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STRATEGY

How the Fireworks Business Really Works

Tougher safety regulations and a surge in patriotism spurred by Sept. 11, combined with market reforms in China, are turning backyard fireworks into a booming industry.
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Chuck Decker's been having trouble fitting the latest imports on his store's display shelves.

"We got these six-foot tall reloadable shells, they're just huge," said Decker, who co-owns Uncle Sam's Fireworks, a family-run consumer fireworks store in Green Bay, Wisconsin, with his wife, Deb, and brother, Tom.

Just as fireworks are getting bigger, the store, founded by Decker's father in the mid 1970s, has itself expanded from a roadside sparkler stand, to a collapsible eight-by-sixteen foot shack, to today's warehouse-sized retail space -- employing anywhere between 35 and 40 sales staff during peak season in the weeks leading to the Fourth of July weekend, when consumers are setting off their own fireworks.

Thanks to a strange mix of tougher safety standards since the Sept. 11, 2001 terrorist attacks, a surge in patriotic fervor, and economic reforms in China, the so-called backyard fireworks business is booming.

In 1976, the year Decker's father opened his first stand, consumers nationwide bought a total of 29 million pounds of fireworks, according to the American Pyrotechnics Association, a trade group based in Bethesda, Maryland. By 2004, they bought nearly ten times that much -- a whopping 236 million pounds, the APA says.

Last year alone, consumer nationwide bought $880 million worth of fireworks, according to the APA.

That's largely because consumer-class fireworks -- almost all of them manufactured in China, despite such homespun-sounding names as American Pride, Broad Stripes and Bright Stars, and Uncle Sam's Answer -- are bigger and better than ever, Decker says.

"We've got the best environment for the fireworks business that we've ever seen," says John Steinberg, a spokesman for the Pyrotechnics Guild International, a nonprofit organization of amateur and professional fireworks enthusiasts.

Steinberg says in recent years U.S.-based fireworks retailers and wholesalers have begun developing much stronger relations with manufacturers in China, helping ensure they produce fireworks with the kinds of spectacular effects American consumers want -- and will pay top-dollar for -- while adhering to safety standards increasingly enforced by the federal government.

The ramped up regulatory environment means poor quality consumer fireworks that don't meet approved standards set by the Consumer Product Safety Commission are being blocked at the border and turned away, Steinberg says.

Meanwhile, China's economic reforms under Chairman Jiang Zemin in the 1990s have slowly weaned local fireworks manufacturers off government subsidies, forcing them to compete on the open market. The upshot, Steinberg says, has been a rapid growth in the number of small, private fireworks labels in recent years, many under the direct guidance of American retailers in local offices scattered throughout the country.

"It's one of those happy occurrences when everyone ends up on the same page," Steinberg says.

Still, back in the U.S., smaller fireworks retailers, importers and display companies say beefed up federal, state and local regulations -- despite having recharged the marketplace -- are becoming burdensome, costly, and even confusing.

At the federal level, industry regulation straddles numerous agencies, including the Department of Transportation, the Occupational Safety and Health Administration, the Consumer Product Safety Commission, the Bureau of Alcohol, Tobacco, and Firearms (notably at 1-888-ATF-BOMB), and the Motor Carrier Safety Administration.

State and local authorities oversee licensing, storage, and operator certification, along with the sale and use. Other restrictions enforced by local fire and police departments vary by state and region.

Currently, nearly every state allows retailers to sell most kinds of fireworks, with Illinois, Ohio, Iowa, Vermont, and Maine permitting only the sale of sparklers and other small novelties. Only Delaware, Massachusetts, New Jersey, New York, and Rhode Island have banned consumer sales entirely.

In general, the legal amount of explosive material in retail fireworks is no more than 50 milligrams, about half the size of an aspirin, according to the APA.

One way to recognize illegal fireworks is by checking for a manufacturers' name and safety instructions on the packaging, which is required under law. However ingrained in childhood lore, so-called cherry bombs, M-80s, M-100s and silver salutes are all illegal, the APA says.

Even as retail sales skyrocket, the number of fireworks-related injuries in recent years has declined. In 1976, there were roughly 11,100 injuries reported -- about 38 for every 100,000 pounds of fireworks sold, APA figures show. By 2004, that number had dropped to just 9,600, or four injuries for every 100,000 pounds sold.

The declines are partly due to a stream of safety awareness campaigns, along with better packaging and labeling, including a ubiquitous warning on all heavy-weight, 500-gram multi-shot fireworks that the contents "shoots flaming balls."

But beyond safety issues, retailers worry that regulators are becoming overzealous.

Julie Heckman, the APA's executive director, has called the current situation -- which is far worse for professional fireworks display operators, than for retailers -- a "crazy quilt of new regulatory activity and inspections that seems to make very little sense, particularly for an industry that was already one of the most heavily regulated."

"There's been a lot of overreaction from the government," Decker says. "The basic rules for consumer fireworks haven't changed much, but we're seeing problems in areas like shipping."

Decker says many carriers have simply stopped handling fireworks, saying added safety regulations -- which include random drug testing programs and up to four background checks and federal clearance letters for drivers transporting display fireworks -- have sent costs through the roof.

Many of those worries dissolve, however, in rush of activity ahead of July Fourth.

"This is a simple mom-and-pop store, and this time of year we've really got hands full," Decker says.

It doesn't end on July fifth, either. Decker says business is so good Chinese manufacturers no longer warehouse their products.

"I have to start ordering next year's stuff right away."

 

Correction: An earlier version of this story incorrectly stated that the legal limit for explosive material in consumer fireworks is 500 grams. The legal limit is 50 milligrams.




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