While new products, plants and growing and marketing techniques keep our industry exciting, it may be the mundane day-to-day requirements of the business that have the biggest impact on whether a company succeeds. For many growers, as the economy has expanded, so have their businesses, responsibilities and opportunities.

What's with the weather?

Last year, the effects of the warm ocean water associated with El Nino had the biggest impact on the weather. Consulting climatologist Stanley Changnon reported in the September issue of the Bulletin of American Meteorological Society that although El Nino caused $4.2 billion to $4.5 billion in damage, including $600 million to $700 million in agricultural losses, it resulted in nearly $20 billion in benefits.

Changnon claims the mild winter weather associated with El Nino helped to save lives and reduced heating costs by $6.7 billion. The warmer weather also allowed increased construction and employment and enabled consumers to set record sales January through March.

Another impact of El Nino, said Changnon, was the reduced impact of major Atlantic hurricanes on the United States, which wasn't the case this year. El Nino's cousin, La Nina, which was the intense upwelling of cold water along the west coast of South America, was this year's key meteorological phenomenon.

La Nina was blamed for this year's flooding in the Pacific Northwest, severe drought conditions -- especially in the mid-Atlantic states -- and the numerous Atlantic hurricanes including Floyd, which caused more than $1 billion in agricultural losses in North Carolina alone. The summer drought experienced by the mid-Atlantic region (from the Carolinas to New York) was the third worst this century. Only extreme dry spells in the 1930s and 1960s were worse. Drought-disaster areas were declared in 21 states east of the Mississippi River and in six Western states.

Regardless of the new plants released by the breeders and the promotional programs developed to promote them, sale of garden products and especially plants, is still very dependent on the weather. Kmart and Wal-Mart are two of the increasing number of retailers and suppliers that are using long-term weather forecasting to determine production and ordering schedules. The use of this weather information will become more prevalent as forecasting technology becomes more exact.

Labor

Finding adequate workers at various levels of experience and skills will continue to be a major challenge for more greenhouse operations. With the unemployment rate at a 29-year low, employers have had to learn to become more flexible and inventive when it comes to hiring.

American workers have an opportunity to choose from a variety of jobs with competitive salaries and benefit packages. The U.S. economy, reports USA Today, generated more than 21 million non-farm jobs between July 1989 and July 1999. Since President Clinton took office in 1993, the Labor Department estimates that three-quarters of the jobs that have been created pay more than $11 an hour. But labor officials said many of the fastest-growing jobs will require a college degree or some special training.

A survey conducted by the National Association for Business Economics of 103 companies during the third quarter of this year indicated that 52 percent of the firms reported a shortage of skilled workers. Among those companies having a hard time finding skilled workers, 29 percent reported the shortage was significant and 56 percent indicated the shortages were chronic but not acute.

Most of the companies in the NABE survey also indicated that they were dealing with a shortage of unskilled workers as well.

Even though companies reported having to pay more for labor during the third quarter of this year, they were able to offset the higher costs by raising prices for their products and services. Almost 27 percent of the NABE survey respondents said their companies raised prices for products and services during the third quarter. That's up from 11.3 percent during the fourth quarter of 1998.

Although some companies have sought to enhance their attractiveness to potential employees by adding benefits and offering perks and signing bonuses, some employers are dropping or reducing benefits, especially health-care coverage, because of rising insurance costs. The percentage of workers with a high-school diploma who are covered by employer-sponsored health insurance fell from 72 percent in 1989 to 69.5 percent in 1997, reports USA Today. Also, the annual growth in what companies spend on employee benefits has decreased from 8 percent in the 1980s to 4.2 percent in the 1990s.

Hispanics, which make up the fastest-growing segment of the U.S. population, are the most likely racial or ethnic group not to have health insurance. In 1998, 35 percent (11 million people) of all Hispanics were uninsured.

Growers will continue to look for tasks that can be automated. Those that will receive the most attention: watering, container filling, transplanting, materials handling and shipping.

