Market focus Minnesota: Feeling Minnesota PR - While Minnesota PR enjoys steady business, it is also dealing with a tight labor market and corporate consolidation. John Frank reports

The Minnesota PR market is a bit like humorist Garrison Keillor’s mythical town of Lake Wobegon, where, he says, ’All the women are strong, all the men are good-looking and all the children are above average.’

The Minnesota PR market is a bit like humorist Garrison Keillor’s mythical town of Lake Wobegon, where, he says, ’All the women are strong, all the men are good-looking and all the children are above average.’

The Minnesota PR market is a bit like humorist Garrison Keillor’s

mythical town of Lake Wobegon, where, he says, ’All the women are

strong, all the men are good-looking and all the children are above

average.’



PR growth in Minnesota last year may not have reached the national

average of 28% - Minnesota firms reporting to PRWeek recorded an 18%

average growth rate - but 18% is a good year by most measures. ’This is

a staggeringly healthy market,’ says Paul Maccabee, head of the Maccabee

Group, which saw a 15% jump in income last year.



And the good news just keeps coming. Most Minnesota PR firms are seeing

business expand at a brisker pace this year than they did in 1999. ’The

market is very robust. The pie is getting bigger,’ says David Hakensen,

president of the Minnesota PRSA chapter and an SVP at Padilla Spear

Beardsley, the largest locally owned PR firm in the state. Growth in

healthcare, technology and public affairs is what’s fueling the area’s

PR boom, along with traditional work in agriculture, food and consumer

PR.



With the robust economy, Minnesota agencies are dealing with the same

problem of finding employees as are firms in the rest of the

country.



’The biggest challenge is recruitment,’ says Doug Spong, head of PR at

Carmichael Lynch Spong. ’That’s the one that keeps me up at night.’

Jerry Murray of LaBreche Murray, a dollars 1.2 million PR shop,

estimates salaries climbed at least 10% in the market last year. Others,

like Glenn Karwoski of Karwoski & Courage, tell stories of PR neophytes

with three years’ experience asking for six-figure salaries. New grads

are pulling down anywhere from the high dollars 20,000s to the low

dollars 40,000s, according to one source.



Such salary pressure has driven up fees, with principals charging as

much as dollars 250 an hour in the Twin Cities. Outside the metro area,

fees are only in the dollars 80-to-dollars 100-an-hour range. Firms in

the Twin Cities metro area, which accounts for more than half the

state’s population, dominate Minnesota.





Strong corporate climate



The area is not only a major corporate center, with 14 Fortune 500

companies headquartered there, but it also is a market populated by

companies that have long appreciated the value of PR. Many major local

companies have taken an integrated approach to communications, lending

an integrated tone to the region’s communications world. ’There has been

a tradition in the Twin Cities of corporate citizenship, and I think

it’s an extension from that to corporate PR,’ says Jon Austin, media

director with St. Paul-based Northwest Airlines.



That’s produced a ripple effect of strong local PR firms and shops that

have picked up the mantra of integrated communications.



’Companies like 3M, for example, the way they approach communications

tends to be more integrated,’ explains Albert Tims, director of the

School of Journalism & Mass Communications at the University of

Minnesota.



Local university programs have emphasized integrated communications,

too, producing a generation of PR people comfortable working closely

with ad and marketing counterparts. ’Students coming out of the

universities are getting that kind of training,’ says Gretchen

Tiberghien, chairperson of the mass communications department at St.

Cloud State University, about 65 miles from the Twin Cities.





Though some caveats ...



The good cheer in the Minnesota PR market comes with a few caveats,

however.



In recent years, communications mega-companies such as Shandwick and

Fleishman-Hillard have made their presence felt, as have other

less-known buyers such as MaxxComm. Many wonder how much longer strong

local shops like Padilla and Tunheim Group will remain locally

owned.



’I think there’s those kind of discussions happening every day,’ says

Riff Yeager, SVP and director of PR at Colle & McVoy Public Relations,

about possible takeovers. Yeager’s firm last year sold an 80% interest

to MaxxComm, a division of Canadian company MDC Corp., based in

Toronto.



Yeager says he preferred to become part of a newly forming group of

communications companies and was also attracted by the prospect of

retaining some local ownership.



Shandwick bought into the market a decade ago and now until the recent

acquisition of the Washington, DC-based Cassidy Companies, counted the

Minneapolis office as its largest. Fleishman opened a local office four

years ago, taking on well-known local PR personality Ann Barkelew to run

it and has seen dramatic growth, from one major client and six staffers

in 1996 to dollars 4.4 million in revenues last year and 31

staffers.



