Dollar Drain Part III: Shop owners and executives struggle to keep prices down
When customers take their dry cleaning to Dependable Cleaners, there’s no reason for them to think about the price of oil.
Patrons who buy a croissant or dessert at French Memories in Cohasset don’t, either. Nor does anyone who orders work clothing from the Norwell firm WearGuard. But all those South Shore businesses are sharing the pressure of record-high fuel costs – and trying in equally varied ways to keep sales and services strong without raising their own prices.
“It’s held us back,” Dependable Cleaners President Christa Hagerty said of the high oil and natural-gas bills for her company’s laundry and dry-cleaning operations.
Those costs have forced Hagerty to delay the purchase of new equipment that would increase automation and make the business more efficient. She has also trimmed office staff, a painful step that allowed Hagerty to avoid reducing the number of workers at all 17 customer locations, and she may shut down one of the company’s 10 dry-cleaning sites.
At French Memories, owner Anne Gabanelle is relying on a loyal clientele and part-time student workers to help absorb the soaring expense of baking flour.
With more farmers growing corn for ethanol fuel instead of planting wheat, Gabanelle said she now pays four times as much for flour as she did just a year ago. She’s paying twice as much for milk and eggs, too. Even so, “there’s no way we could raise prices,” she said.
Big companies like WearGuard and the Bridgewater chemical-processing firm Chase Corp. are navigating choppy waters, too.
When the price of a barrel of crude oil was still in double digits, WearGuard supplied coveralls, lab coats and other work clothing on a month’s notice. Now the company increasingly has to turn orders around in one to two weeks because corporate customers are on tighter budgets, too, and are waiting until the last minute to place their orders.
“It has forced us to be more efficient,” WearGuard President Mark Barrocas said.
WearGuard is among the few local corporations getting any benefit from a weaker dollar: The currency change has narrowed labor and productions costs between the United States and overseas, and that has allowed WearGuard to bring some contract work in Asia back home, where it can be turned around and shipped faster.
“The same boat”
With efficiency at a premium, “everyone is in the same boat,” said Ken Dumas, the chief financial officer at Chase Corp., which produces coatings, laminations and sealants from oil-based liquids and resins.
Chase has also been hit by rising costs of copper, aluminum and other raw materials. While the company has been able to bump their selling prices up a bit, Dumas said it is trying to offset the higher costs with continued growth, consolidated plant operations and more efficient energy consumption.
With gas averaging $3.14 a gallon and diesel fuel above $4, transportation is taking a bigger bite out of any business that depends on a fleet of trucks – but it’s driving small firms like Blanchard’s Overland Express in Braintree to the edge.
“It’s raising havoc with what we charge,” said Frank Blanchard, the owner of the three-person, regional freight firm.
Blanchard has had to raise his fuel surcharges three times in the last year and a half, and lost some longtime customers as a result. If he and one of his drivers weren’t on their wives’ health insurance plans, Blanchard isn’t sure if he could stay in business.
Anne Gabanelle at French Memories isn’t worried about that, though she is braced for a longer spell of high costs and low margins.
So is Dumas at Chase Corp. For big corporations and small retailers alike, “this whole thing hasn’t seen its final days,” he said. “The storm is not over.”
Lane Lambert may be reached at firstname.lastname@example.org.