Coors’ cut-and-run is a final capitulation, but also the wrong bet on the future

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Ten years ago, Coors’ stunning cut-and-run from Denver would have been analogous to Microsoft leaving Redmond, Apple leaving Silicon Valley, or Ford leaving Detroit. We’d have been left at a loss for words.

Today, things are different. Today, the move is no more than a final capitulation to a regional craft brewing industry that’s buried Coors under an avalanche of innovation, and to Peter Coors’ hubris and personal failure to build a bridge to entrepreneurs who deep down respected the Rocky Mountains’ first craft brewer, Adolph Coors.

It’s also a strategic blunder that will cost Molson Coors.

According to the Denver Post, Coors is leaving Denver because it can tap marketing talent in Chicago that’s unavailable here, talent from midwest business schools that apparently plies the hallways of the Fortune 500 food and beverage giants from Chicago to Montreal, the Canadian HQ for the brewing conglomerate.

But last I checked, the innovation coursing through food and beverage is emanating from entrepreneurial, early-stage ecosystems in cities like Denver — not from a corner office at General Mills or Miller or Molson Coors. Legacy, industrial food and beverage brands have shifted gears. University of Chicago grads are great, but today, companies are focused on acquiring innovation. As Coors leaves Colorado, a dozen other companies are setting up shop here to tap into the risk-taking creativity on display in all corners of the economy.

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Coors wanted no part of that scene, at least in the end. Last January I wrote about a MillerCoors blog post, “Brewery Taproom Visits Dragging Down Sales at the Corner Bar,” an empty cheap shot at craft competitors. I expected more. I expected an iconic brand to lead from the front.

Luckily, manufacturing is full of companies that are leading — leading by reimagining manufacturing in a dozen industries in response to customers, to employees, to the communities that today value their business. The trend to make more things closer to where they’re inspired or designed, to where they’re purchased and used, has only been accelerated by globalization, by companies chasing the promise of cheaper, easier — or smarter. We’re still finding some of the best things don’t come easy.

Manufacturing’s challenges are unique — as a manufacturer like Coors has discovered. The challenge of selling a Coors Banquet to a Millennial consumer is similar to the challenge of a selling that same person on a manufacturing career.

But as Coors’ retreats from its fight, we’re joining this battle. It’s a better bet. We’re all in.

Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com.

The ongoing quest to publicize the generational excellence of the people and companies in manufacturing, in the most entertaining and meaningful way we know how, is underway: the fifth annual Colorado Manufacturing Awards. Nominate your company, your customer or peer, your mentor or someone you respect. As an iconic manufacturer departs, let’s celebrate the economy that it leaves.

As Black Diamond bolts to China, red lights should be flashing.

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Last month I acknowledged I’d been overly optimistic about the outdoor industry’s appetite to bring manufacturing back to the U.S. Just days later, Utah-based Black Diamond stunned employees by announcing 70 layoffs as part of plans to move manufacturing back offshore, reversing a decision made in 2015 to reshore manufacturing to Utah.

Bad timing.

As disappointed as former employees and Utah’s business community must be, the reaction from national voices in outdoor industry has been predictably muted. There persists a quiet resignation that the products of outdoor recreation have to manufactured anywhere but here. It’s an ethos shaped primarily by the reality of apparel manufacturing, where the desire to cut and sew domestically runs headlong into an immovable labor challenge. We simply don’t have the requisite production workforce to make as many soft goods in the U.S. as brands would like.

But BD isn’t moving apparel production back offshore. They’re moving metal fabrication, for products designed and engineered in Utah. It’s precision fabrication that’s often located in the U.S. in other industries; work that may be more expensive than in Asia but seems feasible here.

Black Diamond president John Walbrecht doesn’t see it that way, explaining in an SNEWS interview:

“[T]his isn’t driven solely off financial decisions. It’s the ability to gain access to technology that we don’t have. I don’t have those machines, I don’t have the technology, I don’t have the manufacturing capabilities or the knowledge to do that. In some cases, there’s one that does. We had to turn to facilities in the world that had this technology. As an example, we ended up in an electric automobile facility in order to develop the JetForce avalanche backpack.”

