Trends & Issues

Business Optimism Dips in Minnesota

Reversing a trend seen in the past three quarters, business leaders from across Minnesota expressed a drop in overall optimism about business conditions in the state, according to Twin Cities Business’ quarterly economic indicator survey.

Fewer business leaders are optimistic about the economy today compared to three months ago, according to Twin Cities Business’ most recent quarterly economic indicator survey.

Of the 490 business leaders who participated in the June survey, 33 percent said that they believe business conditions in Minnesota will improve during the third quarter (July through September)—down from 50 percent of respondents who entered the second quarter anticipating better times ahead.

The change in outlook follows three consecutive quarters in which there was an increase in optimism, and the dip in confidence appears to be primarily due to factors beyond Minnesota, including the European debt crisis.

One respondent wrote: “We thought this would be a good year financially, but with the euro crisis, things are not looking that good.”

Only 25 percent of the respondents said that they believe the national and global economies will improve during the third quarter—a 50 percent drop compared to respondents who were optimistic as they entered the second quarter.

While confidence in the Minnesota economy is down compared with the last quarter, it is still stronger than one year ago: Only 25 percent had expressed optimism for last years third quarter, and the percentage of those who believe business conditions will worsen this summer (15 percent) is down from 32 percent who voiced such pessimism a year ago.

Meanwhile, a smaller percentage of Minnesota businesses plan to increase their spending compared to investments during the prior quarter: 32 percent of businesses plan to increase capital expenditures compared to 38 percent in the second quarter, and only 20 percent plan to spend more on research and development, compared to 28 percent last quarter. Fifty-seven percent of the respondents expect to maintain the same levels of capital expenditure as the second quarter, and 72 percent will spend the same on research and development as they did in the second quarter.

Finding qualified employees remains a concern, with 29 percent of respondents expecting it to become more difficult in the months ahead—the same percentage of leaders who reported this concern heading into the second quarter. Only 6 percent of respondents believe finding qualified talent will be easier during the third quarter.

Meanwhile, Twin Cities Business’ last four quarterly surveys found that an average of 35 percent of respondents plan to increase their work force in the months ahead, and an average of 60 percent forecast increased profitability.

Additional information from the survey—including charts detailing which Minnesota industries are expecting to most actively hire, increase revenues, and increase investments in infrastructure this quarter—can be found in the August issue of Twin Cities Business, available online here and in print at select newsstands.

Twin Cities Business conducts this survey quarterly to provide a look at business planning and sentiment among leaders across all industries in Minnesota. Of the respondents to the most recent survey, 87 percent represented privately held companies and 13 percent represented public companies.

Another Local Food Truck Sets Up a Permanent Home

Foxy Falafel owner Erica Strait is planning a permanent storefront in the former Café Caribe space in St. Paul.

Local food truck Foxy Falafel reportedly plans to open a brick-and-mortar restaurant in St. Paul, becoming part of a growing trend of trucks expanding their brands to permanent restaurants.

Foxy Falafel owner Erica Strait plans to open the restaurant in the former Café Caribe space at 791 Raymond Street either later this month or in early August, according to a Star Tribune report.

In addition to items that Strait serves from her truck, which include beet and curry falafels, the restaurant will reportedly feature some new items, such as turkey shawarma, merguez sausage, chicken gyro meatballs, and house-made sodas and kombucha, a type of fermented tea.

The restaurant will reportedly start out just selling lunch and then introduce dinner and weekend brunch when the food truck and farmers market season ends. Foxy Falafel is typically parked at farmers markets, but Strait will begin parking the truck in front of the new restaurant location on Fridays, according to the Star Tribune.

Other local trucks that have expanded into permanent restaurants or have plans to do so include Smack Shack, World Street Kitchen, Chef Shack, and Turkey to Go.

Learn more about this growing trend in a story in the June issue of Twin Cities Business.

