Year in review and a look ahead
Monday, February 4th, 2002
By JUDSON BROWN
The heads of several businesses in the area were asked to review the past year and talk about their prospects and challenges this year.
Tube market firming
Steve Rafter, president of Tubed Products Inc., a division of McCormick & Co., a public food-products company, said 2001 sales began with a record first quarter but ended "down a lot" in the fourth period.
Tubed Products laid off 101 workers in October, reducing its workforce to about 750, where Rafter said he expects employment to remain through 2002.
This year started stronger, though sales remain below expectations. Rafter said the company is looking cautiously forward to a "stable" 2002, with sales expected to pick up significantly in the second half.
"Business has started to firm up," Rafter said. "We're starting to see signs" of improvement, although the industry is "taking a cautious approach to building inventory and creating new programs," he said.
The slowing economy has eaten into profits as manufacturers shifted production from "name brand" to "generic" lines with "less value added, less decorating" on the tubes, "less printing," Rafter said.
Auto sales boom
Chrysler-Daimler Corp.'s zero percent auto financing following the Sept. 11 attacks helped boost sales at Medeiros Chrysler Plymouth Jeep on King Street in Northampton, where sales were up 60 percent for the year 2001, according to owner John T Medeiros.
Medeiros, who operates a Chevrolet dealership in Wilbraham and another in Connecticut, bought the Northampton franchise from the Cahillane family three years ago and relocated it from 48 Damon Rd. to 244-246 King St.
Medeiros described King Street as "a great location."
The city dealership sold close to 1,000 vehicles last year, twice the volume of the year before, Medeiros said. Seventy percent of the vehicles sold are used. The company keeps an inventory of 250 to 300 vehicles on the 3.5 acre property, he said.
With auto loan rates around 6 percent or under, Medeiros expects sales to continue strong this year.
"I've never seen a recession like this with the rates so low," he said.
Insurers adjusting
The huge claims resulting from Sept. 11 and the downturn in financial markets have put pressure on insurance carriers to raise premiums and cut costs by becoming more selective in their underwriting to minimize their risk exposure, local insurance agents say.
As long as the financial markets were booming, the carriers were "aggressively underwriting" to bring "money in the door" with new premiums, said Dale Frank, owner of Dale Frank Insurance Agency in Sunderland. Now "nobody want to do high-risk business," he said.
Both Frank and Peter Whalen, president of the Whalen Insurance Agency of Northampton, say it's tough to expand a small agency now, especially in property and casualty insurance. Competition is stiff. Six midsize insurance agencies currently compete in the Northampton market, all run by 40-something natives who went to high school together, Whalen notes.
The easiest way for agencies to grow is a merger. A series of area mergers has occurred in recent years, but few opportunities remain locally, agents say.
Frank, who reported a "flat" 2001, said he hopes to grow by building the financial services side of his business, including estate planning, life insurance, annuities and long-term care insurance. "I'm aggressively going after the senior market," he said.
Riding defense wave
William Hanley, president of Millitech LLC, a high-tech manufacturer of millimeter wave products with offices and labs in Northampton's Industrial Park and in South Deerfield (where he plans to double the plant's size), says 75 percent of his business comes from federal defense contracts. Sales are improving in tandem with increases in the U.S. defense budget. The company makes components used in satellites and in radar for "remotely controlled vehicles" and aircraft "drones."
"We made a strategic, conscious decision to go after military business and it turned out our timing was good," said Hanley.
Millitech's products also have commercial applications, for which Hanley predicts increasing demand, including pollution-control devices and radar and detection devices.
Hanley said sales are up 60 percent - from $6.6 million to $14.1 million - since he and others bought the business, spun off by Telaxis in South Deerfield three years ago. Last year sales grew 35 percent and profits 80 percent, said Hanley, and he's expecting 15 percent growth this year.
Millitech employs 66, up from 40 in 2000. Hanley expects to add some five people in 2002.