Consolidation/alliances

There's no compelling reason the consolidation that has occurred within our industry recently shouldn't continue in all segments (production, wholesale and retail) into 2000. USA Floral, Gerald Stevens and Hines Horticulture were some of the most active companies in 1999 and their names should remain in the headlines.

One change that could slow down the merger mania that was prevalent during the 1990s is the elimination of pooling-of-interest accounting, which USA Today reports was used in more than half of 1998's record $1.6 trillion in mergers. Pooling enables acquiring companies from having to avoid writing off the premium, called goodwill, that they paid above market value. The Financial Accounting Standards Board has indicated starting in 2000 it will eliminate pooling, which will require acquiring companies to write off the goodwill as a charge against earnings, usually over 40 years. This change, reports USA Today, won't take cash away from these companies, but it could impact earnings, which would hurt investor perceptions.

Many companies looking for safer ways to expand their product lines and sales territories are foregoing mergers and acquisitions and opting for less risky alliances. By the end of this decade, one in every four dollars earned by America's top 1,000 companies was related to an alliance, which is double the rate from the early '90s.

Numerous alliances were formed between companies in our industry during 1999, including:

* Goldsmith Seeds and seed companies in Europe, Australia and New Zealand formed the Goldsmith Alliance Group to market and distribute Goldsmith flower varieties in their particular markets.

* Griffin L.L.C. and Nation's Ag II LLC agreed to an alliance for the sourcing, development, registration and marketing of chlorothalonil-based fungicide products.

* Bouldin & Lawson formed an alliance with Tuinbow Technisch Atelier B.V. in the Netherlands to bring TTA's transplanting and plug tray vision technologies to the United States.

* 1-800-FLOWERS.COM Inc. extended and expanded its agreement with America Online to become the exclusive marketer of fresh cuts across key AOL brands. 1-800-FLOWERS.COM continues as exclusive marketer of cuts on AOL and AOL.com and also has the same exclusive deal on Netscape Netcenter (beginning in 2000), CompuServe, Digital City and ICQ. Also for a 1-year period, 1-800-FLOWERS.COM will be exclusive third-party marketer of garden products for AOL brands.

Marketing

Americans' spending continues to repeatedly outpace their incomes. The reason, reports USA Today, is that the stock market is raising Americans' net worth and their confidence so that they are more comfortable about using their savings to buy what they want.

The prosperity that many Americans have been enjoying during the '90s is causing a cultural shift that Trend Letter said will affect virtually every industry, including ours. The puritan work ethic is being replaced by an attitude of self-satisfaction and an expectation of continuous entertainment.

The shift in Americans' expectations, reports Trend Letter, is causing them to seek amusement whether they are shopping, learning, traveling or just looking for things to do. As prosperity increases, more people will begin to view entertainment as their right, not a privilege. What will differentiate products and services will be their entertainment value.

While consumers want to be entertained, retailers, said American Demographics magazine, are trying to make sense of the new products they are inundated with on a weekly basis. Supermarkets alone have to deal with the daily introduction of 30 new food products. With retailers facing such an overwhelming onslaught of new products, they are depending more on the recommendations of manufacturers and suppliers.

Larry Light, a brand management consultant with Arcature LLC, told American Demographics that time not money is the new currency of consumers. He said manufacturers have to make it easier not harder for consumers to choose.

Light said consumers are more sophisticated and better educated and want to make intelligent choices, but with an increasing number of products to choose from, they feel they can't.

On the average shopping trip, reports American Demographics, a consumer encounters so many items that she looks at each item for only an average of 2.5 seconds -- not much time for a product to make an impression.

What does a new item have to do to be successful? Light said it has to be relevant -- it helps the target audience by meeting a need or solving a problem better than products currently available, and it must have differentiation -- it's better, different or cheaper than anything else out there.

Internet

A University of Texas study of the Internet released this past summer indicates the revenue generated by the Internet is increasing at a much larger and faster rate than previously estimated. The Internet economy, reports USA Today, generated $301 billion in revenue for 1998 and created 1.2 million jobs. Although the Internet revenue may seem small compared to the $8.6 trillion U.S. economy, over the last four years, the growth has averaged 174 percent annually. In 1994, the Internet revenue was estimated to be less than $5 billion.