—Nataleeya Boss
(nboss@tcbmag.com)

General Mills Opposes Marriage Amendment

A company executive said that General Mills doesn’t typically take positions on ballot measures, but “this is a business issue that impacts our employees.”

Golden Valley-based General Mills, Inc., has publicly opposed a proposed amendment to Minnesota’s constitution that would ban same-sex marriage—and it joins just a handful of local companies and executives in speaking out about the issue.

In a Thursday post on the company’s blog, Ken Charles—General Mills’ vice president of global diversity and inclusion—called the proposed amendment “an initiative that makes our state less inclusive and reduces our company’s ability to attract and retain talent.”

In November, Minnesotans will vote on the amendment, which would change the state constitution to define marriage as between one man and one woman.

Minnesota companies have mostly remained silent about the amendment. Until now, Little Canada-based St. Jude Medical, Inc., was the only large company to oppose it—and no major Minnesota corporations have gone on record to support it.

“While General Mills doesn’t normally take positions on ballot measures, this is a business issue that impacts our employees,” Charles said in his post. “I am proud to see our company join the ranks of local and national employers speaking out for inclusion. We do not believe the proposed constitutional amendment is in the best interests of our employees or our state economy—and as a Minnesota-based company, we oppose it.”

According to Charles, General Mills CEO Ken Powell on Wednesday addressed 400 local gay, lesbian, bisexual, and transgender professionals and announced that the company opposes the amendment.

Although Charles made clear that the company is firm in its stance, he also acknowledged that the marriage amendment is a controversial issue.

“Obviously, there are strongly held views on both sides,” Charles said. “We acknowledge those views, including those on religious grounds. We respect and defend the right of others to disagree. But we truly value diversity and inclusion—and that makes our choice clear. General Mills’ mission is Nourishing Lives. Not just some. But all.”

The National Organization for Marriage—a major advocate for the marriage amendment—has sent letters to the state’s 50 largest companies and the Minnesota Chamber of Commerce, asking them to remain neutral on the marriage issue.

Although Target hasn’t taken a stand on the marriage amendment, it recently launched an online promotion that supports gay pride. Last month, the Minneapolis-based retailer began selling T-shirts with gay-friendly themes online—and it has pledged to donate the full purchase price of each one, up to $120,000, to the Family Equality Council.

A National Organization for Marriage executive on Thursday criticized the fact that Target is making the donation but “still has the nerve to say they are not taking a position on the marriage amendment itself” and argued that Target has taken a “patronizing and incoherent stance.”

Last month, shortly after President Obama voiced support for same-sex marriage, former Medtronic CEO Bill George urged local business leaders to speak out against the marriage amendment, saying that their companies stand to lose a great deal if it passes.

Local CEOs Marilyn Carlson Nelson, John Taft, and Wheelock Whitney have also publicly opposed the amendment—as has Vance Opperman, who sits on the boards of TCF Financial Corporation and Blue Cross and Blue Shield of Minnesota. Opperman co-owns a holding company under which Twin Cities Business’ parent company, MSP Communications, operates—and he’s MSP Communications’ CEO. To read his May column in Twin Cities Business, “’Til Constitution Do Us Part,” click here.

Food giant General Mills is among Minnesota's 10 largest public companies based on revenue. To read the company’s full blog post addressing the marriage amendment, click here.

—Christa Meland
(cmeland@tcbmag.com)

Target Launches Online Promotion Supporting Gay Pride

On Sunday, the Minneapolis-based retailer began selling T-shirts with gay-friendly themes online—and it has pledged to donate the full purchase price of each one, up to $120,000, to the Family Equality Council.

Target Corporation recently launched an online promotion that supports gay pride.

On Sunday, the Minneapolis-based retailer began selling T-shirts with gay-friendly themes online—and it has pledged to donate the full purchase price of each one, up to $120,000, to the Family Equality Council. The T-shirts will be available through June 30, or while supplies last.

