As long as we promote and encourage the growth of companies that get their start in Flyover Country the economic gains for our region will keep on coming. Often the benefits will be offset by the involvement of coastal startup or exit capital, because we're a long way from being able to completely bootstrap our own continued rise. But there are great benefits, nonetheless.
Take the recent examples of just three companies that, each in different ways, represent encouraging signs about the future of Flyover Country.
Hershey just announced that it will acquire Dot’s Homestyle Pretzels and its contract manufacturer for a total of $1.2 billion in a move that Hershey CEO Michele Buck described as crucial to the growth strategy of a company that’s been known mainly for chocolate for 127 years.
Of course, Hershey is famously headquartered on the East Coast in Hershey, Pennsylvania. And Dot’s is an unusual – but let’s hope prototypical – success story in Flyover Country. A company that was founded just a decade ago by Dorothy Henkel in Arizona and nurtured in North Dakota, lightly spicy Dot’s have become America’s fastest-growing pretzel brand almost overnight.
We’ll Keep Making Them
And now Hershey is buying the company not only with plans to maintain Dot’s headquarters in North Dakota but also to run three plants in Indiana and Kansas that are owned by the contract manufacturer for Dot’s, Pretzels Inc. Hershey is likely to add manufacturing demands in Flyover Country with new products such as chocolate-covered pretzels.
Also consider Rivian. With roots and in initial operations in Michigan, the electric-truck maker has benefited from initial capital from Ford – but also from Amazon and the typical lineup of West and East Coast VCs.
In the financial marketplace, the company tried to catch some draft from Tesla as a maker only of all-electric vehicles. It worked: Rivian went public earlier this month at a market valuation of more than $100 billion, making it the world's biggest IPO of 2021. The company has only produced a relative handful of its sleek-looking e-truck models, and those mostly for employees. But founder RJ Scaringe seems to be following closely enough in the groove laid down by Elon Musk.
Now Rivian is headquartered in Irvine, California. Its biggest asset at the moment is a deal with Amazon for 100,000 e-trucks to be made and delivered over the next few years. And its initial deal with Ford to develop a vehicle jointly has fallen apart just recently. But that’s mainly because Ford has come so far in its own EV development that it no longer needs Rivian, in which it retains an ownership share.
And, of course, Rivian is making all of its trucks for now in Normal, Illinois, in an abandoned Mitsubishi assembly plant that it retrofitted. Next, Rivian wants to build another plant, and it seems that a Flyover Country location, probably in Georgia, is the most likely site.
New Source of Customers
Finally, consider Kohl’s. The trailblazing retailer headquartered in suburban Milwaukee suffered greatly during covid, but under CEO Michelle Gass has been making a strong recovery so far this year. Floor traffic and revenue gains are back – and, most interestingly, Kohl’s has gotten a big boost from a new partnership with the Sephora beauty-care chain, which is part of the France-based LVMH luxury group with Sephora’s U.S. headquarters in San Francisco.
Betting that Sephora’s appeal among young consumers would help draw a new and somewhat upscale crowd to its price-oriented business model, Kohl’s has begun to make lots of room in many of its outlets for a Sephora store-within-a-store and has even given Sephora marquee presence with signs outside its stores.
Voila! Kohl’s sales were up by about 15%for the third quarter, and Gass credited the Sephora partnership significantly. More than 25% of people making Sephora purchases are new to its stores, Kohl’s said. Kohl’s is quickly adding Sephora shops to hundreds more of its stores.
The point is that Flyover Country remains woefully inadequate in terms of being able to finance our own economic evolution, while more than 80% of venture capital still comes from three coastal states: California, Massachusetts and New York. And it will take a long time to chip into that ratio even a little bit.
So in the meantime, folks in our region can benefit greatly from continuing to ideate and build our native companies, maintaining and growing the jobs and investments in Flyover Country. And we’ll gladly accept the recognition and capital and cooperation from coastal entities to assist in the process of making the heartland everything it can be.