If Walbrecht’s search was exhaustive — and here’s more of his explanation — it’s a hard slap in the face for U.S. manufacturing. America’s manufacturing opportunity is to extend its design and engineering acumen to new manufacturing technologies onshore. It’s a discernible trend in the manufacturing ecosystem — so much so we’re adding a design-centered Innovation Award to the 2020 Colorado Manufacturing Awards.

BD’s rationale surprised local manufacturing professionals I contacted. One founder of a design-to-manufacture firm in Denver surmised:

“The move . . . doesn’t make a lot of sense to us. They have been making carabiners in the U.S. since 2015 because of quality issues and recalls from products made in their Chinese factory. . . . I see nothing in their new products that use any different machinery, unless the type of carabiners that they are designing are something special and new that hasn’t been shown to the public yet. Sounds like the U.S. manufacturing was just a stopgap to address production issues to me, and now they have it sorted so back it goes overseas where the labor is cheap.”

Another put it this way:

“I would interpret that Black Diamond did not have a staff (and/or perhaps management) with the expertise needed to advance their design, nor the equipment to run it efficiently in-house, so they believed it would be more expedient and less capital-intensive to outsource rather than reinventing the wheel. Taiwan is certainly cheaper, which may have been more of a driving force than Black Diamond is letting on.”

As difficult the decision — and for Utah’s outdoor industry sector, it’s yet another punch in the gut — Walbrecht is in good company. He’s insulated from industry backlash — and from criticism from D.C. Black Diamond ain’t Harley-Davidson.

I’m not as sanguine. I was also told, “Surely this does not mean that the proper American company could not have done just as well or better.”

This was a financial decision. To fabricate here is more expensive for some of BD’s outdoor products. But it shouldn’t deter communities that are home to outdoor industry companies from developing a manufacturing supply chain to support brands that want to manufacture their products where they’re inspired, designed, and engineered. America can be competitive in outdoor industry products. That BD chose China, and not Utah, should again be a call to arms.

Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com.

Ordered to leave China, American manufacturers must shoot for the moon

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President Trump’s import taxes have always been a tactic lacking a strategy. As such the possible outcomes are limited. If the goal is to end unfair and unreciprocated access to the U.S. market, tariffing the import of Chinese-made shoes, or European cars, is arguably an effective tool.

But if the goal is also to encourage companies to make more stuff in America, tariffs aren’t a remedy. Companies operate in China for a reason. In many cases the means of production reside there, not here. Moreover, as Harry Moser at the Reshoring Initiative points out, “uncertainties from the tariffs will cause 2019 reshoring and FDI (foreign direct investment) to be moderately below the 2018 level.” Tariffs may actually be slowing down the reshoring of manufacturing jobs from China to the U.S.

Now that the President is ordering American companies out of China and production reshored, all eyes are on the domestic supply chain. But if U.S. companies are to actually make more stuff in the U.S., two things must happen.

First, we need to agree that the patient is sick.

Today we labor under the assumption that, in some parts of the U.S., we’re a manufacturing superpower. The past few years, I’ve hashed out the results of Ball State University’s national manufacturing report card, which this year again basically flunked the manufacturing economies of the West. California was an exception in the 2019 Report, improving from a D to a C.

At the same time, the Rust Belt manufacturing economies in states like Indiana, where the report’s sponsor, Ball State University, is located, get As and Bs every year. The difference? Manufacturing employment per-capita. It’s a metric that reflects decades of legacy manufacturing.

Why, then, haven’t we witnessed a tsunami of American brands returning to the U.S. to set up shop in Kentucky, Michigan, or Ohio? I wrote last month of Black Diamond’s decision to return to Asia after reshoring manufacturing in 2013. Why not Indiana? Easy answer. Even in U.S. communities that support high concentations of manufacturing jobs, often the ecosystems lack the skilled labor and advanced processes and machinery that comprise the modern, integrated supply chains found in China.

Are there pockets of highly advanced manufacturing operations in the U.S.? Of course. But scale is lacking, in part because American companies have invested in offshore operations, for decades.

When we acknowledge that U.S. companies can’t immediately walk away from investments in offshore manufacturing, but should redirect resources in the future, we’ll pursue a second imperative: embracing a ‘moonshot’ strategy to modernize America’s means of production.