The promotion comes almost two years after Target gave $150,000 to MN Forward, a political organization that supported then-gubernatorial candidate Tom Emmer, who opposed gay marriage. Shortly after making the donation, Target received significant backlash from both employees and members of the GLBT community. Target CEO Gregg Steinhafel later apologized for the company’s actions, and Target revised its policy on political donations.

Target spokeswoman Molly Snyder told Twin Cities Business that the previous donation and the current promotion are not related—and she indicated that the company’s current online promotion was a grassroots effort.

“Over the past year, we heard from our team members and guests that they’d like to see an assortment of Pride merchandise available at Target,” Snyder said via e-mail. “A team of people from Target’s Lesbian, Gay, Bisexual, Transgender, Ally (LGBTA) Business Council and across the organization came together to bring this program to life.”

Target is selling 10 different T-shirts, two of which were designed by well-known singer Gwen Stefani. Her Target-exclusive clothing line, Harajuku Mini for Target, has been in stores since November. Stefani’s two Pride T-shirts picture a person’s face and a rainbow and display the words “Love is love.”

Snyder pointed out that Target has long supported the Washington, D.C.-based Family Equality Council, which supports gay, lesbian, bisexual, and transgender parents in the United States. In 1999, the retailer was a founding partner of Twin Cities-based Rainbow Families—which merged with the Family Equality Council in 2008. According to Snyder, Target has awarded “thousands of dollars in grants” to the council over the past decade.

“Target’s commitment to the LGBT community, including our team members and guests, is unwavering,” she added. “This [promotion] is about bringing our guests and team members the products they want while being able to support families through the Family Equality Council.”

The T-shirt promotion coincides with gay pride festivities that are taking place next month—including the Twin Cities Pride Festival, scheduled for June 23 and 24.

It also comes at a time when gay marriage is on the minds of many. On the heels of North Carolina’s vote to pass a constitutional amendment banning same-sex marriage, President Obama two weeks ago voiced support for same-sex marriage. In November, Minnesotans will vote on whether to amend the state constitution to define marriage as between one man and one woman.

Few local companies or business leaders have spoken out on the issue, and Target hasn’t taken a public stand on the proposed amendment, but former Medtronic CEO Bill George recently urged local executives to speak out against the amendment, saying that their companies stand to lose a great deal if it passes.

“Defeating this amendment is essential not only to provide civil rights, but also to ensure that Minnesota is open and welcoming to everyone—regardless of religion, gender, race, national origin, or sexual orientation,” George said in an opinion piece that appeared in the Star Tribune.

—Christa Meland
(cmeland@tcbmag.com)

Economic Optimism Increases Across Minnesota

Half of Minnesota businesses expect the state economy to improve in the quarter that ends in late May—and 40 percent plan to increase headcount during that period, according to Twin Cities Business’ quarterly economic indicator survey.

Fifty percent of Minnesota businesses recently polled expect the state’s economy to improve in the quarter ending May 30—up from 39 percent in the previous quarter, and double the percent that voiced such optimism only six months ago, according to Twin Cities Business’s quarterly economic indicator survey.

Of 888 businesses from across the state participating in the survey, 49 percent also said they thought national and international economic conditions would improve this quarter, up from only 32 percent that expressed such views about the first quarter of 2012.

The increased optimism comes as Minnesota businesses invest more in their operations. Planned investments in capital outlays and research and development have risen in each of the last three quarterly surveys. For the current quarter, 38 percent of Minnesota businesses plan to increase their capital outlays, while 28 percent plan to boost research and development spending.

Optimism in the economy also continues to stimulate hiring. The survey found that 40 percent of responding businesses plan to add to their full-time employment levels this quarter—up from 37 percent that planned to increase headcount during the first quarter, and 29 percent during the last quarter of 2011.

The only troubling sign from the survey is that 29 percent of respondents expect it to be more difficult this quarter to find qualified talent. This marks the third consecutive quarterly increase in the percentage of companies expressing concerns on this issue.

