America’s largest family companies: Introduction

When we last updated our Family Business 100 list of America's largest family companies in early 2009, the financial markets had collapsed and the country was mired in a recession. Nearly three years later, the economy remains weak. The growth rate has been slower than projected, unemployment is still high and Standard & Poor's downgrading of the U.S. government's credit rating sparked dramatic stock fluctuations and fears about the future. In short, uncertainty is the new normal.

Yet throughout the hard times of the past several years, some U.S. family business giants proved resilient. Ford Motor Co., which ranked second on the Family Business 100 in 2009, retains that position on the current list. Ford was the only U.S. automaker to survive the industry's 2008-09 downturn without a government bailout, though it benefited from federal loans and tax credits.

Cargill Inc., a vast supplier of commodities and grains, moved from fourth place into third. At a time when emerging markets are hungry to import American soybeans and wheat, Cargill's sales rose from $88 billion at the time of our last survey to more than $107 billion.

Effect of the downturn

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Of course, many family firms have struggled in the faltering economy. Even retailing behemoth Wal-Mart Stores Inc. (#1 on our list) saw its U.S. sales drop for nine straight quarters (as of the second quarter of 2011). In a Feb. 22, 2011, article, the Wall Street Journal offered a reason. Wal-Mart, the Journal observed, strayed from the mission of its founder, Sam Walton, to provide “every day low prices” to working-class customers. The giant retailer's efforts to attract an upscale clientele fizzled; at the same time, longtime Wal-Mart shoppers stayed away.

Family-owned homebuilders and construction firms saw their revenues plummet as housing markets sank. Among the companies that dropped off the Family Business 100 were builders Hovnanian Enterprises and Toll Brothers. Lumberyard chain 84 Lumber Co. also fell off the list. J.F. Shea Co., which builds residential communities, fell from #77 on our 2009 list to #99.

Publishers of newspapers and magazines dropped in the standings as the recession and Internet competition hurt advertising sales. Hearst Corp., publisher of 16 newspapers and 20 magazines, fell from #56 to #66. The New York Times Co. dropped from #76 to #96. Newspaper chain McClatchy Co., #99 on the last edition of the Family Business 100, does not appear on the list this year.

Advance Publications, which owns magazine publisher Condé Nast, fell only slightly, from #36 to #40, but it shuttered Gourmet, Modern Bride and other magazines; its cable and Internet businesses remain promising. Meanwhile, the Washington Post Co. managed to rise in the rankings from #61 to #55, although major hurdles lie ahead for the company, which sold Newsweek magazine to the late Sidney Harman in 2010 for just $1, plus $47 million in liabilities. Some Post Co. shareholders have said they hope the controlling Graham family will consider selling its Pulitzer Prize-winning newspaper to focus on its Kaplan education unit and cable businesses. Yet the Kaplan division, which accounts for about 60% of the company's total revenue, has come under fire from some members of Congress who have criticized the unit's marketing tactics and its students' poor track record for repaying government loans and landing jobs.

O'Reilly Auto Parts, on the other hand, benefited from the downturn, soaring from #90 all the way up to #49. Demand for O'Reilly's wares rose as drivers sought to repair their old vehicles rather than buy new ones.

Among the brightest performers were grocery chains. Whatever the economic outlook, customers must still buy food. Weis Markets Inc. of Sunbury, Pa., jumped to #89 on the Family Business 100 from #97 in 2009. Wegmans Food Markets Inc., based in Rochester, N.Y., and known for its selection and customer service, advanced from #57 in 2009 to #50. The Golub Corp., the Schenectady, N.Y.-based operator of Price Chopper stores (from #79 to #75), and H.E. Butt Grocery Co., which caters to Hispanic markets in Texas and Mexico (from #23 to #19), each moved up four slots. But Raley's Inc. of West Sacramento, Calif., which is trying to counter its reputation for high prices, fell from #70 in 2009 to #77 on the current list.

Convenience store operators also fared well. Altoona, Pa.-based Sheetz Inc. boosted itself from #72 on our 2009 list up to a tie for #62. Another Pennsylvania convenience store chain, Wawa Inc., rose eight spots, from #54 to #46. Cumberland Farms Inc., headquartered in Canton, Mass., advanced from #44 to #42.

Acquisitions and spin-offs

The J.M. Smucker Co., known for its jams, jumped from #91 in 2009 to #54 on the current Family Business 100. Much of the revenue gain occurred as a result of the company's 2008 acquisition of Folgers, the U.S.'s leading coffee brand.

Some companies currently on our list are undergoing major changes. The McGraw-Hill Companies (#44) announced in September 2011 that it would split into two separate public companies by the end of 2012. Diversey Inc. (#79), now 50% owned by the Johnson family (better known as the owners of consumer products maker SC Johnson & Son), will be acquired by the end of 2011 by Sealed Air Corporation. Diversey shareholders will control 15% of Sealed Air's common shares.

Huntsman Corp., operated by the family of presidential candidate Jon Huntsman, returned to the list (#32). We omitted the company in 2008 because it seemed likely to be absorbed in a merger. But the deal fell through, and the family remains in charge.

Several companies vanished from the list because of management changes. Perot Systems, once controlled by the family of two-time presidential candidate H. Ross Perot, was acquired by Dell Inc. We eliminated H&R Block after Thomas Bloch, the last member of the founding family at the company, quit the board, citing objections to management moves. We also dropped the Trump Organization, which did not disclose its revenues.

A diverse group

The current list includes companies that employ many relatives and those whose family owners are involved primarily as investors or board members. The list includes 49 public companies and 51 that are private. The largest employer on the list, Wal-Mart, has 2.1 million workers; the smallest, Host Hotels & Resorts, has 203.

A few notes about our methodology: This list was compiled in the spring and summer of 2011. The revenue figures and number of employees given for each company represent the most recent figures available (most 2010, some 2009 or 2011), depending on the fiscal years or the newest numbers we could find for the private companies (some of which are estimates). Many family enterprises closely guard their financial information, so it's possible that some large firms are missing from our list.

The companies on our list have significant ownership participation by a single family whose members have been involved in the company for at least two generations. We do not include companies currently operating as partnerships between unrelated families (which disqualifies, for example, Amway, owned by the DeVos and Van Andel families).

Our sources include Hoover's (an online business information resource), company websites, annual reports, proxy statements, Forbes and Bloomberg Businessweek, as well as local newspapers. The rankings are based on gross revenues and thus are not an indication of a company's financial stability.

Stan Luxenberg is a business writer based in New York City.

We welcome comments about firms we may have inadvertently overlooked. Please e-mail Editor-in-Chief Barbara Spector at bspector@familybusinessmagazine.com.

 

About the Author(s)

Stan Luxenberg

Stan Luxenberg is a business writer based in New York City.


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