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Last Updated: Thursday, 9 September, 2004, 00:08 GMT 01:08 UK
Bad weather's silver lining
By Will Smale
BBC News Online business reporter

Damage caused by Hurricane Charley in Florida
Hurricanes have recently hit the Caribbean and Florida
The damage caused by the recent spate of hurricanes in the Caribbean and Florida, typhoons in the Far East, and floods everywhere from Bangladesh to Cornwall in south-west England have once again shown the devastating cost of extreme weather.

This cost is initially measured in terms of human suffering, but once the clean-up operations begin, thoughts turn to the expense of the recovery and rebuilding work.

The cost for Hurricane Frances is estimated to be up to $10bn (5.6bn) in Florida.

Yet even if the weather is nowhere near as extreme as a tropical storm or flash flood, an undesired or unplanned for weather pattern - be it hot or cold - can easily damage a company's turnover and profits.

So much so that the UK's official government weather information provider, the Met Office, estimates that 70% of all British companies can be affected by unseasonable weather to the tune of a 10% drop in their profits.

This could be anything from a clothing retailer which fails to sell its summer lines because of a wet August to a mild winter hitting the profits at gas and electricity firms due to their customers not needing to turn their central heating up so high.

American data

With so much money at stake, it is not surprising that the provision of up-to-date and accurate weather information for companies is very big business. Both for official providers such as the Met - which makes 20m a year from commercial revenues - as well as for a wealth of private firms that now offer detailed weather provision.

The vagaries of today's weather appear to be getting ever worse or more unpredictable, so people are wanting ever more information and analysis
Peter Herbert, founder of Metmarine.com

One such company is the UK's Metcheck.com, whose clients range from supermarket group Waitrose to the makers of Fosters lager.

Like most such firms, Metcheck.com uses its own software to transform global raw weather data provided by the US government's NOAA (National Oceanic and Atmospheric Administration) into detailed and easy-to-read weather forecasts.

The strength of its service is in the sheer detail of the information it can provide, says Andrew Bond, senior forecaster at Metcheck.com. It can take the raw data and pinpoint weather forecasts for a specific town on a specific morning as well as provide long-term forecasts for oil and gas companies.

Such information can then, for example, help individual Waitrose stores determine exactly how much barbecue food they need to order in for any given summer week.

The information is a "useful tool", albeit a rough guide, says a spokeswoman for Waitrose.

"It certainly helps our stores to determine, for example, how much hot soup they will need to get in during a winter week, or bottled waters in the summer."

Hedging bets

Other weather information providers go one stage further and help companies financially protect themselves against any unseasonable weather by offering weather derivatives, a sophisticated form of risk insurance.

Cars thrown about by flash floods in the Cornish town of Boscastle
The UK is not immune from the impact of freak weather conditions

One such firm is Weatherxchange, a partnership between the Met Office and Australian mining giant BHP Biliton.

"The weather derivatives market is not about extreme weather, rather the less dramatic but more frequent changes that can affect a company," says a Weatherxchange spokesman.

"For example, a warm winter is not going to be life threatening for an energy company, but it is certainly going to be financially damaging, so they take out a hedge, to offer them a guaranteed level of return."

There is a simple reason why this is a growing industry, says the spokesman - it is today unacceptable for a firm to blame the weather for any dip in profits.

"Five to 10 years ago a company could just put a blip in their profits down to the weather and just shrug their shoulders.

"Today's shareholders and markets will not accept this as an excuse."

Snow, surf and sea

Some companies offer specific weather information to members of the public, such as Wales-based Snow-forecast.com, which was set up by three snowboarders and provides detailed snow reports for more than 600 ski resorts worldwide.

Skier
More skiers are checking the snow forecasts before they travel

Snow-forecast's co-founder, Nick Russill, says the company provides three reports for each ski resort, one for the summit, one for mid-slope, and one for the village.

"You need to do this as the weather can greatly vary depending upon which level you are at."

The service was initially free but as it expanded, they sought to cover their costs with banner advertising. When this didn't work, they introduced a subscription fee of just 3.50 a month, though about half of the information is still free.

It also has a new sister website called surf-forecast, which looks at more than 8,000 global surf breaks.

Metmarine also has a very specific target customer, British boat captains in the Mediterranean.

When qualified skipper Peter Herbert realised that 80% of professional boat captains in the Mediterranean were actually British, he decided to offer English weather forecasts, based on official French government data.

His company provides information via the internet and over the phone. "The vagaries of today's weather appear to be getting ever worse or more unpredictable, so people are wanting ever more information and analysis," says Mr Herbert.




SEE ALSO:
Weather dampens High Street sales
07 Sep 04  |  Business
Poor weather knocks retail sales
19 Aug 04  |  Business
Bad weather prompts JJB warning
19 Aug 04  |  Business
Nestle profits dented by weather
18 Aug 04  |  Business
Mixed weather hampers High Street
12 Jul 04  |  Business
Liffe offers weather protection
10 Dec 01  |  Business


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