California’s decision to impose a mandatory 25% reduction in potable urban water usage will send shockwaves through the state economy and beyond. Make no mistake, there will be dislocations and macro impacts from water rationing in California. Some companies will struggle, others will prosper, and nearly everyone in the state will have to make sacrifices.
One industry that’s being put in the spotlight is agriculture. Agriculture represents about 2% of the state’s economy while consuming about 80% of its water.
To search for more agriculture companies, go to Owler search and add “agriculture” to the Tags field.
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California produces most of our nation’s fruits and vegetables and provides a lot of jobs in the process. If California produces significantly less food during the drought, America will be forced to make up the shortfall by increasing imports and displacing hundreds of thousands of workers in the state and beyond. Food prices would significantly spike around the world. Unfortunately, higher prices are probably unavoidable in the US, particularly for foods that require a lot of water, like beef, avocados, almonds, olives, butter and chocolate.
However, not every farmer and rancher will suffer in California. California has old water rights laws that date back to the 1800s. Riparian, or senior, water rights have big advantages. These water-rights owners are legally allowed to use water that flows through their property from rivers, creeks and streams. They can’t divert water to storage tanks, but the amount of water they use for their business needs isn’t tracked. Companies that have riparian rights could have a distinct advantage against their competition. Many could gain market share and ultimately put some of their competitors out of business.
Meanwhile, certain industries require exceptionally clean, high-quality water. The biotech, pharmaceutical, and semiconductor industries are examples. These industries could run into political risks as more people run out of drinking water from the tap.
To search for more biotech companies, go to Owler search and add “biotechnology” to the Tags field.
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| Pharmaceutical Companies in California | ||
| COMPANY | DESCRIPTION | FOLLOW |
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Allergan produces ophthalmic pharmaceuticals, dermatology, neuroscience, urology and cosmetics. |  |
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BioMarin develops and commercializes pharmaceuticals for serious genetic diseases and medical conditions. | |
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MannKind researches, develops and commercializes therapeutic products for diabetes. | |
To search for more pharmaceutical companies, go to Owler search and add “pharmaceutical” to the Tags field.
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To search for more semiconductor companies, go to Owler search and add “semiconductor” to the Tags field.
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Certain regions of California are experiencing more severe drought conditions than others and some regions are guzzling unnecessary amounts of water.
The bottom line is there will be opportunities for some companies and major headwinds for others. Companies that have products and systems that help increase water efficiency, protect high-quality water, capture more potable water, and desalinate seawater have distinct advantages.
We searched for California companies that are water-focused or -sensitive. The Owler database has approximately 8.6 million private and public US companies. The table below is a sample:
To search for more water-related companies, go to Owler search and add “water” to the Tags field.
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At first glance, some of these companies look like search outliers, like Kawasaki. How could the California water drought affect Kawasaki? Kawasaki is a major producer of jet skis. Less water means less jet-ski sales.
When you explore the list, you will find companies that are well positioned to thrive in the California water drought and others that are challenged. For example, HydroNovation sells water treatment products that remove undesirable water contaminants, and HydroPoint provides smart water management systems. Companies like these are well positioned to profit.
What other industries might be hurt or helped by these new regulations? Will your company be affected? Check back for updates, and stay updated on all top-level news about these companies or your competitors for free at Owler!
Update (April 27, 2015): Bloomberg reports on businesses (e.g. Turf Terminators) taking advantage of the rebate program. Watch the video on Bloomberg here.
About Patrick O’Connor
Patrick won a 2010 Summit International gold medal and 2010 Creativity International silver medal in the financial services category. He began his career at a major Wall Street firm in San Francisco and later became a managing editor for a well-known money manager and financial publisher in Lake Tahoe. Patrick has been called a trailblazer in the financial industry for creating some of the first e-newsletters in the 1990s and blogs in the 2000s. He currently writes for several Wall Street firms and Owler, while raising three children and coaching little league baseball.
Follow Patrick on Twitter and his blog.
