Small businesses fuel area's economic engine

Posted: Thursday, March 01, 2001

Don't call small businesses "small" on the Kenai Peninsula.

"Small business runs our economy," said Betsy Arbelovsky, executive director of the Kenai Peninsula Borough Economic Development District. "It's really the heart and soul (of the peninsula).

"They should be cherished and nurtured and supported," she said. "Outside of Anchorage, (the peninsula) has the most diverse economy in Alaska. Our diverse economy is really one of our strengths."

Data compiled and produced by Jeanne Camp, economic analyst for the Kenai Peninsula Borough, also casts a bright spotlight on the economic contributions made by the peninsula's small businesses.

"The diversity of economic activity within the Kenai Peninsula Borough helps maintain a stable environment although the area is highly impacted by the seasonal highs and lows in construction, timber, fishing and tourism," according to the borough's Quarterly Report of Key Economic Indicators for fiscal quarter ending June 30, 2000, prepared by Camp.

Arbelovsky defined small business as those having less than 100 employees. The Small Business Administration puts a finer point on it, splitting the economic atom into standardized industrial classifications with dollar amounts and numbers of employees businesses cannot exceed in order to be considered small businesses.

"Even something that looks and acts like a small

business, the role it plays in a community has far greater impact than most state and federal programs consider when they look at small businesses," said Wanetta Ayers, business development manager for the borough's new Community and Economic Development Division. "There are really good examples of that in all communities on the peninsula. If you look strictly at employment figures, even the Phillips plant here would be considered small business. But because of bigger industry in the state, it obviously has a far-reaching impact."

Ayers also cited Alaska Wild Berry Products as an example of a small business by definition that carries a big business wallop.

Established in 1946 in Homer as a business making jams and jellies, Alaska Wild Berry Products has flourished under the ownership of Peter Eden, who took over the company in 1975. Since that time, Alaska Wild Berry Products has grown into a $4 million-plus enterprise, fueled mainly by the addition of a line of chocolate products in 1989.

"Adding the chocolate division was one of the best things that the company ever accomplished," Eden said. "We really took off after that."

Eden then relocated company headquarters to Anchorage, where the production facility/gift shop also serves as a tourist destination because of its innovative approach to marketing, which includes a chocolate waterfall and singing clerks.

"I like to think (the shop) is the only one of its kind anywhere," Eden said. "Coming to Anchorage really put us on the map."

Eden employs up to 40 people year round, including six or seven at the Homer outlet, and up to 90 during peak times. He said the company is now focusing on its catalog and mail order business as a way of growing even further.

"There's lots of potential there," he said. "I like to stay growth-minded and keep 10 steps ahead of the nearest competitor.

"You should never stop. There's always something you can do better. One should never get settled in and think there's nothing more to do."

Drawing from Camp's quarterly report, which does not include data on self-employed workers, fishers, domestics and unpaid family workers, only 20 Kenai Peninsula employers had more than 100 employees in 1999. Those businesses employed a total of 6,293, or only 29.2 percent of the 21,539 individuals employed throughout the borough for that time period.

The remaining 15,246 peninsula residents were the power behind the peninsula's successful small businesses.

"People are always surprised by that," said Kenai Peninsula Borough Mayor Dale Bagley. "But it's definitely very true. In any community, there's usually a lot more jobs from small businesses than from large businesses. Small businesses are very important to any economy."

Government was the biggest peninsula employer in 1999 (the last full year for which statistics were available), averaging 4,245 monthly employees.

Close behind, however, were retail businesses, with an average of 3,394 monthly employees. This category includes general merchandise and food stores, eating and drinking establishments, service stations and miscellaneous retail businesses.

"It takes in all of your tourism," Camp said. "And the numbers jump in the summer."

Indeed they do. In January 1999, the retail industry reported 2,884 employees. In July 1999, that number increased to 4,102, and decreased back to 3,122 in December.

Services industries -- including lodging, auto and miscellaneous repair, recreation, health, legal, education, social, engineering, etc. -- placed third. Businesses classified as agriculture, forestry and fisheries reported the least number of employees -- 82.

Conversely, agriculture, forestry and fisheries reflected an 18.8 percent increase in employees over 1998, the largest increase reported by any peninsula industry. Finance, insurance and real estate was second with a 4.5 percent increase, and services and miscellaneous was third with a 2.8 percent increase.

Losing the most employees between 1998 and 1999 were industries in the fields of transportation, communication and public utilities (16 percent). This decline continued in the first six months of 2000.

Gross sales during 1999 brought $1,642,409,262 to the Kenai Peninsula. Retail led the pack with 33.12 percent; services placed second with 13.35 percent; manufacturing came in third with 11.92 percent. Agriculture, forestry and fisheries accounted for 2.47 percent.

Data for 2000 is just beginning to surface. Employment figures have dropped, but the number of unemployed has dropped even more, resulting in "near record low unemployment rates for the period," according to Camp's quarterly report.

"The population has increased by 676 persons while the labor force has declined, possibly indicating a shift to retirees remaining in the area. Evidence indicates the average age of borough residents is on the rise."

Ayers suggested the change in employment numbers could indicate an aging work force.

"We've got a whole generation of people getting ready to phase out of the work force," she said. "Businesses are taking the opportunity to rethink their staffing plans because of that. A drop in numbers will be fairly common."

Ayers also considered the possibility of employers implementing productivity improvements.

Whatever the reason, gross sales for the first six months of 2000 were up 5.5 percent, approximately $40 million more than the same period in 1999.

And for that, the Kenai Peninsula owes a large thanks to more than 15,000 friends and neighbors in the small business sector.

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