Pillars Of Economy

SPRINGDALE — Editor’s Note: Northwest Arkansas’ economy didn’t fall as far as many other regions’ economies during the recession and is recovering faster. In a six-part series that began Sunday, NWA Media explores what’s driving the rebound and how it’s changed our future.

One Northwest Arkansas entrepreneur saw a wider market for local chickens, while another decided to add more locations to a local five-and-dime store. A third skipped the retail and the birds to concentrate on getting products from one place to another.

Those three companies, along with the networks, competitors and supporters that followed them, now form three of the four biggest drivers of Northwest Arkansas’ economy.

Walmart Stores, Tyson Foods and J.B. Hunt Transport are household names far and wide.

A fourth big employer, older than the rest, isn’t so much a company as an institution. Growing throughout the recession and recovery, the University of Arkansas’ presence brings jobs, money and manpower into the region.

“We have so many homegrown companies that have made it big,” said Kathy Deck, an economics professor at the University of Arkansas. “They’re what people look to as the foundation of Northwest Arkansas.”

While the big three each maintain corporate headquarters in Northwest Arkansas, all operate in the national and world economies with stores, farms, plants and distribution hubs far from home.

“That’s where the big companies are a strange influence. They can do either better or worse, but the effects are felt out at the stores or plants somewhere else before they hit the local corporate offices,” Deck said.

The three private pillars weathered the recession, and some of their operations appear healthier than before the downturn.

Walmart

Walmart tightened its collective belt at the height of the recession, cutting 800 jobs from corporate headquarters in Bentonville in 2009, a move big enough to impact area unemployment rates.

The company also moved its apparel division from Bentonville to New York in 2009, but reversed that move in 2011.

Suppliers, however, continue to expand local operations in support of Walmart accounts. Those new arrivals have contributed to home sales, commercial building construction and other local economic indicators.

The company doesn’t disclose details on job numbers and declined to say how many of the corporate jobs cut in 2009 have returned, said Randy Hargrove, director of national media relations.

“The organic growth of Walmart and the suppliers is the story of last decade, not of the next decade,” she said.

Walmart continues to use Northwest Arkansas as a local test bed for new concepts, debuting its small-format Express Markets in Gentry and Prairie Grove and experimenting with an on-campus ministore at the University of Arkansas.

Lessons learned from the Express pilots are being applied both to new locations for Express stores, and in the midsized Neighborhood Market designs, Hargrove said. The smaller formats will account for nearly half the company’s planned new stores in the next fiscal year, he said.

While the growth of Walmart’s own footprint and those of their suppliers can’t continue indefinitely, they offer leverage to attract other related or support businesses, Deck said.

Tyson

While poultry growing and processing remain integral parts of the region’s economy, wider trends tend to define Tyson’s operations, said Worth Sparkman, a company spokesman.

“While we’ve not made any significant changes in Northwest Arkansas since 2009 that have had a direct measurable impact on the local economy, we can say employment at Tyson Foods corporate offices and at our facilities has remained stable both in the two-county area and in the state,” Sparkman said. “The whole company focused on operating more efficiently and concentrated on taking care of our customers.”

The recession and other developments created challenges ranging from sluggish consumer spending to high prices for grain, feed, diesel and other input costs, Sparkman said.

Other local poultry companies, including Simmons and George’s, operated under similar restrictions, but with an exclusive focus on poultry, Deck said.

“When we talk about the effect of Tyson in particular on this area, the recession isn’t as big a factor as their purchase of IBP was,” Deck said. “That really expanded the entire scope of the company.”

Tyson bought the former Iowa Beef Processors in 2002, picking up a chunk of the national and international market for pork and beef as well as poultry. IBP was roughly three times the size of Tyson before the sale.

“Expansion is what brought a lot of the high-end jobs down here,” Deck said.

While factors such as feed costs will continue to present challenges, Tyson appears to have weathered the recession, Sparkman said.

“During the recession and the slow recovery, our company has fared well. Sales in fiscal 2009 were $26.7 billion,” he said. “We recently closed fiscal 2012 with $33.2 billion in sales, a 24 percent increase.”

J.B. Hunt

Diesel prices and reductions in manufacturing and consumer demand hit the trucking industry hard in the past few years, but Hunt and other Northwest Arkansas companies have emerged in a good position, said Lane Kidd, president of the Arkansas Trucking Association.

“The national economy is going to be a big factor in how those local companies perform over the next few years,” Kidd said. “J.B. Hunt, Willis Shaw Express, PAM Transportation, they’ve all grown. Nobody’s in a holding pattern. That’s spread out across the country, though, without a big local impact.”

The economy, along with upcoming and expected regulations across the industry, will likely benefit local trucking companies, he said.

“You’re going to see a further consolidation of the industry,” he said. “That sounds like a bad thing, but many local companies are buyers in that market, not the ones who will be consolidated.”

Trucking in the region isn’t limited to the big long-haul companies, Deck said.

“Walmart, Tyson and the poultry companies, Allen Canning and others own large fleets of their own, and there are a number of local and regional haulers ranging from one independent driver and his rig to companies with a dozen or more vehicles,” she said. “That’s not only good for drivers, but also for mechanics, tire shops and truck dealers.”

Major companies based in Northwest Arkansas run almost 27,500 big rigs, according to Transport Topics, an industry magazine.

The Rest

Retail, trucking and poultry will likely remain the most visible industries in Northwest Arkansas, and the university’s flagship status appears secure, but plenty of other companies contribute large impact to the region, Deck said.

“The banks, manufacturers like Superior Wheel or Pinnacle Foods, Lindsey and other big names in real estate, and plenty of others, play a big role in the area,” she said. “They’re just as critical as a Walmart or a Tyson in terms of economic stability.”

Sudden collapse of one of the pillars is always an outside possibility, should a local company fall such as Hostess, Arthur Andersen and Bear Stearns did, or Chrysler and General Motors nearly suffered, Deck said.

“Companies don’t last forever, even those you think will, and it can happen that quickly, and that’s why you can’t rely on existing businesses to keep growth going,” she said. “The next big thing could be growing already, just as Walmart, Tyson and J.B. Hunt once did.”

The pillars of Northwest Arkansas remain interconnected, and no place is that more evident than Deck’s office. On the University of Arkansas campus, she works for the business college named for Sam Walton. The building next door pays tribute to Hunt, while others on campus honor Walton, Tyson and other prominent business leaders and John Tyson sits on the university board.