Two years into the Great Recession and we’ve seen it all: layoffs, bankruptcies, closures, and foreclosures. Business mogul Tom Petters was arrested and jailed for his deft impersonation of Bernie Madoff. Denny Hecker, once the titan of local car sales, went broke, drove his car into a utility pole, and was sued by multiple parties. Riverview Community Bank in Otsego, launched in 2003, supposedly at the behest of God himself, closed its doors. ¶ And yet, even in an economy as bad as this one, there have been bright spots: A recent rise in the GDP has lifted the hearts of manufacturers; a drop in foreclosures has given hope to real-estate agents and mortgage bankers; and the release of Sarah Palin’s Going Rogue has buoyed the spirits of booksellers, Republicans, and comedians everywhere. Here are a few local people and industries making out like bandits—and the kin and companies envying their success.
Divorce filings are down significantly, according to recent polling by the American Academy of Matrimonial Lawyers. But that’s not because couples are riding out the crisis with a surfeit of coziness and good will. It’s because people can’t afford to get divorced. “I know filings are down in Minnesota,” says Susan Lach, a family-law attorney with Messerli & Kramer and a past president of the Academy’s Minnesota chapter. She estimates that her business has declined by 10 to 15 percent. “People can’t sell their houses, so there is no money,” says Lach. “They don’t want to be valuating and dividing assets we all hope are temporarily depressed.” This, no doubt, makes for some grim looks across the dinner table.
Worry about money is driving more women to postpone pregnancy, says Kathi Di Nicola, spokesperson for Planned Parenthood. “There is definitely a theme, from Duluth to Minneapolis to Rochester.” She notes that the number of women in Minnesota buying IUDs increased by 54 percent from 2008 to 2009.
When the going gets tough, the tough get buzzed. Across the board, liquor makers have held their own. But no purveyors of fermented libations have done quite so well, at least in Minnesota, as brewers of craft beer. One estimate puts local sales up 74.5 percent in 2008, reflecting pent-up demand served at last by newcomers such as Flat Earth in St. Paul, Surly in Brooklyn Center, and Lift Bridge in Stillwater. Brad Glynn, co-owner and head brewer for Lift Bridge, says his shop is producing more than 100 barrels a month, up from 60 at the beginning of 2009. “I personally think consumers are being more picky right now,” says Glynn. “A six pack of craft beer is an affordable luxury.”
Loser: Big Brewers
Sales of middle-tier mainstream beers have been flat and in some cases declining. Bud Light, Miller Lite, and Coors Light all have taken hits, as customers opt for cheaper brands. “People are spending less for more quantity,” says Mike Sheedy, beer buyer for Big Top Liquors in St. Paul. “They’re going for the 30-pack of Ice that’s four bucks cheaper.”
*Economic Snapshot figures indicate changes from November 2008 to November 2009
Goodbye, lobster fork. Hello, can opener. Austin-based Hormel Foods has seen a spike in profits lately, partly due to “double-digit” sales increases of Spam and Hormel Chili. Frugality is one reason for the bump; the desire for tried-and-true comforts is another. “We need a sense of familiarity and belonging, so we go back to the basics,” says Rohini Ahluwalia, a professor of marketing at the U’s Carlson School of Management. “These are the brands that our parents used. We associate them with growing up and that gives us security. It’s a coping strategy.” Spam, it seems, is Mom in a can.
Declining restaurant sales and frugal shoppers loading up on chicken thighs have created hard times for prime cuts. To keep red-meat sales moving, Minnesota-based Cargill has recast some of its sub-prime beef: “Flap meat” has become “Cordelico Sirloin.”
Tapping our inner tightwads, the national savings rate climbed to almost 5 percent in 2009, compared with nearly zero during the housing boom. “People are worried they are going to lose their jobs, so they want to make sure they’ll have food on the table and can pay their mortgages,” says Kathy Schneider Vinge, a longtime financial planner with Ameriprise in Edina. “I have clients say they’re going to put off buying a car. I tell them to have six months of reserves on hand.” Vinge, who encouraged saving even before the bottom fell out, believes the trend will continue. “People who lived through the Great Depression, they never forgot it,” she says. “Now you have people who lived through the recession of 2008 and 2009, and they are probably never going to forget it.”
Those eating and drinking out are veering toward happy hours and cheaper menu items. And while local customers remain as generous as ever with tip percentages, according to Unite Here Minnesota, which represents unionized hotel and restaurant employees, smaller tabs overall have meant diminished leavings for servers.