In a smart column, “Trading Up: Why America Must Ditch China and Pursue Better Manufacturing Opportunities,” Robert Atkison summarizes it this way:

“The second tactic in a market-based decoupling strategy should be to weaken China’s comparative advantage in manufacturing and strengthen America’s manufacturing industry by establishing a national moonshot initiative to modernize and automate U.S. factories. There are various manufacturing applications for new technologies, including 5G, sensors, robotics, and artificial intelligence, which, with the right policy support, could significantly improve factory productivity, making it possible for much of the U.S. manufacturing sector to be a competitive alternative to China. But without a national manufacturing automation strategy, this vision will be fruitless.”

We’re talking a national industrial policy. Are we ready to embrace such a plan? What of the naysayers who object that we’d be playing favorites with manufacturing?

There’s a litany of less ambitious means to pursue as we debate the merits of a manufacturing Marshall Plan: invest in technologies, people, and process for most-favored industries, in some cases driven by regional and community preferences; publicize companies and leaders currently reimagining manufacturing; develop resources that make it easier for companies to locate capable supply-chain partners; elect officeholders who advocate for local manufacturing.

There may never be a better opportunity to rally the nation around a moonshot-like goal to reconstruct our manufacturing commons, our national means of production. At the same time, we should look closer to home. And make small changes that add up to something big in the future.

Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com.

As CompanyWeek turns six, what I got right about manufacturing, and wrong

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In the run-up to CompanyWeek‘s six-year anniversary in September, I’m looking back at columns I wrote to see what I got right, and wrong, along the way.

What I got right

  • Manufacturing’s comeback:

Announcing the launch of CompanyWeek in August 2013, I wrote, “Manufacturing’s at the center of profound change in the economy.”

This past June, the Economic Innovation Group (EIG) released a new study, MANUFACTURING’S REAL BUT PATCHWORK REBOUND, stating:

“Manufacturing’s rebound is real. After shedding manufacturing jobs relentlessly between the turn of the century and the Great Recession, the United States has now added them in 82 out of 100 months since January 2011. Such a turnaround is remarkable in a sector in which employment shrunk by nearly one-third between 2000 and 2010.”

  • On the Western U.S. becoming a new model for American manufacturing:

Also in August 2013, I forecast the West would be at the center of America’s manufacturing comeback in a column entitled: Made in America: Will a MFG revival transform the Rocky Mountain economy?

“Colorado will be a case-study in how a region will leverage new manufacturing to great gain, or miss-out to communities that harness the favorable winds pushing along goods-producing businesses.”

The EIG report confirmed the trend. First, The New York Times referenced the new report in a surprising conclusion: “The manufacturing sector is steadily realigning after the shocks of the early part of this century,” said John Lettieri, president of EIG. . . . “The West is emerging as a new growth engine for the sector.”

The report provided more detail:

“The average western county added manufacturing jobs at an annual rate of 3.9% from December 2016 to December 2018, the highest in the country. That figure also represented a sizable acceleration over the 1.7% annual growth rate registered in the typical western county from December 2012 to December 2016.” And, “nearly one-quarter of U.S. counties (24%) now contain more manufacturing jobs than they did at the turn of the century. In the West, the figure is 42%.”

  • On manufacturing’s new industrial character:

In 2017, I bemoaned a national report card on manufacturing in this column, Rust Belt bias flunks the 2017 Manufacturing and Logistics National Report Card: “Sector diversification is manufacturing’s new calling card. Want to begin to solve manufacturing’s labor problem? Showcase its growth industries — beer and distilling, natural and organic food, technology-fueled fabrication in aerospace, and the outdoor industry — that appeal to a new generation. They’re the growth industries of the manufacturing economies in the West.”

Today EIG agrees:

“Most manufacturing subsectors saw modest to healthy growth in jobs from December 2016 to December 2018. A veritable boom was underway in food and beverage manufacturing, which added 84,400 jobs to the economy from December 2016 to December 2018. Beer, wines, and spirits accounted for much of that growth, adding 29,700 jobs and growing by 22% over two years.”