Additional information from the survey—including a list of Minnesota industries most actively hiring this quarter—can be found in May’s edition of Twin Cities Business, online now at TCBmag.com, and in print at select newsstands.

Twin Cities Business conducts this independent survey quarterly to provide a look at business planning and sentiment among leaders across all industries in Minnesota. It is the only survey of its kind in Minnesota.

Tom Petters’ First Interview from Prison: Twin Cities Business Exclusive

Tom Petters gives his first interview from prison, speaking with Twin Cities Business Editor in Chief Dale Kurschner.

0512-PettersLandingPgHS
       Tom Petters illustration
           by Dale Stephanos

Tom Petters was once one of Minnesota's most promising entrepreneurial success stories. He saved nearly 2,000 jobs and the businesses of Fingerhut, Sun Country Airlines, and Polaroid.

Today, he has a bank account balance averaging $100 a month and lives with a roommate in Cellblock C-1 of the United States Penitentiary in Leavenworth, Kansas, where he is expected to eventually die: For his role in a $3.65 billion fraud scheme involving his company, Petters Companies Inc., Petters was sentenced to 50 years in prison with no chance for parole.

After more than three years of silence, Petters explained in a five-hour interview with Twin Cities Business Editor in Chief Dale Kurschner how the nation's third-largest Ponzi scheme occurred on his watch.

Here, for the first time, is the story of what happened to the once-upon-a-time, fast-rising Minnesota business star—from his perspective. Click here to read Twin Cities Business’ May cover story, “Plausible Deniability?”

Read the Q&A with Petters by clicking here, or to read about Kurschner’s experience in Leavenworth, read his editor’s note from the May issue here.

Comments? Submit a letter to the editor at edit@tcbmag.com.

 

The Latest Petters News:

Petters Petitions Supreme Court to Review His Case

The Main Cast of Characters:

Info on Petters Co-Conspirators Deanna Coleman, Michael Catain, Larry Reynolds, Frank Vennes, Jr., and Robert White

House Committee Rejects Vikings Stadium Plan

Representative Morrie Lanning, the sponsor of the House stadium bill that would use public money to fund a new $975 million Vikings stadium, said after the vote that “somebody will have to pull a rabbit out of a hat for this thing to stay alive.”

A House committee on Monday voted 9 to 6 to reject a Vikings stadium funding bill, perhaps ending the $975 million stadium plan’s chances of gaining legislative approval this year.

The House Government Operations and Elections Committee rejected the funding plan, with five Democrats and four Republicans voting in opposition of the stadium bill, which calls for the Vikings to cover $427 million of construction costs, while the state and Minneapolis would contribute $398 million and $150 million, respectively.

The nonpartisan House Public Information Services said Monday that “a Hail Mary pass may be about the only chance the Minnesota Vikings have left to get a stadium bill passed this session,” which wraps up in two weeks.

House Public Information Services quoted Representative Morrie Lanning of Moorhead, the sponsor of the stadium bill, as saying, “Somebody will have to pull a rabbit out of a hat for this thing to stay alive.”

Governor Mark Dayton on Tuesday conceded that the deal may not happen until next year, but he said he’s confident it will get done, according to a report by the Washington Post. And Minneapolis Mayor R.T. Rybak issued a statement Tuesday saying that the bill remains "the best plan for Minneapolis and the best plan for Minnesota."

"I am confident that legislators will want to create the jobs and benefits that the bill provides for all Minnesotans,” Rybak added.

Before voting against the bill on Monday, Representative David Hancock, a Republican from Bemidji, expressed concern about the expansion of gambling in the state—a key sticking point in the stadium debate. The plan calls for using electronic pull tabs, electronic bingo, and “tipboard” gambling, games of chance that would reportedly be tied to professional sports, to pay for the state’s share of the cost.

