra was a public company until it was purchased in January 1996 by conglomerate American Brands Inc.

1970s Founding

Cobra was inspired in 1973 by Australian Thomas L. Crow. Crow, the winner of the 1961 Australian amateur golf championship, had decided to channel his passion for the game of golf into designing clubs. The idea that sparked Cobra came to Crow in the early 1970s, when he noticed that many American golfers purchased golf clubs individually; they often purchased individual clubs on impulse, hoping that the new devices would improve their golf game. In an effort to tap that high-end market, Crow rounded up $150,000 in venture capital and started a small custom club business. He designed what became known as the "Baffler" wood, a specialized club with a patented soleplate that helped move the ball out of difficult lies on the golf course. Importantly, Crow's clubs were designed to reduce drag during the swing and to increase the lift of the ball.

Crow's company began to experience rapid growth after it was incorporated as Cobra Golf Inc. II in 1978. In that year, Crow was joined by Gary Biszantz, a former San Diego Ford car dealer and an early investor in the company. Crow and Biszantz introduced the company's first product in 1980: the Baffler wood, which integrated the design advantages developed earlier by Crow. Through an aggressive mass marketing effort, the company was able to generate big demand for its Baffler clubs and to increase sales rapidly. Indeed, by 1985 Cobra was selling about $4.5 million worth of its Baffler clubs annually.

Product Line Expansion in the 1980s

While riding a surging wave of demand for its Baffler clubs, Cobra began developing a new line of improved clubs in the early 1980s. In 1985 it introduced the new line of Cobra clubs, which were eventually a huge success. The clubs differed from others on the market because they sported lightweight graphite shafts. The lighter clubs allowed golfers, especially older players and women, to swing the club faster and hit the ball farther. The innovation was important, because it appealed to the fastest growing and most lucrative segments of the market, women golfers and seniors, the latter of whom spent much more on golf equipment than younger golfers. Cobra was one of the first companies to offer graphite shafts for entire sets of clubs, including woods and irons.

Cobra's new line of clubs reflected an emphasis on design continually nourished by its founder and sustained by new management, which pursued a "golf through science" approach to design. In the late 1980s and early 1990s Cobra continued to adopt leading edge technologies that it believed helped it to create the most advanced clubs on the market. It used the most recent computer-aided design technologies, for example, as well as laser modeling, high-speed cameras, and robotic testing. Its research and development team also experimented with lightweight aerospace materials in its pursuit of the optimal club. "We believe we have the foundation laid to come out with whatever product we need to come out with," said Dave Schaefer, chief operating officer, in the November 28, 1994 issue of San Diego Business Journal. "You have a product that you're advertising and people buy it--you better make sure your testing backs up what you're producing."

Augmenting Cobra's management team during the mid-1980s was Mark McClure, a former ski instructor and golf pro who became Cobra's marketing mastermind. Among other moves, McClure borrowed a trick that he had seen ski manufacturers use to market their new products--giving them away. He began to send Cobra clubs to pro shops with requests that the pros try them and to lend them to customers. "Like ski instructors, club pros command quite a bit of respect, and that is the strongest possible advertising," McClure said in the November 7, 1994 issue of Forbes. After using the clubs for a year, the pro shops were allowed to buy them at a significant discount or to return them. Returned clubs were simply reconditioned and sold.

Spurred by the success of its high-quality graphite-shaft clubs, Cobra's revenues were approaching $20 million annually by the late 1980s. Cobra had become a leading name in golf equipment throughout the world, with distributorships in Canada, Japan, Europe, and Australia (Australia accounted for roughly 20 percent of Cobra's sales in 1989). But Cobra's greatest period of growth was yet to come. In fact, between 1989 and 1993 Cobra's sales lurched from barely more than $20 million annually to about $56 million. The reasons for the expansion were multifold, but were largely the result of a savvy marketing strategy devised mostly by McClure. McClure was rewarded in 1990 with a promotion to chief executive of the company; founders Crow and Biszantz assumed the roles of vice-chairman/chief designer and chairman, respectively.

Among McClure's greatest marketing coups was his signing of top-ranked endorsers, including respected golf professionals Hale Irwin, Beth Daniel, and Greg Norman (also known as The Shark). Greg Norman's endorsement was the biggest feather in Cobra's cap, because he was among the top-ranked players on the circuit when he signed on with the company. McClure knew that Cobra could not afford Norman's multimillion-dollar endorsement price. Instead, he offered him a package that included an equity stake in the company, a chance to help design Cobra's clubs, and the opportunity to own, eventually, the Cobra distribution system in Norman's homeland of Australia. Norman, a long-time friend of Cobra's original founder and fellow Aussie, Tom Crow, accepted the offer. The arrangement was ultimately a success, as Norman went on to become the number two ranked player in the next few years.