Class is back in session. Enrollment is up by nearly 7 percent in the 32 Minnesota State Colleges and Universities (MNSCU); 13 schools experienced double-digit growth, according to MNSCU spokesperson Melinda Voss. While there’s typically a jump in enrollment when the economy falters, this year’s surge was particularly significant. While some new students were pushed back into the classroom as a result of layoffs, Voss argues that the long-term results will benefit everyone. “We need to have more Minnesotans who have some kind of post-secondary education,” she says. “More jobs are demanding education beyond high school.”
Loser: Classroom Teachers
Forget apples for the teacher this year—an envelope full of cash will do. “[The enrollment jump] is coming at a time when our budgets have been cut,” Voss acknowledges. “It does require our faculty to work harder than ever to serve students.”
If you need a virtual whoopee cushion, there’s an app for that. Looking for a two-dimensional dashboard hula dancer? There’s an app for that. Searching for a way to mint money? For iPhone software developers, at least, it certainly seems like there’s an app for that. Long before the iPhone’s App store was landing BusinessWeek cover stories and raking in billions, Minnesota-based DoApp saw opportunity. It was among the first developers to get in on the action, launching two apps in 2008 that landed among the most-downloaded utility apps of the year (myLite Flashlight and myLighter). DoApp is also responsible for more than 100 other apps, including the WCCO Mobile Local app, and Adagogo, an application that offers digital coupons based on geography. The company has recently landed a contract with Sony BMG and has other major deals in the works. “We’re growing, and I’m really proud of some of our game-changing technologies,” says DoApp CEO Wade Beavers. “But the app world is the Wild West. We’re just in our infancy.”
In a recent Zagat Survey, 22 percent of diners report skipping appetizers and dessert to save cash. Perhaps that’s why Twin Cities restaurateurs like Broders’ and Salut Bar Americain are packaging their appetizers and entrées together in bargain dining deals.
If you listen, you can hear it: pocketbooks snapping shut tighter than sustainably farmed oyster shells. But that doesn’t mean people are tossing aside their beloved organic foods. On the contrary, the market has continued to expand, though more slowly in recent months. “We are definitely experiencing healthy growth,” says Lee Wallace, director of Minneapolis-based Peace Coffee. “Our customers are still interested in supporting their hometown company.” It seems that java hounds saving dough by brewing at home are willing to splurge a bit on ingredients to make the labor worthwhile. “People are looking for something to feel good about,” Wallace says. “Our coffee is freshly roasted. It gets into their hands in a responsible way.”
Loser: Expensive Restaurants
Now that inelegance is the new elegance, the casualties are stacking up: Morton’s, D’Amico Cucina, and Bellanotte are among the high-end eateries that have closed in the past year.
Crime in the state has reached a 40-year low, but that hasn’t stopped Minnesotans from arming themselves. Gun sales began to soar just prior to the election of President Barack Obama, out of fear that he’d impose new gun-control laws. The rise continued, albeit at a more leisurely clip, right along with the recession. “There has been a slowing of the rush,” says John Monson, owner of Bill’s Gun Shop & Range in Robbinsdale and Circle Pines. “[But] from October 2008 to March 2009, we could hardly keep some guns in stock.”
The golf business has been subpar, according to the Minnesota Golf Association, though the state has fared better than the nation. Rounds here were down in 2008 and up a bit last summer, though new discounts undercut income from the added business. Crafty golfers have found a silver lining: Golf carts qualify for the federal electric-car tax credit.
Okay, so it’s not Paris. But gazing upon Lake Pepin from a high perch in Frontenac State Park can be romantic too. People are traveling closer to home these days—state campsite use was up 9 percent last summer—and that means more tents and mummy bags. “We saw a larger than usual increase in camping sales in 2008,” says Rod Johnson, owner of Midwest Mountaineering in Minneapolis. Sales for 2009 were up slightly also. “People are trying to spend less money,” Johnson says. “A backpacking and camping vacation is less expensive than other options.”
A glut of empty seats, especially in business class, is costing the airline industry a bundle. Delta, which just bought Northwest Airlines, lost more than $8 billion in 2008 alone.
