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BUSINESS NEWS The New York Times Nov 2012
Folks here don't wish disaster on their fellow Americans. They didn't pray for Hurricane Sandy to come grinding up the East Coast, tearing lives apart and plunging millions into darkness.
But the fact is, disasters are good business in Waukesha. And, lately, there have been a lot of disasters.
This Milwaukee suburb, once known for its curative spring waters and, more recently, for being a Republican stronghold in a state that President Obama won on Election Day, happens to be the home of one of the largest makers of residential generators in the country. So when the lights go out in New York — or on the storm-savaged Jersey Shore or in tornado-hit Missouri or wherever — the orders come pouring in like a tidal surge.
It's all part of what you might call the Mad Max Economy, a multibillion-dollar-a-year collection of industries that thrive when things get really, really bad. Weather radios, kerosene heaters, D batteries, candles, industrial fans for drying soggy homes — all are scarce and coveted in the gloomy aftermath of Hurricane Sandy and her ilk.
It didn't start with the last few hurricanes, either. Modern Mad Max capitalism has been around a while, decades even, growing out of something like old-fashioned self-reliance, political beliefs and post-Apocalyptic visions. The cold war may have been the start, when schoolchildren dove under desks and ordinary citizens dug bomb shelters out back. But economic fears, as well as worries about climate change and an unreliable electronic grid have all fed it.
Driven of late by freakish storms, this industry is growing fast, well beyond the fringe groups that first embraced it. And by some measures, it's bigger than ever.
Businesses like Generac Power Systems, one of three companies in Wisconsin turning out generators, are just the start.
The market for gasoline cans, for example, was flat for years. No longer. "Demand for gas cans is phenomenal, to the point where we can't keep up with demand," says Phil Monckton, vice president for sales and marketing at Scepter, a manufacturer based in Scarborough, Ontario. "There was inventory built up, but it is long gone."
Even now, nearly two weeks after the superstorm made landfall in New Jersey, batteries are a hot commodity in the New York area. Win Sakdinan, a spokesman for Duracell, says that when the company gave away D batteries in the Rockaways, a particularly hard-hit area, people "held them in their hands like they were gold."
Sales of Eton emergency radios and flashlights rose 15 percent in the week before Hurricane Sandy — and 220 percent the week of the storm, says Kiersten Moffatt, a company spokeswoman. "It's important to note that we not only see lifts in the specific regions affected, we see a lift nationwide," she wrote in an e-mail. "We've seen that mindfulness motivates consumers all over the country to be prepared in the case of a similar event."
Garo Arabian, director of operations at B-Air, a manufacturer based in Azusa, Calif., says he has sold thousands of industrial fans since the storm. "Our marketing and graphic designer is from Syria, and he says: 'I don't understand. In Syria, we open the windows.' "
But Mr. Arabian says contractors and many insurers know that mold spores won't grow if carpeting or drywall can be dried out within 72 hours. "The industry has grown," he says, "because there is more awareness about this kind of thing."
Retailers that managed to stay open benefited, too. Steve Rinker, who oversees 11 Lowe's home-improvement stores in New York and New Jersey, says his stores were sometimes among the few open in a sea of retail businesses.
Predictably, emergency supplies like flashlights, lanterns, batteries and sump pumps sold out quickly, even when they were replenished. The one sought-after item that surprised him the most? Holiday candles. "If anyone is looking for holiday candles, they are sold out," he says. "People bought every holiday candle we have during the storm."
If the hurricane was a windfall for Lowe's, its customers didn't seem to mind. Rather, most appeared exceedingly grateful when Mr. Rinker, working at a store in Paterson, N.J., pointed them toward a space heater, or a gasoline can, that could lessen the misery of another day without power.
While sales of emergency supplies spike during storms, several retailers and manufacturers — including Generac — say their baseline of sales has grown in recent years, too, perhaps driven by economic uncertainty and the frequency of wild weather and power failures in an overtaxed electrical grid.