At least as important to Cobra's success as its marketing program during the early and mid-1990s was the introduction of its third, and most profitable, product line: King Cobra. The King Cobra line was inspired by the success of competitor Callaway Golf Co.'s Big Bertha clubs, which Callaway introduced in 1991. Big Berthas were oversized woods that sported larger sweet spots, thus enabling classic duffers to drive the ball farther and straighter even when they hit the ball off-center. Furthermore, the clubs allowed better golfers to swing harder, knowing that the effect of a slight error in their swing would be minimized.

Cobra was intrigued by the huge success of the Big Bertha woods, which quickly snapped up a fat 30 percent of the entire $500-million-plus wholesale market for woods. Eager to tap into the profitable new market niche, Cobra began designing its own oversized clubs. But while Callaway remained focused on its oversized drivers, Cobra decided to broaden the oversized market with a set of oversized irons. Cobra invested $2 million to develop a line of high-end irons that sported oversized heads and graphite shafts. It introduced the King Cobra line in 1993, selling the clubs in sets at a retail price of about $1,000.

The King Cobra men's clubs were a huge success, representing about 75 percent of the company's sales within one year after their introduction. Cobra followed up with an equally popular line of King Cobra clubs for seniors and women. To help launch the King Cobra line, Cobra went public in September 1993 with a stock sale that raised $38.5 million. The cash was used to launch an advertising blitz, among other initiatives. In the summer of 1994 Cobra initiated a $5 million television network advertising campaign featuring Greg Norman and its King Cobra line. Augmenting such advertising efforts was Cobra's existing national network of 4,200 on-course golf pro shops and 900 accounts with off-course specialty stores.

Cobra drew on its cash surplus to pursue other avenues to growth. For example, in April of 1994 Cobra paid about $1 million for Cumo Sports, a manufacturer and marketer of apparel, including men's and women's golf and resort clothing imported from Italy. Cobra hoped to use the company to help develop its own apparel and related goods using the respected Cobra name. In addition to branching into apparel, Cobra, in 1991, had become the only U.S. golf equipment manufacturer in the United States to manufacture its own graphite shafts. The vertical integration allowed the company to achieve economies of scale and greater quality control and was credited with helping Cobra to achieve profit margins about six percent higher than its closest competitors.

High profit margins, huge demand for its oversized King Cobra clubs, and healthy sales of its existing products allowed Cobra to post big sales and profit gains in the mid-1990s. Incredibly, Cobra increased revenues more than 100 percent in 1994 to $124 million, and net income doubled to nearly $23 million. In addition to its various King Cobra club lines, Cobra was still generating revenue from its Baffler woods and traditional Cobra irons and woods. It had also introduced lines of specialty clubs, such as its computer-milled and King Cobra Mallet putters, and was marketing various apparel and accessory items. Furthermore, by late 1995 Cobra had expanded its distribution network to include about 7,500 on- and off-course shops.

Acquisition in the Mid-1990s

After boosting sales toward the $200 million mark in 1995, Cobra Golf was purchased by diversified, $11.6 billion conglomerate American Brands Inc., of Greenwich, Connecticut. In late January 1996, American Brands purchased the Carlsbad, California-based golf equipment company in a transaction valued at about $700 million. American Brands was known as the owner of name brands including Jim Beam bourbons, Master Locks, Swing office supplies, Benson & Hedges cigarettes, and Moen faucets. But it had also started buying what was becoming a venerable group of golf equipment holdings. In addition to Cobra, American owned well-known Foot-Joy Golf Shoes and gloves as well as the respected Titleist Golf Ball name.

Cobra entered 1996 as the leading manufacturer of oversized irons and one of a few brand names that together controlled more than 75 percent of the entire golf club market. It was banking on new technology to carry it into the 21st century, including the use of titanium to make its clubs, which would allow it to profit from the replacement market inevitably created by technological breakthroughs like graphite shafts and oversized club heads.

Principal Subsidiaries: Cumo Sports; Cobra Golf Australia.

Principal Divisions: Cobra Golf Sales Group; Cobra Golf Production Group; The Technical Services Group; Customer Service Group.