Representative Bev Scalze, a Democrat from Little Canada, said that the proposed gambling revenue would be better spent paying off some of the $2.4 billion debt that the state owes to its education system.

Representative Joyce Peppin, the House committee chairwoman and a Republican from Rogers, was among those who voted against the bill. Prior to the final vote on Monday, she also successfully amended the bill to remove language that exempted the stadium project from a Minneapolis charter, which requires a public vote when more than $10 million is spent by the city on a sports facility.

According to a report by the Star Tribune, that move alone may have represented a major setback for the stadium legislation, although with the bill rejected, it is unclear whether the action will ultimately result in a vote.

The Minneapolis newspaper also reported that the House committee approved a second amendment before its final vote, rejecting the plan to divert excess Hennepin County sales tax funds currently being used to pay for Target Field.

The Star Tribune pointed out that only one of the House panel’s six Democrats voted in favor of the bill, even though Dayton (a Democrat) has been a proponent of the stadium plan.

The Pioneer Press reported that representatives of labor groups and executives from Target, U.S. Bank, and other corporate organizations testified on behalf of the bill during Monday’s hearing.

Vikings Vice President of Public Affairs and Stadium Development Lester Bagley reportedly “spoke with a frustrated tone” following the vote, saying, “This sends a strong message to the Vikings and the NFL.”

According to House Public Information Services, Bagley declined to provide an ultimatum regarding when the Vikings might depart Minnesota. The team has indicated in the past that it might exit the state if a new stadium isn’t built.

A Senate panel considered its own stadium bill last month but didn’t take action because there weren’t enough votes to approve the project. For the stadium plan to regain hope, it likely would need to be revisited by that Senate panel, according to the Star Tribune.

—Jake Anderson
(janderson@tcbmag.com)

Study: Women Are Successful When Men Are Scarce

A study conducted by researchers at the University of Minnesota and the University of Texas at San Antonio found that when there are fewer single men, the percentage of women in high-paying careers increases.

Turns out, one way to help women be successful is to keep them away from men.

A study conducted by the University of Minnesota and the University of Texas at San Antonio (UTSA) found that when men are scarce, women delay having children and instead pursue high-paying careers. Findings of the study were released Monday.

“Most women don’t realize it, but an important factor in a woman’s career choice is how easy or difficult it is to find a husband,” Kristina Durante, assistant professor of marketing at the UTSA College of Business, said in a statement. “When a woman’s dating prospects look bleak—as is the case when there are few available men—she is much more likely to delay starting a family and instead seek a career.”

The study’s researchers examined the ratio of single men to single women in each U.S. state and in Washington, D.C., and found that as bachelors became scarce, the percentage of women in high-paying careers increased. Women in such careers also have fewer kids when they finally decide to start a family, the study found.

Researchers also discovered that when women attending college are led to believe that there are fewer men than women on campus, they become more motivated to pursue ambitious careers rather than start a family.

“A scarcity of men leads women to invest in their careers because they realize it will be difficult to settle down and start a family,” Vlad Griskevicius, a coauthor of the study and assistant professor of marketing at the University of Minnesota’s Carlson School of Management, said in a statement. “In fact, the strongest effects were found for women who are least likely to secure a mate.”

But the irony is that it only gets harder for women to find husbands as they become more educated and earn higher salaries, according to Durante.

“This is because a woman’s mating standards keep increasing as she becomes more educated and wealthy, which further decreases the number of suitable mates," Durante said. “More than ever before, modern women are increasingly forced to make tough choices, such as choosing briefcase over baby.”

A recent report produced by St. Catherine University and the Minnesota Women’s Economic Roundtable found that out of 808 board seats that were available in 2011 at the state’s 100 largest public companies, women held only 115. To read that full report, click here.

To learn what area leaders are doing to tackle the gender gap, read Twin Cities Business’ April feature story “Glass Breakers” by clicking here.

