Too Early To Assess Katrina Impact On E&S Market
While the robust rates of growth seen in the first quarter of 2005 appear to be moderating somewhat, the seven public E&S companies that have filed reports on the second quarter showed good gains again.
As we write this, the potential impact on the E&S industry of Hurricane Katrina is still impossible to calculate. Thousands of locations, and the infrastructure and logistic channels that support them, have been destroyed or severely damaged. With no food, power, water, employees or customers, it will be months, if ever, before many foodservice operations are back up and running.

The facilities destroyed or damaged include major hotels, casinos, convention centers, schools, colleges and hospitals in New Orleans as well as Gulfport and Biloxi, Miss., and the surrounding areas. Mobile, Ala., also sustained significant damage. A new Hard Rock Hotel and Casino, as well as a Café, were scheduled to open in Biloxi Sept. 1. According to an e-mail received from Eric Rainville, senior manager of facilities for Hard Rock Café, through consultant Ken Schwartz, the facility took significant structural, wind and water damage. It will be 2006 at the earliest before it can open. One report on a national news network speculated it will need to be torn down and rebuilt. Our thoughts and prayers are with all those affected throughout the area.

As for our industry, the direct impact at this point is still not certain. DI Foodservice Companies' plant and headquarters in Jackson, Miss., was closed for only a day and a half, reopening Aug. 31. Master-Bilt Products in New Albany, Miss., further north, weathered the storm, according to a company official. But we were unable to contact several other manufacturers in the area by phone or through their Web sites. The Web site of the Commercial Food Equipment Service Association was also affected.

While the major cities hit by the storm have significant numbers of foodservice operations, combined restaurant sales for the entire states of Louisiana, Mississippi and Alabama account for only 2.6% of U.S. restaurant sales, according to data from the National Restaurant Association. Since only the southern third of the three states is severely affected, total foodservice sales impact is certainly less than 2% total.

The most immediate impact of the storm on foodservice nationally is likely to be yet another surge in gasoline prices. Industry data are beginning show that already high prices are eating into restaurant traffic (see separate story). With more than 10% of the nation's total gas refining capacity off-line because of the storm, prices have already jumped. The question is how long the refineries will be inoperable and even when back up and running, whether the product can be distributed, given the impact on infrastructure in the region.

In the long run, of course, many of the facilities, including restaurants, hotels, casinos and institutional kitchens, will have to be rebuilt and replaced. It's just going to be a while before we know when that might occur.