An old-school industry fights to bring in talent to revive growth
By: BRIGID SWEENEY
After years in which the consumer packaged-goods world’s existential crisis prompted cost-cutting, layoffs and a talent exodus, legacy companies like Tyson and Conagra are trying to lure top-level corporate talent to guide their newfound commitment to innovation. Other big Chicago companies, like McDonald’s and Walgreens, are also hunting for the same talent as they continue their own face-lifts.
“The war for talent is consistently the top issue I hear when I talk to senior executives,” says Greg Portell, who leads consultant A.T. Kearney’s consumer and retail practice in Chicago.
Shiny new downtown offices (Exhibit A: McDonald’s) and fresh leadership preaching the gospel of innovation certainly get attention. “People love to build things, so companies that can perfectly convey their transformation story have an advantage in a highly competitive (labor) market,” says Rona Borre, founder of Instant Alliance, a recruiting firm in the Loop that has staffed new digital offices for several legacy Chicago companies. “Every big company is downtown now. Every company offers flextime. It’s not just about compensation. It comes down to what’s the company mission and how can the candidate have impact.”
But after lean years in which consumer-goods veterans reconsidered their career paths and joined newly minted MBAs in moving to smaller food and beverage startups or higher-growth industries like technology, headhunters say the migration back to Midwest stalwarts is a work in progress.
Executives will not soon forget the bloodshed after Brazilian private-equity firm 3G merged Kraft, then headquartered in Northfield, with Heinz in 2015 and began its aggressive focus on the bottom line. (A 3G refrain, attributed to co-founder Carlos Alberto Sicupira: “Costs are like fingernails. You have to cut them constantly.”) Since 2013, more than 10,000 people have been laid off from Kraft and Heinz. After slashing 700 corporate Kraft jobs—more than a third of its Northfield workforce—after the merger, the company has continued smaller rounds of layoffs as it settled into new Loop headquarters.
That shock wave is related to a larger problem: Young, affluent consumers aren’t interested in boxed mac and cheese, Big Macs or frozen pound cakes. Everyone’s trying to modernize and grow through acquisition, but the transformations remain in early innings, and many companies are still trying to shake off stodgy reputations.
Nearly every large food company here has recently started some sort of incubation lab or acquired of-the-moment brands. After so many layoffs, Kraft Heinz in March launched Springboard, its vehicle for partnering with small organic, natural and specialty food brands. Mondelez, meanwhile, said in May it would spend $500 million to buy Tate’s Bake Shop, a line of premium cookies, three years after acquiring gluten-free brand Enjoy Foods. But analysts point out that these acquisitions across the food industry haven’t necessarily proved successful as customers are constantly bombarded with ever-newer, ever-more-niche products. A June report by investment bank Bernstein predicts a shake-out period “similar to what has happened in the craft beer market.”
Likewise, McDonald’s is rolling out sleek new stores and fresh-beef burgers, but it still sells fast food many millennials won’t touch. Conagra, maker of old-school brands including Swiss Miss and Marie Callender’s, moved to Chicago from Omaha in 2016. Under new CEO Sean Connolly, it has spun off legacy businesses while acquiring modern products like Rick Bayless’ Frontera line of chips, salsas and Mexican meals. Last month, it said it would buy Pinnacle Foods in a blockbuster $10.9 billion deal. But it remains a packaged-food business in an age when consumers can have fresh produce and chef-prepared meals delivered to their doorsteps in an hour.
As such, many executives who’ve been wowed by cutting-edge food, medtech and direct-to-consumer companies in Silicon Valley and New York over the past six years—as well as similarly compelling digitally native, direct-to-consumer fashion and retail lines—aren’t quite ready to move to Chicago to work on brand management strategy for packaged-food companies, says Betsy Tilkemeier, founder of Winnetka-based executive-search firm North Line Partners. Major players like Facebook and Airbnb, as well as smaller digital brands including Everlane, Glossier and Casper, “have been attracting people who used to go into management consulting and (consumer packaged goods),” she says, “and it’s hard to go back to less entrepreneurial environments.”
All those coastal companies are heaped into a growing pile of firms across industries and geography that compete for the same talent. Everyone from food companies to medical device firms now want execs with predictive analytics chops, as well as the ability to translate that data for the executive team. “The set of competitors for talent is much more diverse than it has traditionally been,” says Portell.
Private-equity firms that have bought lagging brands from big food companies offer yet another attractive option for Chicago-area execs hoping for a big payday. On July 9, East Coast private-equity firm Brynwood Partners said it would establish a new Chicago-based company to run the Pillsbury line of baking products it bought for $375 million from J.M. Smucker. And even non-Chicago companies like Kellogg’s, the Battle Creek, Mich., food giant, and Kimberly-Clark, the multinational paper-products company founded in Neenah, Wis., operate increasingly large Chicago offices to attract talent.
Meanwhile, traditional career paths have blurred and big consumer-products firms can no longer rely on company veterans who climbed the brand-management ladder for decades. “We hear executives lament the loss of that classic training while hearing at the same time that it’s not relevant anymore,” Portell says. “The brand manager role of 20 years ago doesn’t work anymore, because the way these companies are set up is vastly different and the consumers to whom they’re marketing are also vastly different. But when you’re running a multibillion-dollar business, you don’t want to turn it over to someone with no industry training. You don’t hand the Porsche keys to a 16-year-old.”
The sweet spot—executives who can embrace disruption without risking these companies’ outdated-but-still-huge businesses—can be tough to find.
Compounding the problem: record-low unemployment rates. “My clients are only looking for superstars,” says Tilkemeier. “There’s more demand than supply, so candidates are more expensive and are looking for significant advancement in order to make a move.”
As the competition increases, headhunters say Chicago’s attributes—a cosmopolitan restaurant and cultural scene combined with livability not found in New York or San Francisco—are beginning to lure next-generation leaders from the coasts. Particularly in Silicon Valley, where 2,000-square-foot homes sell for $5 million, executives in their mid-30s who didn’t hit a Google-style jackpot feel squeezed. They may be working for name-brand startups like Uber or Stitch Fix, but they haven’t cashed in on an IPO and can’t afford a home as they begin families.
“If the money hasn’t materialized and you’ve worked in a startup environment for 12 years, you’re exhausted and you can’t afford to buy a one-bedroom apartment,” says Tilkemeier. “I think we’re about 12 months away from really seeing it, but I do think people are looking at Chicago with fresh eyes.”
From: CRAIN’S Chicago Business