"Anytime you see as much devastation as what happened in Tuscaloosa, Ala., and in Joplin, Mo., it brings it to everybody's minds," says Mike Vaughn, president of the National Storm Shelter Association, referring to devastating tornadoes that swept through both cities last year. He added, "$5,000 isn't much to save your family's life," a reference to the approximate cost of a storm shelter.
Mr. Vaughn owns a company, too, which makes concrete storm shelters for protection against tornadoes, and he says business has grown about 30 percent in recent years. Talk to him and it's clear that he isn't a doommonger. Yet the members of his association market their products aggressively, warning about the dangers from tornadoes and hurricanes and telling how their products can save lives.
"Nature is strong," says the Web site for Vaughn Concrete Products, Mr. Vaughn's company. "Our shelters are stronger."
That sort of disaster marketing is all over the place, in the hope that the memory of a nasty storm will persuade consumers to plan ahead and, of course, spend some money.
It's hard to define the overall market for disaster supplies. For one thing, many products that are useful in emergencies — flashlights, batteries, duct tape and extension cords, to name a few — are also handy for everyday chores. And other products, like "bugout bags," packs holding enough gear to survive a disaster for a few days, continue to be marketed to a small, but apparently growing, niche of survivalists.
But there's little question that the market is in the multiple billions of dollars. The size of the generator market in the United States, including residential, commercial and industrial models, is roughly $3 billion. Trying to nail down a figure for survival supplies is a much more dicey exercise, given the fuzzy parameters of the market.
Jonathan Dick, director of sales and marketing for the Ready Store, whose slogan is "where America goes to get ready," estimates that the market for disaster supplies like freeze-dried food, flashlights and radios was $500 million for consumers, but several billion dollars when sales to businesses and government agencies are folded in.
"The industry is very event-driven," he says. "When there is a hurricane like this, or the stock market crashes, we'll see crazy increases in demand."
Mr. Dick says the core customer for his company, which is based in Draper, Utah, and includes retail and online sales, remains "conservative, gun-toting Republicans." But he says the industry is steadily attracting a broader audience. And major retailers have taken note.
Both Walmart and Costco now sell a year's supply of food, much of it freeze-dried. Costco's offering is 120 gallon-size cans of food for $1,499.99. Sears offers emergency/survival rations for dogs. And the National Geographic Channel has a reality series called "Doomsday Preppers," which "explores the lives of otherwise ordinary Americans who are preparing for the end of the world as we know it."
David Lyle, the chief executive of the National Geographic Channel, said the program was a breakout hit in its first season. The second season will begin on Tuesday.
"You start by thinking, 'Wow, these people are odd.' Then there is this creeping realization: Who is crazy now?" says Mr. Lyle, who notes that other shows like "The Walking Dead" and "Revolution" deal with similar themes, like living off the grid (albeit with zombies). "How interesting that some of them believe that the oil supply will run out and that will result in civil unrest. And now with Sandy, you see people having brawls in gas lines."
If there were a headquarters for the emergency preparedness market, one candidate would be Wisconsin, the center of residential generator manufacturing. Generac's two biggest competitors, Briggs & Stratton and Kohler, are also in the Badger State.
That may be no coincidence. The German immigrants who flocked to the state were particularly skilled in manufacturing engines, in addition to beer and bratwurst.
The founder of Generac, however, was an Iowa transplant and an engineer, Robert Kern, who found a way to make generators so they were more affordable for home use. The time was 1959, during the cold war, when Waukesha had its own missile silo, on the east side of town.
People scarcely seem to remember all of that — and the missile silo is now a park. But that period may have been the beginning of a survivalist economy, the early shoots of Mad Max capitalism.
It has grown ever since, through recessions and wars, Y2K and 9/11, tornadoes and hurricanes.