—Nataleeya Boss
(nboss@tcbmag.com)

Despite St. Jude Protest, Medical Journal Defends Article

St. Jude Medical wants a recently published article retracted, calling it a “biased analysis.” But Douglas Zipes, managing editor of the online journal that published the article, said that’s “not going to happen.”

Despite St. Jude Medical’s request that a recent article by Minneapolis cardiologist Robert Houser be retracted, the online journal that published it, Heart Rhythm Journal, has reportedly said it will not remove the article.

Little Canada-based St. Jude issued a press release earlier this week claiming that the article, which analyzed deaths tied to defibrillator leads made by it and Fridley-based rival Medtronic, contains “substantial errors” and a “biased analysis.”

Douglas Zipes, managing editor of the journal and a professor at the Indiana University School of Medicine, on Tuesday told the Star Tribune that Hauser’s work had been extensively peer-reviewed before it was accepted for publication. Asked about a retraction, he said, “It’s not going to happen.”

The article analyzed deaths attributed to St. Jude’s Riata and Medtronic’s Quattro Secure leads. Leads are wires that connect defibrillators to the heart.

In a press release, St. Jude said its research, which used the same database as Hauser, found 377 reports of deaths involving Medtronic’s Quattro Secure leads—significantly more than the 62 reported in the article. The company said it also found 74 deaths related to its products, compared to Hauser’s 71.

According to the Star Tribune, Hauser has defended his conclusions, and Medtronic told the Minneapolis newspaper that it has looked at the data and concluded that Hauser’s findings about the Quattro lead appear to be accurate.

To learn more about the article and the controversy surrounding it, read the full Star Tribune story here.

—Jake Anderson
(janderson@tcbmag.com)

Supreme Court Sides with Mayo in Patent Battle

The court determined that Prometheus’ blood test involved naturally occurring phenomena, and its patents are therefore invalid; the ruling is expected to have broad implications in the scientific community.

The Rochester-based Mayo Clinic on Tuesday announced that the U.S. Supreme Court ruled in its favor in a case against Prometheus Laboratories, Inc.

The case dates back to 2004. At issue was a blood test developed by San Diego-based Prometheus that helps physicians determine the appropriate dosage for thiopurine, a drug used to treat gastrointestinal illnesses. Mayo at one time purchased Prometheus’ test but stopped buying it in 2004, when its own researchers created an improved test, the company said.

Prometheus subsequently sued Mayo for patent infringement. A district court ruled in Mayo’s favor, saying that the patents at issue involve naturally occurring phenomena and therefore cannot be patented. Following an appeal, a federal court found that the patents were valid and reversed the earlier decision.

Mayo then filed a petition, and the Supreme Court’s recent ruling reversed the federal court’s decision. The Supreme Court’s order states that Prometheus’ test involves “well-understood, routine, conventional activity previously engaged in by researchers in the field.”

Mayo Clinic President and CEO John Noseworthy said in a statement that Mayo “chose to pursue this lengthy litigation process because we believed it was in the best interests of our patients.”

“This decision concerns the value of delivering high quality patient care in a timely manner and at an affordable cost,” he said.

According to a report by the Star Tribune, the court’s decision has broader implications than how it relates to a blood test.

The ruling essentially means that companies can’t patent a medical or scientific idea that depends too much on natural laws, and the case has drawn the attention of hospitals, researchers, pharmaceutical companies, software developers, inventors, and legal observers, the Minneapolis newspaper reported.

Two partners in the intellectual property and appellate groups of law firm Faegre Baker Daniels LLP even released a video, in which they analyze how the decision may impact future patent applications and litigation.

Noseworthy told the Star Tribune that the ruling will spur innovation, but patent lawyer Eric Guttag, who filed a legal brief in support of Prometheus’ position, argued that the decision will impede medical innovation because large institutions like Mayo will be able to model their practices after those invented by smaller companies, without compensating the smaller businesses.

—Jake Anderson
(janderson@tcbmag.com)