With the White House declaring clean energy an economic priority, Minnesota will reap more than $200 million in federal stimulus dollars for weatherization and other projects, according to the state Office of Energy Security, including $54 million for solar, wind, and biofuels. These dollars, plus a handful of tax credits and rebates, have been especially beneficial to the state’s fledgling solar industry. Suddenly, St. John’s University in Collegeville is breaking ground on a solar farm and St. Paul is planning a $2 million system for the roof of its downtown RiverCentre. “The solar industry has gotten a huge shot in the arm with the stimulus bill,” says Linda Taylor, clean energy director for the St. Paul–based policy group, Fresh Energy. And that only makes sense in a state with an estimated sun-power potential that’s equivalent to Jacksonville, Florida.
Loser: Ethanol Advocates
Lower gas prices combined with higher corn prices spelled trouble for old-school ethanol. Minnesota plants closed in Morris and Melrose and a facility planned for Dundas was shuttered.
Twin Citians are taking the edge off—and then some. The use of heroin and other opiates has risen significantly. In fact, Minneapolis now has some of the cheapest and purist heroin found anywhere in the country, according to a June 2009 report by Carol Falkowski, director of the Alcohol and Drug Abuse Division of the state’s Department of Human Services. Of the local flood of heroin, she offers, “This is a new market that’s open for new entrepreneurial opportunities. And I think, in terms of law enforcement, there is a perception with narcotics that Minnesota is like Mayberry or Pumpkin Hollow.”
Use of stimulants like cocaine and meth is declining. Whether that’s due to police efforts or people switching habits, one thing is certain: Nobody needs to be more alert right now.
Never have “pre-owned” lamps and “vintage” armchairs looked so appealing. Shoppers wishing to sate their spending-spree impulses have flocked to thrift stores. “We are having a good year,” says Brian Becker, marketing director for Goodwill/Easter Seals Minnesota. “Our store sales are up 14 percent over last year.” The local Goodwill, which takes in more than 60 million pounds of donated goods annually and funds job-training programs, recently opened two new outlets. It has also spiffed up the older ones. “We’ve got a bright color template that’s inviting. Lots of duct work.” Becker says. “It’s kind of the Old Navy look.”
Loser: Specialty Home Stores
With home building in the dumps, there are fewer living rooms and bedrooms to furnish. This has been tough on shops like the Deco Boutique, Poliform, Luehmann, and the Good Life—just to name a few of the specialty home stores that closed their doors in 2009.
Though tattoo artists tend to be too pirate-like to belong to any state organization that might track business trends, anecdotal evidence suggests they are doing well indeed. That’s not so hard to believe when you consider that about a third of people between the ages of 18 and 40 say they bear ink. “We’re on an upward trajectory,” says Scott Elke, co-owner of Live Fast Die Young Tattoos in Minneapolis. Though the studio opened in the dark days that brought 2008 to a close, he says they recently hired two additional artists. By Elke’s lights, a tattoo may be the perfect antidote to the recession: “You can’t have it taken from you. You can’t pawn it. And it doesn’t break down.”
Loser: Plastic Surgeons
As patients opt for less expensive procedures or forego them altogether, plastic surgeons are earning less, says Joe Gryskiewicz, who practices in Edina and chairs the American Society of Plastic Surgeons’ emerging-trends committee. “A lot of patients, rather than having a face lift, will have a filler. I’ve had doctors in Minnesota tell me that their earnings are down 20 to 50 percent.”
Do-It- Yourself Classes
When earnest young do-it-yourselfers start asking the hardware-store owners where they stock the elbow grease, perhaps it’s time to acknowledge that the times really are changing: We’ve stopped outsourcing our household tasks. Minneapolis community-education classes on furniture reupholstering, home repair for women, plumbing, and glass-block windows have filled up fast, and classes on hardwood floors and drywall installation have also been popular. A remodeling class is perhaps the only DIY class that’s gotten a tepid response—perhaps because of the perceived high cost of making major changes. “My sense is that people are interested in the do-it-yourself things that are also low-cost,” speculates community-education specialist Rita Keltgen.
Your million-dollar idea just got more difficult to make a reality: Venture capital investment in Minnesota is at its lowest level since 1995, and credit card companies are pulling back credit lines, which means that entrepreneurs have fewer places to turn for cash. Mom? Dad?