What I got wrong

  • Outdoor industry brands moving production back onshore

I’ve forecast along the way that outdoor industry brands would be leaders in moving production back onshore. In a column, Moving Outdoor Retailer out of Utah carries risk for OIA, I said, “Brands are highly motivated to shorten supply chains and make products closer to where they’re designed and sold. Hap Klopp, founder of The North Face, outlined his reasons last month. Under Armour’s Kevin Plank told CNBC, ‘We should be bringing jobs back, not just to America, but tightening supply chains all over the world. We have the ability to do it better. It’s time for all of us to make an investment.’ It’s why manufacturing will get its jobs back here in the U.S.”

I overestimated their enthusiasm, and the difficulty in developing a U.S. supply chain that supports apparel and accessory manufacturing. Just two weeks after first posting this column, Utah-based Black Diamond stunned employees by announcing 70 layoffs as part of plans to move manufacturing back offshore, reversing a decision made in 2015 to reshore manufacturing to Utah. I would have preferred to have been wrong, again.

Similarly, in “Five reasons why manufacturing jobs are coming back,” I was 20 percent wrong. I’m still convinced that, “Brands want to make more stuff here…in response to consumers, and for other compelling reasons including cost, access to technology, brand integrity, and social responsibility, the trend in product management is for companies to shorten supply chains in support of domestic manufacturing.” I didn’t forecast tariffs would be the biggest motivator.

  • Enthusiasm for the cannabis economy

In December 2017, in a column entitled, A Trump presidency unnerves cannabis manufacturers. Is it time to change tactics?, I wrote, “It still may be a bridge too far for some, but business and policy leaders looking closely will determine that Colorado’s cannabis experiment is today an engine of conventional economic growth.”

Wrong. Cannabis industry continues to suffer an “enthusiasm gap” from business leaders and economic development pros. It’s a mistake, but it’s real. Cannabis is no more an existential threat to conventional business than craft brewing was in its infancy. Billion-dollar industries can’t live in the shadows.

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As for new forecasts, here are three major trends currently reshaping manufacturing, trends we’ll write about and that will inform most all our initiatives. Ignore at your risk.

  1. Contract manufacturers rule: Not only have contract manufacturers prospered the past five or six years, growth has occurred industries, a trend we’ll see accelerate. CMOs hold the keys to more domestic manufacturing.
  2. Design-centered Manufacturing: Industrial designers can now control their means of production. Stand by for a wave of innovative products designed for domestic manufacturing as the promise of additive manufacturing and other enabling technologies becomes reality. It’s one reason local contract manufacturers, flashing new tools and technologies, will thrive.
  3. Manufacturing’s brand will evolve to reflect the automation and technology that’s transforming it. See above.

Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com.

Ross Reels’ sparkling new Montrose factory speaks to the state of regional manufacturing

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To tour the new Ross Reels factory in Montrose is a bit surreal, as if you’re looking at something that’s not supposed to be there. So many voices have written off manufacturing, but here it is, one of Colorado’s finest new manufacturing facilities, on the stunning Uncompahgre River because, of course, they make world-class fly-fishing gear. It’s a lot to take in.

What may truly separate this facility, though, is the roadmap it provides for other communities. There’s a model here, with lessons to be learned.

Whether others follow is an open question. Hosting a panel discussion with manufacturers at Grand Junction’s first-ever West Slope Startup Week suggests that towns on the Western Slope of Colorado are still ambivalent about manufacturing.

But first, what Doug and Dave Dragoo, owners of Ross parent Mayfly Outdoors, have accomplished in Montrose is eye-opening. The Dragoos celebrated the official grand opening of the new building with employees and a couple hundred of local notables, pleased as they seem not only with the new physical space but with the city’s support of the project and vision of a modern business cluster focused on the outdoor industry.

Manufacturing for two of fly-fishing’s most respected brands — Ross Reels and Abel Reels — is now consolidated in Montrose at the Mayfly headquarters. It’s part of the Colorado Outdoors development, with a plan that envisions an outdoor industry cluster of light manufacturing, along with new workforce housing, retail, logistics, and hospitality tenants. The end goal is to foster a destination for outdoor enthusiasts and new business and commerce from the region and around the world.

It’s a vision shared by the private and public sector, and here, public action has meant the difference between idea and reality. The city has offset hard expenses on roads and infrastructure and provided financial incentives for incoming firms, but it’s also a co-developer of the river assets and adjacent open space. Colorado Parks and Wildlife is partnering to improve an already spectacular fishery in Montrose’s city limits. Overall, the development is a multi-institutional collaboration, with manufacturing jobs at its core.

