Experts see layoffs, gains from food merger

by Latasha Webb

Economists speculate last week’s merger of two of Minnesota’s largest food companies, Pillsbury and General Mills, could mean hundreds of Minnesota layoffs. But the good might outweigh the bad, they said.

Both Pillsbury and General Mills have deep roots in Minneapolis, dating back to the mid-1800s. And both lead their respective fields: Pillsbury produces more refrigerated dough than any other company, and General Mills is the largest cereal maker in the country.

The merger will create one of the world’s top five packaged food companies, but it will also mean layoffs in the metro area, where both companies are headquartered.

“They have a few thousand employees in Minnesota,” said University economics professor Bruce Erickson. “So, I would think a couple of hundred layoffs would be a good estimate.”

Erickson said he thought most of the layoffs would be in middle or upper management because when two companies merge, the responsibilities of two positions generally meld into one.

Jean Kinsey, a University applied economics professor, said Pillsbury employees will be most affected by layoffs.

But while Erickson said the losses will have a short-term negative impact on the state’s economy, Kinsey said the state’s other big food businesses will swallow the laid-off workers.

“The effects will probably be initially negative because of the job loss,” he said. “But the company will be running strong in a couple of years and that will have a positive effect on the state’s economy.”

Kinsey said Minnesota-based companies such as Land-O-Lakes, Malt-O-Meal and Cargill will find jobs for the displaced workers. Therefore, the state – aside from downtown Minneapolis – won’t feel much change.

“The merger could have an impact on downtown Minneapolis’ economy because a lot of the workers from downtown are being moved to the General Mills facility,” she said.

“So that might depress downtown a little, with loss of retail sales, fewer people buying lunch, paying for parking, empty offices,” she said.

But both said consumers can expect the merger to result in positive changes.

Kinsey said although the merger was approved by the Federal Trade Commission, some in the industry are concerned the new company will raise prices, eliminate products or block innovations. Kinsey said she is confident prices will stay down and favorite products will remain available.

“I’m not worried about prices going up because there’s so much competition right now,” she said.

“Pillsbury products are so high right now. And the Doughboy has the Pillsbury logo on his hat, so since General Mills plans to use the Doughboy, they’ll probably keep Pillsbury as a name brand,” she said.

Erickson said consumers can expect more freshly delivered food because General Mills will have almost twice as many trucks available for deliveries.

“The company will eventually be in a stronger position to compete,” he said. “In the long run it could be very positive.”


Latasha Webb welcomes comments at [email protected]