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Bankers Pass on Premium Golf Balls, Use Recycled Ones - By Michael Buteau (Bloomberg)

Monday, December 06, 2010

Sept. 24 (Bloomberg) -- Whenever Sheldon Chychrun takes clients for a golf outing, he hands them a sleeve of new golf balls emblazoned with the logo of his employer, Deutsche Bank AG.

Chychrun, the 40-year-old head of structured equity sales for Canada at the bank’s Toronto office, then reaches into his bag and tees up a ball bearing a different logo: refinished 2.0.

“Budgets are tighter so you don’t have as much supply,” Chychrun said. “You use the new logo balls for your clients and you use whatever you have for yourself.”

As the U.S. PGA Tour winds up its season with the Tour Championship beginning today in Atlanta, Chychrun is among a growing number of weekend players turning to the used golf ball market as a way to maintain their game amid a recession marked by less spending on leisure activities. Such frugality has been a boon to companies like Knetgolf, a Markham, Ontario-based golf ball reseller. The company said it expects to sell about 20 million golf balls this year, up from about 16 million in 2008.

“The economy took the back door into our business,” Knetgolf founder Gary Shienfield said in an interview at the company’s 25,000-square-foot Ontario warehouse, where 30,000 balls are washed, sorted and repackaged every day. “Sometimes, you’re better off lucky than good.”

Shienfield’s business has been around since 1995 and over the past two years he has begun to draw more interest in his products. This is shaping up to be the most profitable year, by far, he says.

Public Course

Knetgolf customers are mostly public-course golfers, like Jim Boggs, a 58-year-old Georgia resident who is nearing retirement. As he keeps a close watch on his savings, Boggs said he’s reduced his annual rounds to about 20 from 52. He recently purchased three dozen “mint” condition Maxfli brand balls from Knetgolf for $40, about $6 less than it would have cost him to buy a dozen top-end Titleists.

“I just can’t afford to do it,” Boggs said in a telephone interview. “I don’t go to the pro shop and buy golf balls anymore.”

For others like Chychrun, who said he shoots under 80 regularly, the stigma of using secondhand golf balls died about two years ago, when the global credit crisis led to the worst recession since the Great Depression.

“With everything that is going on in the economy, if I can play a golf ball that’s one-third of the price and I get the same performance, it’s a pretty easy trade,” the father of two said.

Saving Money

In the first seven months of 2009, sales of new golf balls at on- and off-course retailers were down 12.9 percent to 10.4 million dozen from a year ago, according to Kissimee, Florida- based Golf Datatech, which tracks industry sales.

There’s little disputing that the used, or “recycled” balls as Shienfield likes to call them, are cheaper. Their performance remains in question. Shienfield doesn’t test balls for elements such as trajectory and spin, and said that isn’t a high priority of his customers. They just want to save money.

“The whole world wants a deal,” he says. “We’re marketers. We’re not ball guys. We happen to market golf balls. At the end of the day, after the first swing, everybody uses a pre-owned ball.”

Courses Searched

To get that deal, Shienfield, 58, dispatches workers onto 2,000 contracted golf courses, mostly across the southwestern U.S., to scour for lost balls. He then resells them out of warehouses near Toronto and Phoenix. The balls are graded from “Shag” or “Grade C” quality to “Mint” condition. Grade C balls can cost as little as $3.99 for a dozen, while 12 mint- condition Titleist Pro V1 model golf balls cost $34.99.

The Pro V1 is golf’s top-selling premium ball and most-used model by professionals, according to the Darrell Survey, which tracks equipment use among pros. In 2009, the ball has been used to win 112 professional events worldwide, the most of any ball. Titleist said the average selling price is about $46 a dozen.

Acushnet Co., the maker of Titleist and a division of Fortune Brands Inc., filed a lawsuit in 2003 against a similar golf ball reseller, claiming that the integrity of their balls was diminished, hurting the performance.

“Acushnet Co. does not design or manufacture its Titleist or Pinnacle brand golf balls to be refurbished or refinished, nor do we authorize or support it in any way,” company spokesman Joe Gomes said in an e-mail.

The suit was thrown out in 2006 after a judge ruled that Nitro Leisure Products clearly marked on its packaging that the balls were “used & refurbished.”

“Are they happy with us? No,” Shienfield said of the golf ball manufacturers. “Am I in touch with them? Yes. It is what it is.”

Such details don’t seem to matter to golfers like Chychrun, whose bag is filled with brand-name “demo” model clubs, which sell for about 20 percent less than new clubs.

“If you’re a touring pro, and that one stroke makes a difference, you may not put these in your bag,” Chychrun said. “But for me, it was a pretty easy decision.”

To contact the reporter on this story: Michael Buteau in Atlanta at mbuteau@bloomberg.net

To contact the editor responsible for this story: Michael Sillup at msillup@bloomberg.net

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