The leadership team at Town of Genesee-based Generac Power Systems knows what it’s like to have business change overnight. When major storms or hurricanes hit an area, demand for the company’s home standby generators spikes over the following quarters.
The COVID-19 pandemic took things to another level. With more people than ever working from home, a growing distribution network and multiple major weather events, the company saw its sales grow from $2.2 billion in 2019 to more than $4.56 billion in 2022.
After the third quarter of 2023, Generac’s guidance called for sales to be down 10% to 12% for the year as demand stabilized.
Heading into a new year, Aaron Jagdfeld, chairman, president and chief executive officer of Generac, doesn’t expect a return to the strong consumer spending seen in the aftermath of the pandemic.
“We expect consumer confidence to remain somewhat muted and cost-of-living pressures to remain elevated in 2024, causing some homeowners to remain cautious about large-ticket purchases related to their homes,” he told BizTimes.
Jagdfeld was among the speakers at the 2024 BizTimes Media Economic Trends event on Jan. 25 at the Italian Community Center.
Even if consumer demand is a little softer than a few years ago, Generac does have at least one advantage other businesses may not, as maintaining access to power makes the company’s products indispensable rather than discretionary. As a result, Generac has “a certain level of insulation … from broader economic softness,” Jagdfeld said.
Even with some insulation, Jagdfeld acknowledged the pace of change in business can be unbelievably fast.
“New technologies and new markets are constantly emerging, bringing new opportunities and new threats to business that can appear almost overnight,” he said.
In particular, Jagdfeld pointed to continuing to better understand the impact of artificial intelligence on business and society as an area to watch in 2024.
“We must be agile as business leaders to ensure that our companies can remain not only visible in the face of these challenges, but also find the right opportunities that allow our businesses to continue to grow,” he said.
Within the markets Generac serves, there are some megatrends shaping the business outlook that Jagdfeld and his team are watching closely.
For starters, more people are seeing “home as a sanctuary.” It is a pandemic-era trend that has continued with more people working from home, schooling their kids at home or aging in place.
“This is leading to increasing sensitivity to power outages and the need for peace of mind and desire by homeowners for improve energy resiliency and efficiency,” Jagdfeld said.
At the same time, climate change is driving more volatile and severe weather patterns, leading to increased power outage activity just as consumers are becoming more sensitive to those outages.
“Additionally, the impact of climate change is driving a policy backdrop that favors less carbon-intense forms of energy generation and consumption,” Jagdfeld said, highlighting faster adoption of solar, battery storage, electric heat pumps and electric vehicles.
The challenge for consumers is compounded by increasing reliance on intermittent renewables and growing electrification of products used every day in homes and businesses, both of which create a potential supply-demand imbalance and higher costs amidst the emergence of Grid 2.0.
“The speed of the transition occurring with the energy grid is leading to decreased reliability and highlighting the greater need for distributed energy resources and other solutions such as virtual power plants,” Jagdfeld said.
The final megatrend is the emergence of alternative fuels like natural gas or hydrogen. Using those fuels in generators, fuel cells and other power-producing products offers another path for decarbonizing the energy grid, Jagdfeld said.
Generac has already been acting on the megatrends, making a series of acquisitions since 2019 to expand its product portfolio to include solar inverters, residential energy storage, energy monitoring and management, smart thermostats and electric vehicle chargers.
“With the transition to Grid 2.0 underway, we believed there was an expanded role for Generac to participate in the evolution by leveraging our brand, our distribution, and our expertise in energy,” Jagdfeld said, adding the company is also developing an energy ecosystem platform that allows users to have control over their energy usage.
Even as Generac has been expanding its offerings and meeting increased demand, the company had to navigate many of the same supply chain challenges faced by other businesses coming out of the pandemic.
Jagdfeld said many of the pandemic-related challenges are in the rearview mirror and the supply chain has normalized.
“That said, rising logistics costs and increased geo-political risks in certain countries and regions around the world have become the greater concern with their respective potential impacts on supply chains,” he said. “Our focus at Generac has been to create a supply chain for the future that is more resilient and more flexible.”
