Golf's Golden Bear still roars off the course
Playing through a few duffs, Jack Nicklaus has been golden in business, too. His courses span the globe, and now he's planning a new product line.
By Steve Schaefer, Forbes
Golfers have longer careers than most pro athletes, but it's been a long time since Jack Nicklaus made his primary income from swinging a club.
The man who won a record 18 major championships considers the pair of Senior Tour wins he notched in 1996 to mark the end of his playing career, though he continued playing in occasional PGA Tour events and the Masters through 2005.
But don't ask Nicklaus what he thinks about retirement. The man has little use for the term, and bristles at the suggestion that he's retired.
"I stopped playing competitive golf, but that was just one part of my business life, Nicklaus says on a warm February day at the North Palm Beach, Fla., offices of Nicklaus Design.
Seated on a swiveling desk chair and surrounded by light tables covered in sketches and blueprints for golf courses the firm is in the process of building and renovating around the world, Nicklaus certainly seems as if there's nowhere else he would rather be.
"Most people work all their lives so they can eventually stop and go play golf," he says. "I played golf my whole life, and when I stopped I went to work."
That is not to say Nicklaus doesn't enjoy other pursuits — he's an avid fly fisherman, goes bow-hunting with his sons and plays more tennis than golf these days — but developing and designing courses remains his passion.
Nicklaus Design, created almost 45 years ago, has designed more than 380 courses in 36 different countries. Courses built, designed or consulted on by Nicklaus host regular PGA Tour stops, like the Memorial Tournament (at Ohio's Muirfield Village) and the RBC Heritage (South Carolina's Harbour Town Golf Links). In 2014, the Ryder Cup will be hosted by Nicklaus' PGA Centenary Course at Gleneagles in Scotland, and the 2015 President's Cup will be played on a Nicklaus course in Incheon, South Korea.
Course design is just one business under the umbrella of the Nicklaus Companies, an umbrella that is constantly evolving to cover new ventures, most recently a new line of golf balls and a lemonade deal with Arizona Beverage Company.
The long list of businesses and marketing deals is impressive, with ties to names like Allen Edmonds, Perry Ellis and Rolex, giving the company the feel of a business empire. What people don't realize though, Nicklaus says, is that he nearly lost it all twice.
The first time was after the company couldn't fulfill ill-considered completion guarantees for a pair of courses (St. Andrews in New York and California's Bear Creek). The second mistake was when Nicklaus took a portion of the business — not the course-design branch — public in 1996 as Golden Bear Golf. An initial warm reception turned sour as accounting malfeasance at a golf course construction subsidiary sparked multiple shareholder lawsuits and led to costly settlements, and ultimately the repurchase of the shares in a deal that cost Nicklaus millions.
"I really did it because it gave the guys who had worked for me a while the chance to cash in a little bit," says Nicklaus of the IPO. "My background was as a golfer. I didn't have the business background to understand what I was getting myself into," he continues. "I'm much better off today with a business partner who will guide the company beyond my work time and my lifetime."
That partner is Howard Milstein, who bought 49 percent of the company in 2006 for $145 million. Milstein, chairman and CEO of New York Private Bank & Trust, which operates Emigrant Bank, says he was a fan of Nicklaus but even more intrigued by the business opportunity.
"In the branding business you get to play offense," says Milstein. "We don't invest and lend money, we license and get a percentage of sales; there's very little risk and a lot of upside."
When the partnership began, Nicklaus signed a five-year contract. But the financial crisis that followed shortly thereafter wrecked those plans.
"I didn't think my partner would get a fair shake and I didn't think the income would continue for my family (if I stepped away)," Nicklaus says, though he admits it was unlikely he would have left anyway.
After all, Nicklaus is hardly a figurehead. He travels incessantly, visiting courses around the world that are in various stages of design and operation, particularly in China, which both he and Milstein believe is the next great frontier for golf.
Nicklaus visits China three or four times a year, and Milstein notes that for a country with more than a billion people, there are only about 800 golf courses. Compare that to more than 15,000 courses in the U.S., a country of 317 million people.
The course-design business is a passion for Nicklaus, but he also speaks with pride of the company's other endeavors, particularly the new golf balls, which are color-coded to the white, blue and black tees golfers play.
The color-coding makes for easier purchasing decisions than the traditional way golf balls are sold, based on club-head speed, which most duffers don't understand. There is also a charitable element: The balls sell for $30 per dozen online (versus $50 at Nicklaus course pro-shops), with buyers encouraged to make a donation to the Nicklaus Children's Health Care Foundation.
"The charitable part is nice," Nicklaus says, but the bottom line matters too. "You either make a profit or you're not in business."
Both the golf ball venture and the deal with Arizona have been fruits of the partnership with Milstein, who says he's been impressed by Nicklaus' passion for business over the last six-plus years.
"He could do half of what he's doing and it still would be much more than most people," Milstein says. "The essence of the man is that he loves to compete."
That is reinforced when Nicklaus discusses the Arizona Beverage deal, which began in 2012.
"I didn't want to step on Arnold's toes," he says, speaking of fellow golf legend Arnold Palmer, who was already selling his eponymous beverage (half iced-tea, half lemonade) with Arizona.
But once Palmer made it clear he had no objection, Nicklaus got back into competitor mode.
"It took Arnold six years to get to where we got in our first year," he says of the Arizona Golden Bear Lemonade, and company projections anticipate a 50 percent sales increase in 2014.
Nicklaus' latest venture is the closest he's come to dealing with the public markets in years: an investment in Fantex, the company that aims to sell tracking stocks for athletes like Arian Foster and Vernon Davis. Having invested in the company and joined its advisory board, Nicklaus says he wishes something similar existed during his career.
The newest foray is fun, but doesn't distract from his primary focus, which is continuing to build Nicklaus Companies into something that can survive and thrive long after he is gone.
"It could increase your fan base, because people are interested in you and want to invest in you," he says.
"It was never important to me to be the wealthiest person," he says, stressing the overarching motivation of providing for his family.
"Frankly, I'd just as soon die penniless. Just not today."
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