William L. Coney Blog: Hogan’s New Play: Factory Direct

The curtain came down on the Ben Hogan Company last winter, as the 2-year old venture collapsed under its bloated infrastructure and overly optimistic - some say delusional - business plan when the company filed for Chapter 11 bankruptcy in Forth Worth, Texas.

It certainly looked like the end of the line for Hogan. Founder Terry Koehler had been ousted/voluntarily retired months earlier, and the company had laid off nearly its entire staff. Market share and sales were virtually nonexistent, but accounts payable certainly were very existent.

Dead and gone. All that was left was the funeral and the slow singing and flower bringing.

No one figured there’d be Third Act in this play.

Welcome Back, Lazarus

Sometime this week, or perhaps next, you can expect the curtain to come up on Act III of the Ben Hogan Company. Call it Hogan 3.0.

“The company has been sold and refinanced,” says Hogan CEO Scott White. “We have a new business model and business strategy. It’s not novel to commerce, but it’s fairly new to our industry. We’re going to sell premium Ben Hogan products at factory direct pricing.”

What that means is you’ll be able to buy Hogan equipment directly from the company via its new website, and only directly from the company via its new website.

“Consumers will be able to buy ultra-premium Ben Hogan products at dramatically lower prices than they’d ever see at retail. There will be no retail markup.” - Scott White, Hogan CEO

Hogan is cutting out the middle man. There's no MSRP, no retail partner pricing or margins to protect. White says the current lineup will be the same, forged FT Worth blades and PTx players cavity backs, TK 15 wedges, VKTR hybrids and FT Worth 15 hi utility irons.

“They’ll be offered at prices that will allow us to make a decent margin - not a greedy one by any stretch of the imagination - but again, there’s no retail markup.”

White says you’ll be able to buy TK wedges for $95.00 each or a set of FT Worth irons for $665.00. Consider that when it launched, Hogan’s wedges sold for upwards of $150.00 each, and iron sets for well over $1,000.00.

How Did This Happen?

White says management did flirt with the idea of just closing the brand down and calling it a day.

“That was the worse possible scenario. We didn’t want to do that.”

During the bankruptcy proceedings, the Hogan brand was purchased - sort of - by ExWorks Capital of Chicago. ExWorks is, among other things, a capital investment firm and had been listed as a secured lender for Hogan in bankruptcy court. White says ExWorks did a credit bid on the assets and basically bought Hogan for what they were owed.

Recent court documents show significant changes in the Hogan bankruptcy case. Within the past few weeks the name of the debtor has been changed from the Ben Hogan Company to Eidelon Brands LLC. To get to the bare bones of the story, Eidelon was Terry Koehler’s company (SCOR wedges), which he rebranded into the Ben Hogan Company in 2013. ExWorks has essentially purchased the brand name out of bankruptcy, but none of the debt. Eidelon is now the company of record in the bankruptcy proceedings and has applied to transfer the case from Chapter 11 to Chapter 7. That's a procedural manuever and means any assets Eidelon has left will be liquidated, and the remaining creditors will get whatever they get.

Perry Ellis, the owner of the Hogan brand, was one of the largest creditors in the original Hogan bankruptcy case. White says Hogan is still a licensee of Perry Ellis, but the structure of the deal is vastly different. Perry Ellis now has an equity stake in the new organization.

The New Hogan

White has been nothing if not consistent about Hogan’s prospects. Back in January, the day most of the staff was let go, White said it’s a reset opportunity. He said the same thing last spring when Hogan started liquidating product, and he’s saying the same thing now.

“We’ve spent a lot of time restructuring,” he says. “We’re in the old Callaway building in Fort Worth, and we’re going to maintain our headquarters here, but it’s going to be a very small structure.”

“One of the challenges we had was our overhead was so out of whack. We’ll have manufacturing, R&D, assembly and a few other functions at Fort Worth, but we’re going to outsource a lot of other functions, like marketing, finance and accounting.” - Scott White, Hogan CEO

We've written about how and where Hogan went wrong - and White is very frank about the fact the original Hogan concept was flawed from the get go.

“We’re not going to make the same mistakes we made in the past. Not again,” he says. “ We’re going to be very calculated, very nimble and will grow as needed. But we’re not going to build something and bet that if we build it, they will come. We’re going to do our best to minimize costs and pass the reduced overhead on to the consumer.”

There’s still a 2-person R&D team in place, and White says you can expect some new Hogan equipment perhaps by the end of this year or early next. The plan is to expand its hard goods offerings - drivers and fairway metals were in the works before the bankruptcy - and add accessories.

“We’re never going to have an enormously wide or deep product line,” says White. “But we are committed to bringing new product to market.”

Will It Work?

Well that depends on what you mean by "work."

If you're thinking Hogan will try to rival TaylorMade, Callaway or PING right out of the gate, then no, that's not going to happen.

And I don't think anyone in Fort Worth is thinking anything of the sort. This game plan, unlike the original Hogan relaunch, seems a bit more - shall we say - realistic. Start small, keep overhead limited and build slowly, with no delusions of grandeur.

But will golfers buy premium product at a direct-to-consumer pricing? This past spring Hogan tried just that by selling off inventory at, comparatively speaking, bargain-basement prices. White says no one was expecting what ultimately happened.

“Consumers had the opportunity to buy directly from us with no real retail markup,” he explains. “The response was more than we could keep up with. We had to hire outside help to field all the calls and emails we were getting. It really took us by surprise.”

Hogan’s new model of online only with no retail does mean the If-I-can’t-try-it-I-won’t-buy-it crowd will be out of luck.

“The demo and trial thing is something we’re going to have to figure out. In the short term we’re counting on our primary audience of pretty serious golfers. They know us, they know what they like and they know their specs. There will be an issue with people absolutely committed to fitting and demo and trial, but it’s something we don’t have an exact answer for right now.” - Scott White

Consumers are funny beings. Price makes a statement and while it’s not always the case, a high price does carry with it the impression of high quality and premium performance. But with golf equipment high prices tend to heighten emotions. Every time MyGolfSpy runs a story on PXG, for example, we see Torch and Pitchfork Nation screaming with genuine anger in the Comments section about how ridiculous the pricing is. This new Hogan seems to be taking the opposite approach - offering what the company considers premium product at a lower price by cutting out standard retail markup.

We all might jump at the opportunity to buy a set of $1,200.00 clubs for $700.00. But will you jump at Hogan irons priced to move at $665.00 per set? Would that pricing devalue the clubs in your mind, or make you think of Hogan as a discounted brand?

“That’s something we’re going to have to get over,” says White. “How do you retrain people to understand that when they go into a retail store, they’re paying 40 to 50% markup off the top, for nothing? It’s not a discounted brand if it was never marked up in the first place. This isn’t discounted product. It’s factory-direct product.”

The new Hogan website should be up within the next few days. White says there are still a few I’s to dot and T’s to cross.

“I had hoped to get it going before The Open starts this week, but there are still some details to figure out. But we’re 90-plus% there.”

Ben Hogan famously said the most important shot in golf is the next one. After being all but dead and buried in January, Hogan’s namesake company is getting another shot, maybe its last shot.

The cynic in you may say Hogan is down its last strike. The optimist may say the curtain is rising on Act III, and we’ll see what happens next.

Which are you?