New Internet mix
 Perhaps reflecting trends in Internet business, the enterprise mix has altered dramatically at eclecTechs in Northampton in the last couple of years, even while the 11-person firm's bottom line and payroll have stayed about the same. Eighty percent of sales three years ago were in Web development, the rest in training and support. Today training is off and Web development has shrunk to less than half of sales, while the company's dialup Internet access services have picked up the slack, according to owner and founder Victoria White.
White bought Valinet, an Internet service provider, in 1999, a timely transaction, considering that in 2000, "we began to see a big retraction in Web development," she said. "Many people already had Web sites by then, and others were re-evaluating what to do as the economy started to slow. Now Web development is way off."
Even as "broadband" is touted as a big improvement over traditional phone lines for Internet access, eclecTechs has managed to stay competitive, adding 500 customers to the 1,200 it inherited from Valinet for its 56K modem-based, dial-up Internet service.
The reason is simple, says White: "We're cheap." Despite the hype, broadband may not be the last word in technology, she said. The firm recently added hardware that compresses data sent over standard copper phone wire, speeding Internet connection and upload times, White said.
White foresees "another level year" for the firm.
The retail scene
Most national retail chains rang up healthy sales over the all-important holiday season by slashing prices through myriad discounts and special sales, which some analysts think may come back to haunt them.
Meanwhile, some leading independent retailers in Northampton said they experienced not only strong sales, but also, unlike the chains, healthy profit margins over the holidays by selling a high share of their inventory at full price.
Mazie Cox, owner of Cedar Chest in Northampton, described last summer as slow, the fall as "incredible" and the holidays as "unbelievable." For the year, her store, which features bath and beauty products, home furnishings and stationery, had sales up 3 to 4 percent, she said.
Higher sales with lower inventory made 2001 one of the store's most profitable years, she said. "My gut is that people overspent in December," she said. "We're being very cautious about the new year."
John Donnellan, a former professor of retail business and now dean of business at Holyoke Community College, said "promotional pricing" produced "a weak bottom line" for many national chains.
Many came into the Christmas season with swollen inventories, he said. He predicts a "tough year" ahead for many.
Momentum
Growing community banks regionwide have invested heavily in new computer networks and software programs in recent years, and Innovative Business Systems, a small computer services firm formed in Florence in 1987, has benefited from the trend.
The company, with a staff of 14, unchanged from a year ago, designs and sells customized business software as well as re-sells, installs and maintains computer hardware and network systems. About 60 percent of its business now is with some 40 community banks in the four western counties, said general manager David DelVecchio. Thanks to bank contracts to do "data center conversions" and install "data mining" software, company sales grew 15 percent in 2001, and IBS starts 2002 with many such projects "in full steam."
The second half is more up in the air. Some nonprofit and non-banking customers are at least temporarily putting the brakes on technology spending, said DelVecchio. The firm expects relatively more demand for its maintenance services this year.
"We'll be satisfied if we keep even for the year," said a cautious DelVecchio.
Bete much better
Times are said to be tough for publishers, but 2001 brought recovery to Channing L. Bete Co. of South Deerfield, which produces educational booklets and Web sites on diverse topics.
Thanks mostly to strong demand from public schools and health agencies for its new line of "prevention science" products geared to youth, several new partnerships, and a new emphasis on packaging print and Internet content, the company notched 24 percent sales growth in 2001 and anticipates 5 percent growth, despite the recession, for 2002, according to President Michael Bete.
No tears were shed here when the "dot coms" that flourished in the late 1990s imploded, said Bete. A proliferation of companies proffering free health information on the Web had eaten into Bete's sales and was a major reason the company laid off 67 in June 2000, a fifth of its workforce.
The company began 2001 with 282 workers and this year with about 300, Bete said.
Big Y's solid
The supermarket business is somewhat resistant to economic recession, says Donald D'Amour, CEO and chairman of Big Y Supermarkets, a family-owned corporation that operates 47 stores in central and western Massachusetts and Connecticut.
Consumers nervous about the economy and therefore cutting back on buying big ticket items and on restaurant dining are not necessarily scrimping at the grocery store, he said. "Eating at home is one of the things that people are coming back to," he said.