If it sounds straightforward, or easy, it’s not.

The type of willful pursuit of manufacturing jobs on display in Montrose runs headlong into economic and social barriers that frame the economic development conversation in other towns in western Colorado. One involves growth — economic growth of any kind. A strong anti-growth sentiment informs local and regional deliberations in tourism- and recreation-fueled communities like Durango, Telluride, and Steamboat Springs. One consequence is that building consensus around the idea of investing city and county resources in roads, infrastructure, and other new assets to recruit new manufacturing companies is often hard.

To be fair, some communities have no interest in manufacturing, even outdoor industry- related manufacturing. They prefer stronger tourism and recreation service economies, or seek a place in the new technology economy, where Google campuses and tech startups, not light manufacturing clusters, dot the landscape. It’s a worthy, modern goal.

In Grand Junction, this seems to be on the minds of some. But the Makers and Producers track in Techstars’ first West Slope Startup Week points to the undercurrent of interest in the Grand Valley to combine a legacy of manufacturing with a tech-savvy future.

In theory, it’s a powerful combination. New manufacturing can be a breathtaking mix of technology, automation, and innovation. Industry clusters in the future will include companies flashing enabling software, automation, tech-driven logistics, and other advanced services. Alongside more advanced CNC shops and other new forms of prototyping and fabricating, these ‘centers of manufacturing excellence’ will be the destination for future for brands and OEMs.

It won’t happen by accident. A new development in Grand Junction, Riverfront at Los Colonias Park, promises similar outcomes as Colorado Outdoors. But how aggressive will the city be in offsetting the costs of roads and infrastructure, moves that are critical to attracting new companies? Is affordable housing and workforce development tuned to the needs of manufacturing brands? These and other questions seem open.

The stakes are enormous. An outdoor industry-focused commerce and manufacturing corridor, with major hubs in Grand Junction and Montrose, would put the region on the national map.

It’s a vision the folks in Montrose have willed into reality. Who will be next?

Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com.

Tariffs provide a clarifying moment. What we do next is the true test.

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Republished February 2, 2022, with strikethroughs.

If tariffs COVID has accomplished anything, they’ve it’s brought into focus the manufacturing strategies of American companies and vulnerabilities of sourcing and manufacturing offshore.

For American brands built on Chinese contract manufacturing, it’s a reminder that managing production operations offshore carries risk. For others it’s been an affirmation of decisions made to rethink manufacturing in China or Asia. Still for others, like small manufacturers who work global supply chains out of necessity, the topic can be maddening. A single trade tactic pandemic would never realign their global network of suppliers and manufacturers. Replicating services or replacing suppliers is hard; they’re in China for a reason. They pay anyway.

Regardless of the outcome of this round, tariffs COVID is forcing some brands to reassess Asian supply chains and for many, accelerate efforts to move out of China or back onshore. The question for those considering U.S. manufacturing, is how, and it’s the industrial issue of our time.

If, in the next decade, we create the conditions for some American brands to return jobs to the U.S. or keep them here in the first place, we’ll witness a new era of U.S. industrial accomplishment.

Isn’t that what the tariff supply-chain discussion is all about? If it isn’t, it should be.

America has the requisite pieces to enable brands to manufacture more products here. It just doesn’t have enough of some, like qualified employees. They lead a long list of much-needed resources.

But there’s a community of people and companies working to change the future of manufacturing in the U.S. If you believe in domestic manufacturing, helping these players thrive is a worthy calling:

  • OEM’s innovating to develop domestic sourcing and production capabilities — new domestic supply chains that promise growth. Those shoe brands feeling the pain of tariffs? Many endeavor to establish more prototyping and small batch manufacturing (to start) in the U.S., closer to transformative technology and to customers.
  • Contract manufacturers – companies that make things for other companies across a dozen industries. They’re more capable than ever. Ensuring brands find fabricators and producers, or cultivate new relationships, is imperative.
  • Engineers and designers improving the manufacturability of parts and products, a process that often works to speed prototyping and keep short production runs local. It’s a step in the right direction.
  • Integrators bringing technology and production together; they’re contemplating new ways to fabricate products with new tools and processes.
  • Early-movers in growth industries — brands and manufacturers — that value local supply chains and means of production.
  • Community leaders trying hard to pull the pieces together, understanding as they do the value of manufacturing jobs.

