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Layoffs at General Mills and lessons from Minnesota’s Fortune 500 companies

A look back at Minnesota’s Fortune 500 companies helps put the layoffs in a larger context.

General Mills, with headquarters in Golden Valley, MN, announced layoffs on Tuesday.

General Mills, one of Minnesota’s first Fortune 500 companies, announced Tuesday that it is eliminating 850 jobs, with about half of the losses in the Twin Cities.

The cuts are related to struggles in the U.S. food industry, and General Mills says it is restructuring to “accelerate administrative efficiencies across the company.” But the news raises bigger questions about the state of Minnesota’s Fortune 500 companies and whether we should be alarmed.

A look back at Minnesota’s Fortune 500 companies helps put the layoffs in a larger context. This history reveals that companies come and go — and offers some lessons on public policy.

The Fortune 500 ranks by revenue the 500 largest U.S.-based, publically traded companies. Fortune magazine has published the list since 1955, and all of the data are available on its website.

Early years

Seven Minnesota companies appeared on the initial Fortune 500 in 1955.  I’ve included each company’s national rank in the Fortune 500 and their rank in Minnesota. For example, General Mills was No. 56 on the 1955 national list and the largest publically traded company in Minnesota.

Name Rank – National Rank – Minnesota Revenue
(millions of dollars)
Revenue
(millions of 2011 dollars)
General Mills 56 1 487.6 4,100.0
Pillsbury 90 2 336.0 2,825.3
Hormel Foods 92 3 331.8 2,790.0
3M 131 4 230.9 1,941.5
Honeywell 132 5 229.4 1,928.9
Minneapolis-Moline 353 6 77.4 650.8
Minnesota & Ontario Paper 379 7 70.1 589.4

Source: Fortune 500In the table above, notice that all seven companies were manufacturers, with all but Honeywell connected to natural-resource processing. Four of the seven were tied to agriculture, with three food processors (General Mills, Pillsbury, Hormel) and an agricultural implement manufacturer (Minneapolis-Moline). Two companies were headquartered outside the Twin Cities: Hormel (in Austin) and Minnesota & Ontario Paper (in International Falls).

The year 1983 is half the distance to 2012, so let’s take a look at the Fortune 500 that year. Here are the Minnesota-based companies:

Name Rank – National Rank – Minnesota Revenue
(millions of dollars)
Revenue
(millions of 2011 dollars)
3M 44 1 6,601.0 14,900.0
Honeywell 59 2 5,490.4 12,393.1
General Mills 63 3 5,312.1 11,990.7
Control Data 80 4 4,292.0 9,688.0
Land O’Lakes 100 5 3,770.1 8,510.0
Pillsbury 115 6 3,385.1 7,641.0
Farmers Union Central Exchange (CHS) 234 7 1,470.6 3,319.5
Hormel Foods 239 8 1,426.6 3,220.2
International Multifoods 268 9 1,147.7 2,590.6
Ecolab 379 10 670.3 1,513.0
Deluxe 427 11 549.5 1,240.3
American Hoist & Derrick 467 12 464.2 1,047.8

Source: Fortune 500Again, all of these are primarily manufacturing companies, but there are four important differences from 1955. First, food processors such as General Mills and Pillsbury diversified their operations, adding restaurant chains and other non-manufacturing divisions. 

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Second, manufacturing is no longer dependent on natural resource processing. For instance, by 1983 3M had a large portfolio of products that had nothing to do with its original base in sandpaper and other types of abrasives. Similarly, Control Data and Honeywell were computer manufacturers, Ecolab produced cleaning products and Deluxe was one of the largest check printers.

Third, the companies grew much larger. The last column of each table shows company revenues in 2011 dollars. The largest company in 1983, 3M, earned three times more revenue in inflation-adjusted terms than the largest company in 1955 (General Mills).

Fourth, only one company, Hormel, was not headquartered in the metro area. Corporate growth was centered in the Twin Cities.

Now look at today. There are 19 Minnesota-based companies in the Fortune 500:

Name Rank – National Rank – Minnesota Revenue
(millions of dollars)
UnitedHealth Group 22 1 101,862.0
Target 38 2 69,865.0
Best Buy 53 3 50,272.0
SuperValu 75 4 37,534.0
CHS 78 5 36,915.0
3M 102 6 29,611.0
USBancorp 132 7 21,339.0
Medtronic 164 8 15,933.0
General Mills 181 9 14,880.2
Land O’Lakes 210 10 12,849.3
Xcel Energy 246 11 10,654.8
Ameriprise Financial 248 12 10,621.0
C.H.Robinson 259 13 10,336.0
Mosaic 268 14 9,937.8
Hormel Foods 327 15 7,895.1
Thrivent Financial 332 16 7,842.8
Ecolab 365 17 6,798.5
St. Jude Medical 437 18 5,611.7
Nash-Finch 498 19 4,807.2

Source: Fortune 500There is a wide variety of industries that were absent in earlier years: retailing (Target, Best Buy), health care (UnitedHealth Group), financial services (US Bancorp, Ameriprise Financial), logistics and distribution (SuperValu, C.H. Robinson) and medical devices (Medtronic, St. Jude Medical).

3M, General Mills, and Hormel were on the list in 1955 and 1983, and they’re still there. They are not the same companies they were back then: 3M continues to move into new areas, General Mills absorbed Pillsbury, and Hormel now has turkey processing (through Jenny-O) in addition to its traditional strength in beef and pork products.

The trend to bigger and bigger companies also continued. UnitedHealth’s $102 billion revenue was seven times bigger, in constant dollars, than 3M’s 1983 revenue.

A virtuous circle

Minnesota’s per capita income was below the national average in 1955, at the national average in 1983 and above the national average in 2012.  (See my Feb. 9 post for more details.) The growth of Fortune 500 companies in Minnesota and the rise in Minnesota’s per capita income worked together in a virtuous circle that benefited both. 

The first part of the circle is the effect of corporate growth on economic growth. The evolution of large companies in Minnesota from natural resource processing in 1955 to diversified manufacturing in 1983 to a broad range of industries in 2012 promoted economic growth directly by creating large numbers of high-wage jobs throughout the state.

The second half of the circle is the feedback from economic growth to corporate growth.  Control Data is gone. But the human capital and knowledge that Control Data employed – the heart of economic growth — didn’t disappear when the company died. Instead, these resources were now available to fuel the growth of companies such as Medtronic and Target.

All of this means that we should put news such as layoffs at General Mills in a larger context. Established companies adapt or sometimes go away, and new firms come on the scene. It makes little sense to put in place public policies that focus on keeping particular businesses intact. Rather, we should create an environment in which people have the knowledge, skills and access to capital so that they can move among jobs or create new businesses.

Who knows what kinds of companies will be on the Fortune 500 in 2040?