The average American family's food bill eats up only 7 percent of family income, he noted.
"The single most important thing for us is consumer confidence, and it appears to be on the rebound since the lows of Set. 11," said D'Amour.
A softening in the job market is good news for the family-owned chain, said D'Amour. Big Y employs 7,900 people, three quarters of them part-time. Big Y is always hiring. Staff turnover is as much as 50 percent a year because the chain hires a lot of high school and college students, said D'Amour.
Looking at the company's growth prospects, D'Amour said he doesn't think the region has been hit hard by recession. Slow regional population growth limits how fast the company can grow. D'Amour said he's looking at single digit "same store" growth in sales in 2002.
The year 2001 was a fairly busy one for the company. It added one store and expanded and upgraded four, including one in Southampton. There are several new stores, expansions and renovations on the drawing board including an expansion of the Northampton store to include a larger food court.
Health-care IT strong
Health-care information technology, from "point of care" software for doctors to hospital-management systems, has been growing by 9 or 10 percent a year "and we're tracking very nicely to that" curve, says James Stewart, vice president and general manager of Amherst Products Group for McKesson Information Solutions, the Atlanta-based public company and national leader in the field.
The group last year moved from its original digs in Amherst to a new 67,000-square-foot, two-story office building on Route 9 in Hadley.
The group employs 100, mostly software developers, analysts and technicians, down slightly from three years ago, and a number Stewart doesn't expect to grow much this year.
Building to the test
Work continues on a new 85,500-square-foot, two-story building in the University Business Park in Hadley for National Evaluation Systems, a 30-year-old homegrown company that develops certification tests for teachers.
The company's clients include 10 states, many now in a budget crunch due to falling tax revenues. The good news for the company, says founder William Gorth, is that teacher testing programs are high in priority for most states. Most state testing programs also are supported by fees and thus are largely self-financing, he said.
Gorth anticipates a "basically flat" 2002.
The 45 local employees are looking forward to moving into their new home this summer, he said.
The old economy
One self-described "old line" industry, Perstorp Compounds Inc. in Florence, a unit of a Swedish holding company that processes compounds for plastic molding manufacturers, reports its situation "stable."
"We are looking somewhat positively toward 2002 simply because raw material prices are down a bit from the beginning of 2001," said treasurer David Tracy.
Lower energy prices, he said, are the "real driver" behind the price drop in the melamine, urea, cellulose and formaldehyde the company uses to make its mixtures. All these require heavy energy inputs to produce, Tracy said.
Also working in the company's favor is a Texas rival's recent closing, which makes Perstorp one of just two facilities in the country making thermoset plastics compounds.
The Florence plant employs 50 people, down a dozen or so from five years ago.
New business outlook
The economic slump has made it harder both for entrepreneurs to launch ventures and for early-stage companies to get the venture capital they need to grow.
Total financing obtained by small businesses with the assistance of the Massachusetts Small Business Development Center dropped dramatically last year. The total was $22.8 million in 1999, $23.9 million in 2000 and to $15.9 million in 2000 last year, according to regional director, Dianne Fuller Doherty.
The figure may look more dramatic than the reality, Doherty noted. There was a lot of financing already "in the pipeline," she said, and there is a lot of private financing that is not included in the statistics.
Agency counselors are focusing on helping clients "examine their internal operations to ride out the current economy," Doherty said. Few are hiring; many are trying, even while in "a cost cutting modality, to find "creative ways to avoid layoffs, she said.
Tripp Peake, a managing partner in the Valley's newest venture capital fund, Long River Ventures, said venture capital firms are spending a lot more time hand-holding with existing clients than funding new ones in the past 11/2 years.
On the plus side, Peake cited "good deal flow" (three to four proposals cross his desk each week); an increase in venture funds in the Valley, up from zero in 1994 to four today; and economists' projections that a lot of the $75 billion "overhang" in venture capital raised but uninvested will "come back into the game" later in 2002.
© 2002 DAILY HAMPSHIRE GAZETTE. Used with permission.
Back to News
| 
