After ConAgra Foods Chief Executive Sean Connolly said job cuts in Omaha and a greater emphasis on Illinois are in the company’s future, the question now is underlined: Will ConAgra’s headquarters move to Chicago?
Connolly said a “significant presence” will remain in Omaha, but didn’t say Friday whether that would include the company’s headquarters. He said the company would tell employees next week about major changes on the way, including details on possible layoffs.
Theresa E. Mintle, president and chief executive of the Chicagoland Chamber of Commerce, wouldn’t say whether she’d been in contact with ConAgra. A stream of companies in recent years have moved their headquarters to Chicago — Boeing helped start the latest round more than 10 years ago, she said.
“Chicago has done a brilliant job of positioning itself for global headquarters to make their home here,” she said.
Her message to Omaha? “It’s never, never easy to lose a corporate headquarters,” she said. “We might have a lot moving into Chicago, but we lose some, too, every now and again.”
Why would a company that has called Omaha home since 1922 uproot itself for the Windy City? If big companies move, it’s usually not because of economics — it’s because of people, said Steve Weitzner, president of Silverlode Consulting, a Cleveland-based economic development-consulting firm that has helped Fortune 500 companies relocate their headquarters. Weitzner isn’t working with ConAgra.
“Companies don’t typically make decisions — humans within companies make decisions, and the humans at the top of the food chain have the most decision-making power at the company,” he said.
ConAgra’s Connolly, who began as CEO in April, lives in Chicago. That could matter, Weitzner said.
“It’s not an easy thing for a company to move, whether it’s a headquarters or a facility or anything else, so it’s not the sort of the thing that companies typically do very frequently,” he said. A CEO or other executive’s preference sometimes can push the decision, he said.
A spokeswoman for Omaha-based ConAgra Foods, maker of Pam cooking spray and Peter Pan peanut butter, said “we are currently evaluating office spaces in the Chicagoland area,” but wouldn’t disclose any other information. The company, which also produces dozens of other grocery-store brands, had about $16 billion in revenue in fiscal 2015.
As for relocating divisions, units or the entire headquarters, David Schultz, a political science professor at Hamline University in Minnesota, said most people think tax credits or other business incentives offered by governments are deciding factors when companies move.
Not so, said Schultz, author of the 2012 book “American Politics in the Age of Ignorance,” which has a lengthy chapter on government business incentives and corporate relocations.
“Taxes and incentives actually rank pretty low on the list — fifth, sixth or seventh,” said Schultz, who studied surveys of business leaders who disclosed the reasons behind their location decisions. “At the top of the list are workforce availability, proximity to suppliers, and transportation links.”
Schultz said Connolly also appears to be re-making ConAgra into a younger and hipper company. He’s reviewing old brands with dowdy images with an eye toward either selling them or refreshing them to suit today’s consumers.
And that fits with Chicago, he said, home of vibrant advertising-agency businesses, marketing professionals galore and all of the energy and talent of one of the world’s major cities.
“It sounds like he himself is interested in living in a hipper place,” Schultz said. “This sounds like a major restructuring — jettisoning old products, old images, the whole company.”
Schultz said Omaha is a great city in its own right, with many big-city amenities, reasonably priced housing and friendly folks.
“But we have to admit Chicago has a much cooler image,” Schultz said. “Omaha has an outstanding quality of life, but it can’t compete with Chicago in the minds of millennials.”
And it’s people that age and younger that every big company needs working in its headquarters. At Creighton University, the business school can’t supply enough graduates to meet demand for people trained in the Xs and Os of business and financial work, said Tony Hendrickson, dean of the Heider College of Business.
“We graduate about 200 undergraduates a year,” Hendrickson said. “Last year, our placement rate was 99 percent. What that means is that each of our graduates has a choice of three or four job offers.”
Mintle, the Chicago chamber’s chief, noted the high concentration of college students in the Chicago area — a ready-to-go, educated labor supply — and what she said was the city’s “incredibly vibrant” downtown area.
“People want to be where the workers are now, and the workers right now are a newer generation,” she said. “Downtown Chicago’s got everything.”
