Profit from peril – Y2k

In the current issue of Countryside magazine, a small display ad features an 800 number for a Y2K denture kit. “How would I eat if my dentures break and my dentist office is closed down?” reads the tongue-in-cheek ad, which shows a picture of a steak, a blender, a glass and a straw. Ads under the Y2K banner compete for attention throughout the
Wisconsin homesteading magazine’s 148 pages, touting water purification systems, garden seeds, appliances and more.
While many have grown weary of Y2K hype, the endless attention devoted to it reflects widespread concern that delivery systems for electric power, food and building systems could fail when the year 2000 rolls up on computer-based machines and systems. As everyone knows by now, the problem lies in older computers and systems with embedded computer chips that do not recognize a date which ends in “00.”
Just as fear and greed rule the stock market, so has fear over a Y2K shutdown resulted in a boon for Wisconsin businesses which offer products or services which allow people to be ready in the event of a disaster. Sales of portable generators, dried food and other emergency preparedness items are going through the roof. Y2K preparedness has become a legitimate segment of the economy.
At Bill’s Power Center on Capitol Drive in Brookfield, sales of portable generators have increased anywhere from 200 to 300 percent depending on the make and model. The average cost of a 4,000-watt or greater generator is somewhere in the $1,500- to $2,500-range.
“Most people aren’t coming in here and saying it’s for Y2K, but they will say it’s what pushed them over the edge [to purchase],” says co-owner Dave Rosenberg. “I think a lot of people are afraid to admit that they are buying a generator because of Y2K.”
Countryside, a family-owned homesteading magazine based in the hamlet of Perkinstown in northwestern Wisconsin, is enjoying a resurgence thanks, in large measure, to concerns that everyday living will be disrupted by a Y2K meltdown.
The 82-year-old magazine, with roots in Waterloo in Jefferson County, fell into decline in the 1980s as people were more interested in Rolex watches than they were self-sufficiency, notes J.D. Belanger, the longtime publisher of Countryside.
Before it moved to northern Wisconsin 10 years ago, circulation of the bi-monthly publication bottomed out at 4,000. But as the millennium approaches, Countryside has seen its press run balloon to 110,000, up from 80,000 copies in December. Page counts are up from 100 per issue to 148.
“When times are good, nobody gives a damn about simple living and self-sufficiency,” says Belanger, who has worked for the magazine for 30 years. “Our circulation goes in cycles.”
On the verge of retirement last summer, Belanger decided to do a reprise of his best stories over the least 10 issues of the magazine. That decision dovetailed with a series of stories on Y2K called “Countdown to the Year 2000.”
“So we suddenly have a much better magazine, and the interest in Y2K certainly helps,” says the 62-year-old Belanger. “This is something we have been talking about for 30 years, so it’s really nothing new. We’ve always had those type of advertisers – food storage,
raising animals and gardening. Homesteaders are interested in self-reliance and preparation.
“Our competitors say they haven’t benefited from it,” Belanger says, “but, they are still selling ads like crazy.”
Preparing for the worst
During the 1950s and ’60s, everyday life was punctuated by a series of public bomb shelter drills that prepared people in the event of atomic war. By contrast, today’s Y2K-related buying activity is driven by individuals who want to be prepared for the worst.
Compared to the rest of the country, the fear of a loss of electricity from Y2K is much greater in the southern US than it is here. At least that’s what representatives for Honda and Mitsubishi generators are telling Rosenberg at Bill’s Power.
“Everyone seems to think the panic will start at the end of August or in early September,” Rosenberg says. “It’s going to be an interesting year.”
Many people are buying generators over concerns that the supply of electric power is no longer reliable, says Bill Fisher, marketing director for Generac Portable Product in Jefferson, which manufactures portable generators that retail for $600 to $1,600. Severe weather and a perceived power shortage from utility companies are leading members of the Baby Boom generation to go out and buy portable 5,000 watt generators, Fisher says. Y2K has simply served to heighten awareness, he asserts.
“People want convenience, they want comfort and they want security,” says Fisher, whose firm is about to go public after being spun off from Waukesha-based Generac Corp. last year. “These are planned purchases for dual income couples who buy these as emergency backup power for their homes.”
Demographics are behind the portable generator trend, according to Generac’s market research. More than 60% of the purchasers of portable generators are age 45 and over, Fisher says. Ironically, the numbers drop off the table for people 60 and older.
“These people are from a different era,” Fisher says. “Many of them went through the Great Depression. They say ‘I’ll just light some candles.'”
Also feeding into increased sales are the fact that portable generators are more affordable than they were five years ago, and have become widely available at retail outlets, Fisher says.
Kohler Power Systems, a division of the Kohler Co. just north of Sheboygan, has seen an increase in generator sets in the 8.5- to 22-kilowatt range. In anticipation of increased volumes, Kohler has streamlined the generator winding area in its Sheboygan facility, and has opened a new engine plant in Hattiesburg, Miss., all with the goal of meeting short-term needs driven by Y2K concerns.