While the value of the dollar has precipitously tanked, the price of gold has skyrocketed, reaching an all-time high in 2009 of more than $1,200 per ounce. People are rushing to purchase the shiny stuff because it “holds its buying power,” says Chuck Lewensten, owner of Twin Cities Gold & Silver Exchange, which has been around since 1968. By way of example, he explains that the amount of gold it took to buy a nice suit 70 or 80 years ago is the same amount it would take today. “It’s a great insurance policy. If it’s doing well, everything else is doing poorly.” Everything except Lewensten’s shop that is, which is drawing double the business of five years ago.
Loser: Scrap-Metal Dealers
Global demand for salvaged metal has slowed dramatically, leading to falling prices and slimmer margins for Kirschbaum-Krupp Metal Recycling and other area scrap dealers.
We know you’ve been itching to bust out that Beemer, but trust us: that sweet ride is so 2007. Gas-price volatility, an increased interest in eco-friendly living, and the high price of car ownership have given a boost to car-sharing services like HourCar, a four-year-old program that rents cars online, by the hour, to members. “Changes [in the culture and economy] are allowing people to think about the alternatives to owning a car,” says HourCar program manager Christopher Bineham. Its fleet of trendy Priuses and a hip marketing campaign (which includes the slogan “Kick Gas!”) have also encouraged young hipsters to take the plunge. Since late 2007, membership has doubled to about 950 households, and a 2008 grant has allowed the organization to add four cars to its 21-car fleet; another six cars will be added soon.
Loser: Solo Commuters
The environment isn’t the only thing paying the price when people drive alone: Single-car commuters are paying up to $8 each way through MNPass to get into express lanes between downtown Minneapolis and the south and west suburbs.
In Preston Sturges’s 1942 film Sullivan’s Travels, a producer sets out to make an earnest movie about the travails of the poor, only to discover that what people really want during hard times is a good laugh. Hollywood found the same last summer, setting box-office records on the strengths of such light fare as The Hangover and Up. That was a boon for local multi-plexes. “What we’re seeing during the recession is that people want an escape from what they’re reading in the newspapers and seeing on television,” says Andy DiOrio, a spokesperson for AMC Entertainment. At the movies, he adds, “people can turn off their brains and enjoy themselves.”
Anxiety has become a national pastime, yet fewer people can afford therapy. “I have a sense that business is down 20 to 30 percent,” says Trisha Stark, a licensed psychologist and director of professional affairs for the Minnesota Psychological Association. “It really is a struggle.”
If the Keebler Elves seem to be quaking in their tiny boots, it’s for good reason: brand-name recognition isn’t as powerful as it used to be. Two-thirds of people admit to buying store brands more frequently than in the past. Not only are the store brands profitable for businesses and cheaper for consumers, most people can’t tell a difference between, say, Pepperidge Farms and Archer Farms, according to a recent Consumer Reports study. Target has capitalized on consumers’ newfound thriftiness by rolling out a redesigned store brand called Up & Up. The brand, which ditches the bull’s-eye in favor of colorful arrows, includes about 800 items ranging from laundry detergent to sandwich bags. Early reports suggest sales are strong. And Tony the Tiger? He’s grrr…umpy!
Empty storefronts are getting more common, even in places that seemed poised to thrive. Despite getting a short-term boost in office rentals from the Republican National Convention in 2008, for example, St. Paul wasn’t able to convert the surge into long-term relationships: Building owners reported a year-over-year increase in commercial vacancy rates, now hovering at about 20 percent.
Even in a bum economy, Minnesotans still root, root, root for the home team. In the season of their Metrodome farewell, the Minnesota Twins drew 2.4 million fans to their home games, the highest attendance the team has had since 1992. The late-season playoff push helped boost numbers into the stratosphere, but clever promotions that linked ticket prices to stock-market performance helped, too. The future looks equally bright as the team settles into its new digs at Target Field. On the gridiron, Brett Favre’s arrival in Minnesota goosed Vikings season-ticket sales by 3,200 in just 24 hours. His new purple jersey was the NFL’s top seller from April through August, even though he didn’t join the team until July. With that lucrative new contract, maybe Favre should be buying us the peanuts and Cracker Jack.
To trim costs, schools in Apple Valley, Eagan, Eastview, and Rosemount have instituted a one-way bus policy for some “away” athletic contests. Players are expected to find their own ride home after the game.
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Erin Peterson, a Minneapolis writer, contributes regularly to the magazine. Jennifer Vogel, a former editor of The Stranger in Seattle, has written for The Rake, City Pages, and several other area publications.