The destruction and loss of revenue from severe weather conditions are a nightmare for most businesses.
But some companies see the near-constant deluge of rain, floods, hail, and snow as an opportunity—for the right price—to help them get ahead of nature’s ruin and improve their bottom line.
“Our business has really picked up since the first of the year,” said Scott Bernhardt, president of Planalytics, a global business weather intelligence firm founded in 1996, with offices in London and Berwyn, Pa.
“We’re seeing more companies turn to firms like us to get on top of weather conditions,” said Bernhardt, who added that he has more than 300 clients.
Bernhardt said Planalytics provides up-to-the-minute weather information, as well as long-term forecasts, so businesses can plan how much a weather event might affect their products and services.
“Companies need to know how to set up their inventories for weather, and that way they won’t hurt their income,” Bernhardt said. “If you know it’s going to rain, you should be selling umbrellas instead of Bermuda shorts. If you make snow blowers, it’s good to know when a snow blast is coming.”
However, some experts say companies like Planalytics should be used with caution.
“For the bigger firms, they might be worth it,” said Marc Roy, a professor of disaster resilience at Tulane University. “But I don’t know if they really offer a big advantage for businesses.”
Billions lost to weather
There’s little doubt of weather’s impact on business. According to a 2013 report from financial services corporation Allianz, 30 percent of the U.S. gross domestic product is affected by severe weather conditions each year. The report says that as much as 70 percent of all companies can be exposed to severe weather conditions at any one time.
And that exposure can be costly. Losses from weather-related delays to U.S. trucking companies, for instance, are as much as $3.5 billion a year.
“We say it’s not about the weather but about the impact,” said Steve Bennett, senior vice president of Verisk Climate, which sells software, data and analytics designed to help companies manage climate risk.
Like Planalytics, Bennett said Verisk is seeing growth. It formed a 700-person division in October to focus on the work of weather services. Clients include utilities, banks, insurance and commodity firms, said Bennett, who is a meteorologist.
Information from firms such as Planalytics and Verisk is passed to customers through email, phone alerts, on-site planning meetings and even individualized websites for firms that want to track conditions in one or several locations.
“Knowing how to target customers in bad weather is key for some businesses,” said Brent Shelton, a consumer expert at comparison shopping website FatWallet. “This past winter’s rough weather showed a run on items like snow shoes, gloves and scarves. Being prepared can make a difference on a company’s revenues.”
Cheaper alternative
Exact numbers aren’t clear, but analysts say there may be about a dozen companies in the U.S. that provide a high-end weather risk management, with around 50 or so in a mid-level range and probably a hundred offering lower-end services. Prices to customers range from hundreds of dollars to thousands—depending on the services.
National fast food chain Sonic, a client of Planalytics, says that it’s getting its money’s worth.
In an email response to CNBC, the company said: “Sonic uses numerous intelligence providers to help inform our business decisions. Planalytics’ ability to help us understand the impact of weather on our business, particularly because of the concentrated number of Sonics in severe weather states, helps us with our projections and our review of past performance.”
What that means for Sonic is managing its products when extreme weather conditions like snowstorms that can “dissuade consumers from leaving their homes and halt restaurant traffic. Planalytics will help Sonic manage these periods of opportunity and risk throughout all of the regions they operate.”
However, even though companies have the latest technology and manpower to provide services, there may be cheaper alternatives, said Tulane’s Roy.
“It is an interesting concept, but there’s so much information out there on the web and other sources that anyone can use to plan ahead for severe weather incidents if they really want to,” argued Roy.
More competition ahead
Both Bernhardt of Planalytics and Bennett of Verisk said they expect their competition to grow, as their profits have, in the years ahead.
“It’s pretty simple why,” Bennett said. “We’ve got more people living in areas exposed to natural disasters. Plus, the technology to get on top of weather conditions has never been as good. There’s a need for our services.”
It might not be hard to test Bennett’s theory—with the stream of forecasts for more severe weather conditions around the world.
“Weather used to be in the news,” Bernhardt said. “Now it is the news.”
Friday, 2 May 2014
Mark Koba | Senior Editor, CNBC
