Like all of you, I’ve been mesmerized in a macabre sort of way over the past several weeks with all of the very graphic, at times almost surreal, images on television showing the power, fury and total devastation wreaked by hurricane Katrina in Louisiana, Mississippi and Alabama. Though Florida also incurred significant damage, it somewhat paled in comparison to the destroyed livelihoods and, more importantly, lives in Louisiana.
I can’t begin to imagine what those people who lost everything — their homes, their businesses, their worldly possessions — or those whose lives were disrupted by the horrific physical damage to their towns and cities must be going through. They’re going to need our prayers and our help for many months, even years, to come.
No disaster in recent and possibly recorded history has had the impact on the total U.S. population and economy as this hurricane had. I’m not trying to compare tragedies because all are unmitigated disasters of unfathomable proportions. The psychological impact of 9/11 affected us all because of the great loss of life caused by terrorist actions, but it didn’t have the far-reaching implications on our economy as this storm will.
Caring for the displaced people will take a tremendous toll in terms of monetary costs and human resources. The humanitarian costs will be far greater than those provided for by the federal government. The state of Texas and many of its cities courageously stepped up and took ownership of more than 250,000 displaced people. Some cities have doubled in size overnight, putting tremendous strain on their services, infrastructure and budgets. And many states are taking in busloads of displaced citizens. Forbes just stated that this internal migration of the homeless will be the biggest since the days of the Dust Bowl and the Great Depression. Area businesses in the affected region, both large and small, may never recover. Countless lives will have to be rebuilt.
The social service costs of unemployment, welfare, food stamps and providing the basic necessities of shelter, food, clothing, education for the kids, counseling services and many other things will be huge…
and long term. The volunteer efforts and financial contributions from corporations and ordinary citizens have been nothing short of phenomenal, and I’ve been proud and gratified by the caring, sharing and empathy that has been displayed in the great American tradition of caring for our own.
Caring for the survivors of this disaster must absolutely take precedence, but as business people, we also need to consider the impact on our own economic lives. The magnitude of the physical costs we’re incurring and the trickle-down effect of a displaced economy will inevitably take some discretionary spending out of the market…dollars that might have been spent on the products of our industry.
The disruption of a stable supply of petrochemical products — gas/ diesel/aviation fuels, heating oil, natural gas, plastic stocks and many others — will have a far-reaching impact and will affect almost everyone in the country. It will cost more to ship cut flowers from South America and for the florist to deliver arrangements to the consumer. Cuttings from Central America will cost more.
Delivering plants from the nursery or greenhouse to your customers will be more expensive. It will cost more for farmers to ship their grain crops from the Midwest to markets in California or China because the Mississippi River ports that processed their shipments no longer exist, and they’ll have to look at more expensive ways, such as truck or rail, to move their products to market, raising the costs of goods for the finished, packaged products at retail.
Heating costs for you as growers, the retailers you sell to and the consumers who buy the product will be higher by as much as 30-50 percent, according to some energy consultants. Delivered costs for your inputs will be higher because of the increased transportation costs. I don’t think it’s an exaggeration to say that this hurricane may well affect every aspect of our business lives…whether it comes from our companies’ abilities to consume products or our customers’ abilities to consume products.
Dealing With Realities
So, we all have some realities to deal with, not just those poor souls in the areas that bore the brunt of the hurricane.
Gas prices will be higher. Though we may see it move down from the $3-plus per gallon current levels, some estimates are that gas will still be at least 40 percent higher than last year. Freight costs will rise for your raw materials and for delivery to retailers. Consumers will drive less, consolidate their shopping trips and focus their spending on necessities rather than what could now be perceived as luxuries. For many that may be plants and flowers.
Heating costs will continue to rise for greenhouses and consumers. The first real impact of this will hit consumer wallets during the Christmas shopping season. U.S. consumers are notoriously reluctant to cut back on holiday spending, but higher heating bills could certainly put a damper on consumer sentiment for the holidays or at least early spring.
With rising costs for finished goods at the register as a result of higher materials and transportation costs, retail prices will have to rise, despite the best efforts of some retailers to drive costs down or at least maintain them at current levels. With reduced discretionary spending and higher prices, consumers will be forced to make harder and harder choices about what to spend their money on — what offers them the best value, accentuating the age-old want-versus-need/luxury-versus-necessity dilemma we’ve always had to deal with.
Just maybe, the reality of the challenges we’re about to face will be the catalyst for a change for our industry. We have a product the consumer genuinely enjoys, and especially in tough times, our product can make a positive difference in peoples’ lives and the way they look at life. We know the intrinsic benefits that flowers and plants can provide, but most companies are still selling plants, not communicating the positive aspects of what those plants can offer.
In this new world we’re facing, we can no longer effectively compete for the consumer simply on the merits of price alone, especially as our costs and retail prices increase, and consumers, out of necessity, have to be more selective with their decreasing discretionary dollars. Just having lower prices than the guy down the street won’t improve our chances of being perceived more as a “need” purchase than a “want” purchase. Collectively and individually, we need to change the message we’re sending to consumers.
Our industry’s challenges pale compared to those directly affecting so many people whose lives were changed by the recent Katrina devastation, and even discussing our problems and challenges right now seems almost sacrilegious and petty. But we all have an obligation to ourselves, our employees and, yes, even to our consumer to face the realities and make the changes that will allow our products to make a difference for them and their lives.
Change is never easy, but denying the realities of change is even worse.