So has Generac, with a 15 percent compound annual growth rate since 2000. In 2012, with a big boost from Sandy, the company expects shipments of residential products, which account for 60 percent of its business, to increase nearly 40 percent.
At the company's plant in Whitewater, Wis., about 30 miles southwest of Waukesha, employees have worked three shifts, six days a week, since Hurricane Sandy increased demand. The plant makes residential generators and power washers. Inside, wires and cranes dangle above a bustling factory floor where workers, many in Green Bay Packers garb, assemble the parts. Air hoses hiss, drills drone and carts beep to alert unhurried visitors and keep them from being run over. At a 200,000-square foot distribution warehouse across a parking lot, oversize boxes of generators are stacked high, awaiting shipment.
"Everything in this building, except for the power washers, is sold and then some," says Russ Minick, Generac's executive vice president for residential products. "The metrics on this storm have been nothing like we have ever seen. Compared to Hurricane Isaac, this is five times bigger."
At the company's newly rehabilitated headquarters in Waukesha, Aaron P. Jagdfeld, the youthful and enthusiastic chief executive, says major storms typically create an immediate demand for portable generators — and the demand from Sandy was unprecedented.
But while his company has sold tens of thousands of portable generators in recent weeks, Mr. Jagdfeld gets more excited talking about the longer-term possibilities: the sale of more permanent, and more expensive, "standby" generators that can be hooked into a house's natural gas line and that turn on immediately when the power goes off.
He explains that standby generators for homes were once considered appropriate for only the largest estates. But the worries of Y2K — the idea that computers would stop functioning in the new millennium — made the company realize that it could sell standby computers to a broader market if it could bring down the price, he says.
He now envisions a day when standby generators, which start around $4,500, fully installed, are as common as central air-conditioning, a goal that is a long way off but one helped immeasurably by Hurricane Sandy. Standby generators are in roughly 2.5 percent of stand-alone single-family homes, he said.
"No one knows about it," Mr. Jagdfeld says, but he adds, "It is the next must-have appliance."
He later tempers his enthusiasm. "We don't want to appear we are profit-mongering," he says. "This is a horrible situation. It's really, really tough, the marketing around that."
For now, at least, with tens of thousands still without power and millions of others harboring grim memories, a chimpanzee could sell generators by the truckload. Like Generac, Briggs & Stratton and Kohler say they, too, are swamped by demand.
"People are really starting to understand the impact of what a power outage means to them, and it is changing their behavior," says Melanie Tydrich, a senior manager at Kohler, which sells kitchen and bath appliances and standby generators, among other things. "It's just not something they want to live through again."
Laura Giangeruso, the mother of two girls, 4 weeks old and 7 years old, certainly fits that description.
In the wake of the storm, Ms. Giangeruso, who is 42 and lives in Glen Ridge, N.J., spent nine of 10 nights living with relatives because her house had no power. With a newborn, she says, she had little choice but to leave. But she says the solution became obvious during a visit with her sister, who lives nearby.
"It was like a miracle," she says. "The power went out, and then in like 30 seconds, I heard this hum." She lifts her hands from her hips upward, along her sides. "And then the power came on."
So now she is leading an electrical contractor through her home's cold and dark basement, pointing out the electric box and meter, all so she can get an estimate on a standby generator of her own. A neighbor, Chris Nehrbauer, tags along, partly to be neighborly but partly because he is getting an estimate next.
Jack Lamb, the contractor, who works for Bloomfield Cooling, Heating and Electric, says he has been working nonstop since the storm, providing estimates. When he shows up for an estimate, often four or five neighbors are waiting, he says, adding that he is booked through Jan. 8.
Ms. Giangeruso, who notes that last year, after the "Snowtober storm" on Halloween, her house was powerless for six days. "If we are talking in the neighborhood of $6,000, it is worth every dollar. If I could get it right now, I'd write a check," she says. "The wives in this area don't want jewelry for Christmas. They want generators."
