Higher energy costs squeeze vendors in CA
February 5, 2001,
LOS ANGELES -While few home textiles vendors in California have been directly affected by the blackouts plaguing the northern part of the state, some have already been hit by higher energy costs and face the dilemma of trying to pass them along in a softening retail environment-or swallowing them whole.
"We'd rather not have the added expense, but it's not affecting our production or hours here," said Loren Sweet, vp and national sales manager. "We aren't a big power user anyway. All we do is flip on some lights and turn on some sewing machines."
Just in case Brentwood's luck should change, Sweet said, he recently stopped by Home Depot and bought 20 industrial flashlights.
Flashlights would have been handy at San Francisco-based Peking Handicraft, which has experienced the brownouts that have garnered headlines around the country.
"Our computers did go down once, but we got a warning so we were able to close them down," said Ray McCall, sales manager. "And we've shut down part of the office twice and taken a couple of forced lunch breaks." Otherwise, he said, "We've been fortunate."
Since receiving a notice that its energy bill may climb by 70 percent to 100 percent, the company has lowered the heat settings in its office, asked warehouse workers to shut off their space heaters and advised office employees to wear sweaters and jackets to work. "We're doing everything we can to save those kilowatt hours," McCall said.
For fabric producer Chris Stone & Associates, based in the Los Angeles area, the power bill hasn't jumped yet, but the natural gas bill has taken off, according to president Mark Azawa. The company's December 2000 bill was seven times higher than its December 1999 bill, he said. "And natural gas is not a floating rate, so we have no idea what it will be."
To SDH Enterprises in Cordelia, CA, which does all of its manufacturing in Europe, utilities do not represent a significant amount of overhead. Nonetheless, "we have to be more conservative about our energy use," said Cathy Stemmier, sales manager.
In some cases, it is the vendor's vendor that has been affected by the power outages. W-C Designs product development manager Tim Bynon said that although it sources a great deal of product, "there have been some domestic suppliers that caused a temporary blip." But, he added, "we don't see that as an ongoing issue.'
Custom Comfort ceo Trever Rabkin echoed that sentiment. "A couple of our vendors-fabric and finishing plants-have been affected. It delayed us a couple of days at worst."
Cecile Saydah/Design Network president Harold Schierholt noted that one of his company's plastic processors has not been able to meet deadlines because of the exorbitant amount of power needed in its production process. But Saydah itself is located in "one of the most dependable and reliable utility districts (the Los Angeles Department of Power and Water)," he added, and hasn't seen any meaningful rate increases.
Veratex, Los Angeles, also finds itself in a fairly secure power zone. "We generate our own power, and we have excess power," said vp Dale Talbert. "Most of the companies in greater Los Angeles are selling power to the state."
The big question now is whether the vendors that have been saddled with higher utility costs will find a way to pass them along, a particularly sensitive subject given the cautious retail environment.
Sibyl Shepard owner Chris Sarris hasn't been clocked with a price hike yet but acknowledges that it could be coming. Before making any move to pass along costs, he said, the company would look to see what other California vendors were doing. "We still have to remain competitive with the rest of the country," he said.
And that, more than anything, may prove the deciding factor for many California textiles companies. "It's simply not an option to pass any kind of price increase along because there's always someone out there willing to sell the same products for less," noted Leo Hollander, chairman and ceo, Hollander Home Fashions, which has a production facility in California.
"We're just not in the kind of environment right now to be passing costs along," said Brentwood's Sweet. "We're putting a little ketchup and mustard on it and swallowing."