These are among the shareholders in a new domestic manufacturing economy, along with consumers who want more locally made products, brands who’d rather manufacture here and families who want options for their kids.

Let’s move from tariffs COVID to a robust strategy that supports these shareholders in their quest. To do so will strengthen trade agreements but more, fulfill the promise of a new U.S. industrial sector. It’s the outcome we all can support.

Bart Taylor is (still) publisher of CompanyWeek. Email him at btaylor@companyweek.com.

Just Build It: Why Nike tuned out the distractions to invest in Arizona’s workforce

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Nike’s first obligation is to shareholders, not politicians, so it’s no surprise it yanked the Besty Ross flag shoes to appease “talent” that speaks for a growing customer base. Colin Kaepernick has demonstrated he can move the sales needle for Nike. The political voices critical of Nike’s move haven’t.

Not every business calculation pans out, though, and the shallowness of this decision may yet come back to bite the company. But the stakes are much higher for Goodyear, Arizona — and politicians like Goodyear Mayor Georgia Lord. If Nike responds to Governor Doug Ducey’s encouragement to take its new shoe factory elsewhere, her work to bring new jobs to Arizona will have been for naught.

News last week is that Nike will Just Do It, and proceed with the factory. Good for Nike — and for Arizona. The grandstanding must have been hard for executives at Nike to stomach. The factory is a win for Ducey’s ally in the White House and aligns with the president’s push to persuade American brands to relocate manufacturing in the U.S. For a Trump supporter to throw water on a new U.S.-based factory must seem rich. Just last week, Nike confirmed the Goodyear facility would be only its third in the U.S.

Yet this factory represents more than the numbers convey, even though the numbers aren’t insignificant: 500 new jobs with an average salary of $48,514 per year, including overtime and bonuses. It’s a new apparel factory in the U.S. — a rarity these days — with jobs seemingly tailored to Arizona’s growing immigrant population. It’s talent that for decades has done work for American brands, just not on American soil.

An honest assessment of why American apparel brands haven’t opened new U.S. manufacturing facilities begins and ends with the challenge of workforce. In apparel, it always comes down to labor. Today many U.S. cut-and-make shops rely on the expertise of labor trained elsewhere. We’ve written about dozens over the past five years.

Nike has acknowledged that Goodyear offered a unique, hard-to-find talent pool by selecting the community in the first place. It’s a unique win. It’s unlikely we’ll see a surge in apparel manufacturing employment in the U.S. Companies are working overtime as it is to find production partners, and keep them, often in places like San Francisco and Los Angeles, where companies can tap a diverse labor pool. There’s a pathway for others to travel, one that involves an investment in the latest technology and a commitment to retrain underutilized talent. But it’s not easy. If it were, others would have accomplished it.

The hope is that companies like Nike will fuel the model and respond to the demand for more domestically made products, by siting new facilities where pieces are in place. Arizona is one such destination. Nike wisely tuned out the distractions to make an investment in a community willing to invest in a labor force uniquely suited to its needs.

Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com.

Service companies contemplate a cannabis future as Farm Bill falls flat

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Many thought the national legalization of hemp cannabis in the 2018 Farm Bill would usher in a new era of collaboration and industry development. Since then, the news has been confusing to say the least, and for services providers, downright disappointing:

  • States were asked to submit follow-up plans to the federal government, with approval providing a final free-and-clear signal for the hemp cannabis industry and businesses that support them to operate legally and without fear of retribution or jeopardy. But the USDA, the federal agency responsible for managing the process, has since let states know that they’re unprepared to accept the plans or provide guidance as to what should even be in the plans.
  • The Trump administration is ignoring the Farm Bill altogether, announcing last week that employment in the sector may be a sign that even legal immigrants “‘may lack good moral character if found to have violated federal law, even if such activity has been decriminalized under applicable state laws,’ the [U.S. Citizenship and Immigration Services] guidance states.” The guidance makes no distinction between hemp or marijuana, or provisions in the Farm Bill that profoundly change the sector.
  • Service providers continue to cancel cannabis business associated with hemp-derived CBD companies. Nor has the the Farm Bill led a parade of name service brands into the market with new programs to support cannabis companies or others that operate legally in market but don’t touch plant or product.

