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Remembering ... grasshopper & the ant: business owners bolstering their base while times are good.

Healthy crop prices, increased popularity in the area, record-setting market increases in home values and the potential for a reconstructed waterfront in the Wenatchee Valley signal good times for the area.

However, a basic analysis of a market economy shows potential for businesses to go from boom to bust.

Local businesses are well aware of the pendulum swing and doing what they can now to stay ahead.

A 'growing' concern

Christopher A. Phillippi, operations manager for Phillippi Fruit Company Inc., said his family must remember not to over-extend themselves in the good times.

A lot has changed since his relatives planted apple trees in the valley 100 years ago. A business must be flexible to survive even when prices for products are good, he said. And a business needs to lay out a diversified operations plan so the business can function in the down times.

Phillippi Fruit owns 55 acres of fruit trees on the northern flank of Castle Rock and Number One Canyon. Due to the steady demand for homes over the last 20 years, Phillippi Fruit has sold off periphery properties for development slowly, retaining its core orchards. The 55 acres it currently owns is in fruit production. However, Phillippi said the company plans to slowly sell off the property in the next 20-30 years, depending on demand.

Phillippi said the company has begun to shift its focus from fruit production to fruit packing, especially organic forms of packing fruit.

"We have to look toward the future and what will be profitable," he said. "You have to balance growth with what will be needed in the future."

Over the last few seasons Phillippi Fruit packed more conventionally grown fruit than it did organic, but as the organic fruit market increases, Phillippi said they will shift emphasis.

Orchardists can grow fruit organically, but it cannot be certified organic unless it is also packed organically.

Fantastic opportunities are appealing.

For Phillippi it has been tempting to purchase new property especially when it's cheap.

Dole Fruit warehouses in East Wenatchee sold for half of their market value recently, Phillippi said.

"But what would we do with all the space," he said. "The price is great, but it would have been too much for us on several levels."

Instead, Phillippi Fruit has survived tough times in the past. Phillippi Fruit bought a smaller existing packing house in Baker Flats with 10 acres of land for about the same price as building a new packing facility would cost at the company headquarters on Fifth Street in Wenatchee.

Phillippi recalled the red apple bust that culminated in 1999. Farmers produced far too many red delicious apples and saturated the market. The price fell through the floor. At that time Phillippi Fruit sold off orchard property between Castle Rock Street and Washington Street in Wenatchee to development. Phillippi said the decision helped keep the company viable. The property had also become surrounded by homes and a demand existed to turn that property into homes.

Too many pieces

Lonny D. Bauscher, an attorney in Wenatchee who represents businesses in the area, said the valley needs to figure out what its goals are.

The Wenatchee area needs to bring a uniformity to its image, he said.

The signs at the north end of Wenatchee indicate the city has a difficult time identifying itself first with the Apple Capital of the World sign and then the Meeting Rivers Meeting People Meeting Needs sign just down the road.

"If you had a sign for everything that happens here, you'd have signs every where," he said.

Bauscher said Wenatchee is represented by so many different people for so many activities it can leave people confused.

He likens Wenatchee's image to a shotgun approach where a lot of little holes are created.

There are a lot of them, but they're spread out all over the place.

He said people need to decide what they identify with. Different sectors of the community can grate each other and make it difficult to accomplish tasks.

"There have been so many changes," he said. "Wenatchee needs to spend some time examining who it is."

A clear idea of what the community offers socially and physically will help attract new business to the area and help elected officials and the citizenry function when changes come whether they're good or bad, Bauscher said.


James Fletcher of the small business development center echoed Phillippi's plan not to overextend a business when times are booming.

"Grow, but stay within what you can handle," he said. "Overall, if you can stay right above average, you'll probably do OK."

He said businesses can use the extra capital to expand training, pre-purchase supplies and look for ways to streamline business.

Planning can reduce future expenses, gives businesses immediate tax deduction, hedges against inflation and helps avoid supplier problems.

He said it's also a good time to create loyalty among customers and employees.

A business also needs to examine what it need. More business isn't always profitable business, Fletcher said. Some customers eat up more profit than they bring in.

"If you can be choosy, cut out the ones that slow the business down," he said.

One way to cull out customers is to price yourself out of the game, he said. That way it becomes a price issue and not a personnel issue.

Is a slowdown coming?

Chelan County Commissioner Keith Goehner pointed out that no one single industry holds up the area's economy.

He said agriculture is stable in this region for now, though the paradox between housing and orcharding is an issue that needs to be resolved.

From the county's perspective, things are good. Sales tax revenues are above projected levels. During this good time, Goehner said the county is trying to update its critical areas list, model for sustainable growth, begin looking at areas for new parks and open spaces and hold visionary exercises in the communities to help determine where the area needs to go.

Goehner pointed to the loss of the Longview Fiber mill at Lake Wenatchee last year and the disappearance of major wood processing as an example of how the area can take a hit and still continue to grow.

Fletcher, Goehner and Bauscher said they cannot foresee any influences that would spell out a downturn in the region's economy. Goehner said it would take a powerful outside influence like the market tremors in 2001 and 2002 that followed the events of 9/11 to severely rock the local economy.

Bauscher and Fletcher said housing sales could cool with the national subprime mortgage issues, however the consistant demand from people wanting to move to the area could keep the development pressure strong. Plus, for the first time, large scale and outside developers are investing in the area. Those factors could counter balance any negative effects, they said.

Bauscher said a little slowdown, particularly in the housing and development markets, could be a good thing.

He said it could give planners, developers and business owners a chance to see what the area is turning into and check its development progress and direction.

"In many ways we are all just like dogs chasing our tails," he said. "We need to figure out who we are and where we are going."

Phillippi remembered a book he read a few years ago called the "Pig and the Python." In the book the baby boomer generation was the pig and American industry was the python. He said depending on what stage of life the baby boomers were at, the market could expect a corresponding increase.

"It looks like the pig has reached our part of the snake," he said. However, challenges will come. Goehner said the price of housing and the tight job market can make it difficult for young professionals to move to the area. He said if that trend continues the area could run short of work-age people and a ripple effect would be felt throughout the region.

Bauscher said geographic, transportation and engineering limitations may hinder growth in the area more than the marketplace.

"The freeway is a ways away, there's limited space to develop," he said "But there's work being done with the infrastructure and the area is growing."

Bauscher, Goehner, Fletcher and Phillippi agreed that the area's industries are taking steps to hedge against future problems now instead of letting them broadside them later.
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Title Annotation:Phillippi Fruit Company Inc.
Author:Bentley. Ryan
Publication:Wenatchee Business Journal
Geographic Code:1USA
Date:Sep 1, 2007
Next Article:Hawley Street work underway.

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