Mark Arend, the editor of Site Selection magazine, said companies have different boxes they need to check when it comes to making a commitment to a long-term investment in a city. Site Selection covers the business of companies deciding where to locate their operations. It’s not one thing — a big tax break, for instance — that typically lures a company. Instead, he said, companies usually consider:
» access to certain higher education specialties.
» transportation infrastructure, including nonstop air service to a variety of destinations, along with international flights.
» quality of life for employees, which includes the cost of living.
» financial considerations, such as the tax structure — including corporate, property and income taxes.
Speaking at ConAgra’s annual shareholder meeting at the Joslyn Art Museum on Friday, Connolly didn’t say when next week he would make his announcement of serious changes.
But Connolly said the answer is “likely yes” that there will be jobs lost, that some departments will be moved to other parts of the country and that there will be a greater concentration of workers in Illinois.
Naperville, in suburban DuPage County, Illinois, is where a big portion of ConAgra’s consumer foods division already works administering the unit responsible for brands such as Peter Pan and Reddi-wip.
“Illinois is an important part of our history and will continue to be an important part of our journey,” Connolly said, speaking to shareholders. “It is likely there will be some increase there.”
ConAgra employs about 400 people in Naperville. It has been scouting for new offices in downtown Chicago capable of accommodating many more employees than that, according to news outlets in the area.
Chicago Mayor Rahm Emanuel’s office didn’t respond to requests for comment. On Friday, Crain’s Chicago Business, a magazine, published an article with the headline: “Is Chicago about to be a big company’s new headquarters?”
Omaha Mayor Jean Stothert said company officials told her no decisions have been made.
“As far as I know, they have no plans to leave Omaha,” Stothert said.
John Carpenter, president of Choose DuPage, the economic development organization in DuPage County, said he would welcome any expansion of ConAgra in the area, which includes the Naperville operation.
“But as to where they are expanding in Illinois, I don’t know,” Carpenter said. “I know they have already moved some people to downtown Chicago, but if they choose DuPage, they will have made the right decision.”
Chicago has been an aggressive recruiter of big businesses over the years, luring aerospace giant Boeing from Seattle in 2001; 31 companies have done the same since 2011, according to the mayor’s office.
Some solace for Omaha: Connolly said Friday the city “absolutely” will remain a sizable part of the company, and a “significant presence” will continue here.
David Brown, president and chief executive officer of the Greater Omaha Chamber of Commerce, said the city values its five companies on the Fortune 500 list of the country’s biggest. He said the chamber would work with ConAgra during any deliberations.
“We commend ConAgra’s vision to maintain a significant presence in Omaha — and we look forward to continuing our long-term, positive relationship,” he said.
It is clear Connolly is trying to remake the company to amp up shareholder value by reducing costs. While good for stock owners, it will be the source of tension, headache and frank family discussion at the kitchen tables of ConAgra workers for the next week or so.
“I want to acknowledge the uncertainty about our future, particularly here in Omaha,” Connolly said at the annual meeting, speaking to an audience of about 100 people. “Change is often not welcome. But we are going to make this company into a winner, and that will require meaningful change.”
He continued by posing a series of questions to himself: Will there be job reductions? Will parts of the company shift to Illinois? Will there be a “geographic reshuffling” of departments?
“Likely yes,” was his answer in each case.
Of its 31,500 employees around the world, ConAgra employs about 3,000 people between Omaha, Lincoln and Council Bluffs. How many of them will still be employed next week is the question now looming over them and their families.
|How they Compare|
|City population||427,872||2.7 million|
|Metro population||904,421||9.7 million|
|Fortune 500 companies||5||34 in Illinois|
|Nonstop airline departures/day||up to 72||1,020|
|Cost of living with 100 as the average||88.3||116.9|
|Residential property tax rate||2.20%||1.84%|
|Income tax rate on $100,000||6.84%||3.75%|
|State and local tax burden as percent of income||9.40%||10.20%|
|Sources: U.S. Census, airports, Tax Foundation|