Some Internet experts believe the UT study underestimates the revenue generated because of the limited number (3,000) of companies that were contacted for it. It was estimated that there were at least 100,000 companies that weren't contacted.

The study indicates the Internet economy is doubling every nine months, not the 12-18 months previously estimated. The $301 billion generated by the Internet in '98 is comparable to the $350 billion in revenue reported by the centuries-old American auto industry.

One consulting firm, reports USA Today, predicted the Internet economy would hit $1.3 trillion by 2003. But based on UT calculations, this amount should be surpassed by next summer.

The employment positions created by the Internet accounted for more than 40 percent of the jobs added to the entire country's economy. One concern some researchers have of the study is that it doesn't take into consideration the negative impact of the Internet. While the Internet may be creating thousands of jobs, there are retailers who are closing stores and laying off workers.

Y2K impact

The concern over Y2K computer problems and the havoc they could wreak on the United States seems to be subsiding among the general public, but businesses owners seem to becoming more antsy as the new year approaches.

Fewer Americans expect to encounter major problems due to Y2K glitches. A USA Today/National Science Foundation poll found 40 percent of Americans expect no problems to occur, while only 7 percent expect their personnel lives to be disrupted in a major way. In a similar poll taken last December, 30 percent foresaw no problems and 14 percent expected a major impact.

A Gallup poll taken in late August found that more than 50 percent of Americans plan to get documentation of their financial records, nearly 50 percent won't fly on New Year's Day, almost 40 percent plan to stockpile food and water and 20 percent will stock up on gasoline. The biggest concern among polled Americans (48 percent) was over a failure in banking and accounting systems that could result in errors in paychecks, government payments and other automated financial transactions.

The biggest fear among businesses, reports USA Today, is that the problems created by the Y2K computer glitch may be minor, but they could create a domino effect that could cause serious consequences. A near universal concern is that not every weakness can be identified and this could balloon into major system failures.

Other areas, identified by USA Today, where problems could arise include:

* Microchips contained in millions of products that may have some time-sensitive qualities might fail and trigger a domino effect.

* Small suppliers that are unable to fix their own Y2K problems could cripple larger companies.

* Some companies may increase inventories of key products to have additional stock available in the event that excessive purchasing occurs by their customers in late 1999. This stockpiling could skew economic statistics and be misinterpreted as economic growth.

* About 25 percent of companies are installing new systems rather than upgrading old ones. USA Today reports that historically, 80 percent of technology projects that don't meet deadline are considered to be on schedule just three months prior to deadline.

* Many companies are saying they just don't have enough time left to make sure all of the necessary changes are made.

By early October, America's 1,000 largest companies had spent about 77 percent of what it was going to cost to make them Y2K compliant. But others, including some chemical companies, have spent as little as 33 percent of their Y2K budgets.

Some companies are already facing fallout from Y2K problems. USA Today reports that major corporations, including GTE, Xerox and Unisys, are suing their insurance companies for the nearly $1 billion they've spent trying to fix their computers. These companies are citing a legal theory known as the "sue-and-labor" clause that dates back to 17th-century shipping. The clause is meant to encourage policyholders to minimize damage before disasters occur. The insurance industry says the claims are an unfounded attempt to have insurance companies pay for a business expense. Other companies have filed claims for more than $10 billion related to Y2K fixes.

The insurance industry expects to pay out $35 billion for Y2K claims, but that amount could escalate rapidly if insurers are required to pay these sue-and-labor claims. The bottom line for the rest of us could be higher premiums as insurance companies try to recoup their losses.

Concerns with potential Y2K problems have also spurred some companies to make initial public offerings before the end of the year. USA Today reports that as many as 65 issuers rushed to sell stock before investors become wary of the Y2K impact. The proliferation of Web-related companies filing IPOs and the recent less than stellar record of companies that have gone public, has caused some investor anxiety.

. © 2000 Branch-Smith Publishing