That’s not to say service brands aren’t watching cannabis closely. Each brand will likely have a different path depending on their operational footprint, how they’re structured or aligned culturally with cannabis. But it’s a safe bet most every brand is formulating a plan that will lead, eventually, to a cannabis strategy.

How can they not? Hemp CBD companies are thriving, driven by strong consumer demand. The realities of the market may force their hand.

Consider banking in Denver.

If Denver isn’t the most over-banked city in the nation, it’s close. It’s a growth market regardless of the cannabis opportunity and today, the quality and quantity of the banking teams serving Denver and Front Range businesses is extraordinary. Twenty-five years ago a small number of brands like Wells Fargo and Chase (formerly Bank One) rode herd over business banking here. Ten years later, CoBiz Bank, upstart brands like UMB and Citywide, and regional stalwarts like Alpine and FirstBank had carved out significant commercial portfolios.

Today, top to bottom, the sector is home to a world-class array of banking brands targeting the commercial sector. Bank of America and PNC are among recent entrants to business banking along with BOK Financial (formerly CoBiz Bank). Regional players like MidFirst have strengthened through acquisition, and credit unions now dot the landscape. Loan options, including those from Colorado Lending Source that target certain types of borrowers, are multiplying.

How, then, to grow in a market saturated with great people and more banking options than ever?

Developing targeted strategies and service offerings for vertical markets or sectors, for one. Manufacturing, across the multiple industry palette that we report on, is an example. Cannabis is part of that mix, and it’s becoming too large — and, with passage of the Farm Bill, too legal — to ignore. Hemp-derived CBD companies are operating legal businesses and selling products across state lines. CBD demand is creating cannabis unicorns by the dozens. Banks measure success by deposits and loans. In a competitive market, with little or penetration into the cannabis sector, banks not participating in the rush may fall behind, especially when the economy cools.

Given that most brands are not banking cannabis, it’s still a relatively even playing field, not only for banks but insurers, accounting firms, and other service providers. No one, really, has lost by being last.

What happens next seems straightforward enough. Service companies are bound to invest in due diligence to identify the most risk-averse cannabis companies to sell and support. The less risky the client, the less chance for a public setback that compromises decades of sector leadership, of community involvement, of brand equity. As other market signals flash green, service companies will only be more emboldened.

It’s a dance that in so many ways is as interesting, if not as existential, as the two-step that cannabis companies themselves have had to perfect on the way to becoming mainstream businesses in states that support cannabis.

And the music is just starting.

Bart Taylor is publisher of CompanyWeek. Contact him at btaylor@companyweek.com.

A sustained Trump manufacturing surge will force economists to rethink the sector. How likely is it?

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A common theme in business is that automation will continue to sap U.S. employment in manufacturing even as productivity rises.

This week the New York Times‘ Louis Uchitelle surmised that “manufacturing is unlikely to be capable of producing a great deal of additional employment,” making the familiar argument:

Modern assembly-line machinery continues to eliminate jobs. Production has been increasing, but factories are doing this with fewer people.

From a post-World War II peak of 19.6 million workers in 1979, employment in manufacturing has declined to 12.5 million, according to the Bureau of Labor Statistics. Put another way, manufacturing has dropped from 23 percent of the total work force to nearly 8 percent. That happened even as factory output rose in total value to $2.154 trillion in 2018. America is making more goods and materials with fewer people.

But to make his case, Uchitelle shorts the argument. Manufacturing bottomed out in January of 2010 at 11.3 million jobs, two years after President Obama took office, but has since then recovered, adding 1.5 million to a total today of 12.8 million manufacturing jobs.

How, then, to square conventional wisdom — that American manufacturing is losing jobs to automation — with the positive trend the past six years?

Let’s back up. Clearly, Obama walked in to a buzzsaw: Manufacturing employment was in free-fall from 17.3 million jobs when President Bush took office in January 2000 to the low-mark in 2010. In all, the economy shed 6 million manufacturing jobs during the Bush presidency.