Kohler Co. is also beginning to observe changes in the way people are conducting business due to Y2K, a company fact sheet says. Some companies are starting to place incremental parts orders in order to “beat the rush” so they can have reserves on hand in case Y2K-related problems arise from suppliers, the Kohler statement says. The result is that parts shortages are starting to be seen already.
Renewable energy
Alternative sources of power such as solar and wind are experiencing renewed interest.
“We have some new customers that are worried about Y2K only,” says Gunars Petersons, owner of Alternative Power in Viroqua in southwestern Wisconsin. “But, we try to set people up with a solar or wind-powered system that will run for the rest of their life. We are selling energy independence. Solar is the future for people who want to be ahead of the curve.”
The good that Petersons sees coming out of Y2K concerns is that it gives him a platform to educate people about home energy efficiency and how sources of alternative power fit into the overall energy picture.
“I’m not trying to promote Y2K,” adds Robert Niehueser, who operates Windpower Tech in Grafton. “What are you going to do with this stuff if Y2K doesn’t happen? What we are trying to do is get people away from this tunnel vision.”
Niehueser was at the Y2K Expo in Waukesha in February primarily to educate consumers. He believes Y2K concerns are overblown, and thinks the investment in a portable generator is a waste of good money.
“There will be a million of them for sale next year,” says Niehueser, who buys and sells new and used wind turbines around the country. “A generator will suck anywhere from a gallon [of gasoline] to eight gallons per hour. Instead of spending your money on generator sets, why not check into solar panels and wind turbines?”
Niehueser has seen an incremental increase in sales of remote installations as a result of Y2K fears. Homeowners in Muskego, East Troy, Germantown and Hubertus have purchased hybrid remote systems at $15,000 to $20,000 from Windowpower Tech, including a man who runs his own home-based computer business who cannot afford to lose power. Those wind-powered systems have inverters that charge batteries which power a home’s electrical system for three to four days in the event regular power from the electric company is lost.
In Wisconsin, homeowners with windpowered systems have the ability to sell power back to the utility at full retail, Niehueser says. Wind turbines can produce between $150 to $250 of electricity per month. Over 10 years, that could add up to an $18,000 savings on electricity. Tax credits make the investment even more attractive, Niehueser says.
Creating entrepreneurs
Y2K fears helped spawn a cottage industry for small entrepreneurs Eric and Eva Owen of Neosho. Eric Owen is a former airborne ranger who developed an ongoing interest in survival training from his military experience. After repeated inquiries from friends and family, the couple decided to become a local distributor for Sam Andy, a national dealer of survival food and equipment. They sell “insurance in a can” under the name Preparedness Food Supply.
Profit margins range from break-even on $100 to $200 orders to 35% for semi-loads of the nitrogen-sealed dried food, Eva Owen says. While the couple uses their basement and an outdoor shed for inventory, most orders they take are shipped direct from Sam Andy.
“We are not out there scaring people about Y2K,” Eva Owen says. “That’s not what we’re about. If it weren’t for the concern and the phone calls, we wouldn’t be in this business. We did this mostly to help the people we know get going. Some people buy enough food for a week, some for a month and some for a year. The majority of the people who purchase from us take this perspective that it makes sense to have food in their home.”
Owen, who is 42, said she grew up on a farm where canning vegetables and having a freezer full of beef and a wood stove were standard operating procedures.
“If you talk to people in their 80s and older, they have this philosophy of having things on hand and being prepared,” Owen says. “I think that philosophy has disappeared. People are in the habit of running to the store every day.”
Most of the people who call to place an order with Preparedness Food Supply almost always ask Owen or her husband what they think will happen when the Year 2000 rolls around. Those people tend to be self-reliant and are skeptical of traditional media, she says. Many of them listen to short-wave radio.
“I would urge anyone who is thinking of doing anything to do it now and not wait for fall,” Owen cautions. “Prices will go up and supplies will get harder to come by.”
Computer systems consultants stand to gain the most from Y2K, as they complete the task of rewriting lines and lines of code.
While some estimates place the cost of correcting the millennium bug for U.S. businesses at $300 billion, the Y2K fix has not been all that lucrative for Tushaus Computer Services in Wauwatosa. Greg Tushaus estimates that the fix has meant just 5% of sales for his company, and indirectly, perhaps another 5%.
Tushaus says many companies are in need of making applications and systems changes, and concerns over Y2K is what took them over the hump.
“For companies that rewrite an application, they start finding that they are more competitive and that they have cut costs,” he says. “They really find out that it’s an opportunity.”
Robert Johanssen of Brookfield-based Entre P.C. Solutions, downplays his company’s Y2K-related business, even if it has occupied 20 of his employees for the last year or more. He looks forward to moving past the fear of Y2K fallout.
“We built bomb shelters in the 1960s, and we never used them,” Johanssen recalls. “I remember being scared to death back then, and I’m still here today.”