But from 2010 to 2016, Obama added 900,000 or so jobs, and President Trump’s on a faster pace, adding 480,000 or so jobs in 26 months of his presidency. I’ve pointed to growth in new manufacturing industries as a source for new employment, and clearly red-hot market sectors like food and beverage are piling up the numbers. Manufacturers are generally bullish on Trump’s tax policies and his efforts to reset trade policy with manufacturing powers like China. It’s also more economical to make things in the U.S. than in decades, and fabricators in growth industries like aerospace are finding that innovation is enabling more domestic production. The numbers would look even more impressive if companies were able to fill the half-million or so manufacturing job openings that bedevil recruiters.

It’s possible we’ve reached a peak and employment will head down again. Or, perhaps we’ve found a new equilibrium, where huge jobs losses to offshoring are a thing of the past, and steady growth in new industries will sustain moderate growth.

If the Trump administration is able to maintain it’s hot start, economists and pundits might even be forced to reassess the premise that American manufacturing employment is in irreversible decline. Today President Trump’s cheerleaders boast of his gains compared to Obama, which seems the wrong argument to make. If a Trump manufacturing surge continues at its current pace, to add a million or so jobs in four years, it could reshape the narrative of manufacturing in the U.S.

How likely is it?

The numbers are daunting. The economy added 2.9 million manufacturing jobs 40 years ago, from June 1975 to June 1979, a staggering number by today’s standards. There’s no period in the past four decades that comes close to this surge in manufacturing employment. A Trump recovery of a million manufacturing jobs would be equally impressive, given technology’s influence.

Mining more jobs from legacy industries to add over half a million net new jobs in the next two years seems implausible. Or does it? The president may do well to add carrots to a manufacturing strategy that today relies on sticks.

His manufacturing legacy may depend on it.

Bart Taylor is publisher of CompanyWeek. Contact him at btaylor@companyweek.com.

CMA winners deliver unequivocal message: respect the middle market

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Several years ago, I wrote the headline, “Middle-market innovators steal the show at the inaugural Colorado Manufacturing Awards,” to describe the first CMA program. It’s also a takeaway from last week’s fourth annual event and list of winners. The region’s manufacturing sector is overflowing with creativity and success, owing much to mid-sized companies that have grown into market leaders and change agents, many from humble beginnings. It’s a journey we chronicle each week.

The CMAs are only a single manifestation of the vibrancy of regional manufacturing. In 235 in-depth interviews in CompanyWeek last year, executives painted a healthy picture of the manufacturing economy. Here are a few of the our top-line conclusions from the 2018 Manufacturing Market Report.

  • Across all industries, Managing Growth was the top challenge, reflecting positive underlying trends in a sector that’s made a startling comeback from the “dog days” of the 2000s.
  • Workforce, again, is a pervasive challenge across most all manufacturing industries. Data continue to reflect the need to retrain a new generation of manufacturing employees, in fast-changing production environments.
  • Competition has emerged as a significant challenge for companies, as is Market Awareness, reflecting a more competitive marketplace for the products of U.S. manufacturers.
  • Expanding Opportunities for manufacturers is also reflected in high-water three-year marks for New Markets, Growing Markets, and New Products, cited by fully one-third of all companies interviewed.
  • Real Estate has emerged as the top Need for manufacturing companies, second only to workforce. It’s an additional sign of expansion across manufacturing industries.

One anecdotal takeaway from CompanyWeek profiles is that the sector seems to have more resilience than even four years ago. Manufacturing isn’t a single-industry sector and growth can be reasonably forecast across multiple industries.

That said, manufacturing still has a long way to go before its companies and people attain the same rock-star status as technology unicorns or iconic tourism and consumer brands. But the stars are aligning. The companies that today comprise the “maker economy” are on the rise. The opportunity we have once a year to bring together and celebrate this extraordinary group is our great privilege.

Before we look ahead, even to next week, as we track the talented companies shaping the sector, we owe it to the 2019 class to stop and say congratulations. There were no losers in the group of nominees and of 37 finalists last week. Only winners, all adding to the fabric of America’s new manufacturing class.

Bart Taylor is publisher of CompanyWeek. Email him at btaylor@companyweek.com to get the 2018 Manufacturing Market Report, a summary of CompanyWeek interviews from last year.