Another question mark for the market is the future of its Fortune 500

companies. The area has lost some notable corporate citizens in recent

years. Today, Northwest Airlines sits in the takeover sights as analysts

speculate about airline consolidation.



PR people fret that as corporate HQs leave town, with them will go some

of the business vibrancy that has helped the PR world prosper.



That said, the state has been encouraging hi-tech growth. Many PR shops

reported an influx of tech business last year. PR people are hoping the

tech boom will produce a wave of new companies that can take the place

of old-line firms succumbing to takeover fever.



As the area’s business base changes, the PR community also is seeing a

changing of the guard. A generation of PR people in their 60s, such as

John Beardsley and Barkelew, are passing the reins to 40-something execs

such as Lynn Casey, COO at Padilla; PRSA’s Hakensen; Kathy Tunheim, who

runs Tunheim Group; Spong and others. ’I’m probably one of the last PR

people who came out of journalism,’ notes Beardsley, 63.



Beardsley’s firm saw business climb 11% last year, not bad considering

it lost its second-largest client, US Satellite Broadcasting, to a

merger, and its largest client - Beardsley won’t give a name - cut PR

spending 30%. The firm’s PR income has jumped 41% year-to-date this

year. Beardsley says his goal is 15% to 20% sustained growth, a rate

that won’t unduly tax internal resources.



Shandwick’s Minneapolis office saw a 16% jump in income last year to

dollars 18.8 million and business remains strong, says Dave Mona,

chairman of the office. Shandwick was so busy last year that it launched

a program to lure back former staffers who had moved to other jobs. It

succeeded with 15 people, Mona notes.



Income at Fleishman’s office increased 38% last year and profits rose

69%; the outpost snagged a major HMO and a major healthcare

provider.



Barkelew is expecting income to top dollars 5.5 million this year

compared to dollars 4.4 million in 1999. Himler Horner’s PR fees jumped

in the 15%-to-20% range last year to dollars 2 million thanks to its

work in the public affairs area, says president Thomas Horner. Nemer,

Fieger & Associates, which specializes in grass-roots PR for national

brands, saw PR income rise to dollars 2.5 million last year from dollars

2 million.



Carmichael Lynch Spong, an integrated firm that saw a 44% jump in PR

income last year, is grabbing tech business, says Spong. A few years

back, it had no tech clients; now a quarter of its business comes from

tech.



Income is up 71% over the first four months of this year.





Taking integration seriously



Colle & McVoy, another integrated shop, has taken integration so

seriously that about three years ago it did away with separate profit

centers for PR, advertising and the rest. Freed from worrying about

their separate bottom lines, heads of those groups now work together to

decide which tools will best suit a client’s needs, Yeager says.



Kerker Marketing Communications, which had been in advertising since

1950, now emphasizes its integrated approach, notes Gary Young, VP and

director of PR. ’The integrated agencies have established a reputation

for creativity,’ he contends. Karwoski & Courage, a PR operation owned

by ad agency Martin/Williams, has implemented a six-month training

program for new employees that exposes them to advertising, PR, direct

marketing and other communications disciplines. ’People spark to that

because it broadens their skills base,’ says Glenn Karwoski, SVP and

managing director.



Outside the Minneapolis/St. Paul area, Russell & Herder in Brainerd,

about 150 miles north of the Twin Cities, also has found success with an

integrated approach, says Geoff Gorvin, PR manager. ’We’ve created a

niche for ourselves in both PR and advertising,’ with clients in higher

education, communications, building products and healthcare, he

says.



While the company doesn’t release figures, Gorvin says PR income is up

nearly 30% this year.



In northern Duluth, however, 51-year-old PR shop WestmorelandFlint is

prospering doing only PR, says chairman Harold Webster. In a region

still heavily dependent on such natural-resource industries as mining,

business was slow as little as six months ago, but has picked up

significantly this year, he says.



The bulk of Minnesota PR comes from the Twin Cities, though, with firms

there roaming across the country for business. Only about 15% of the

535-person strong Minnesota PRSA chapter are from outside the Twin

Cities.



Humorist Keillor likes to joke about how self-effacing Minnesotans

usually are. The state’s PR people can be excused these days if they’re

crowing a bit more than usual.



Minnesota PR firms: by the numbers

Rk        Agency Name         Audit    MN income                  Growth

                                       (dollars)

99   98                                     1999          1998    (%)

1    1    Shandwick           *       18,828,000    16,165,000     16

2    2    Padilla Speer

          Beardsley           **       8,112,045     7,334,781     11

3    3    Colle & McVoy       **       7,100,000     6,400,000     11

4    4    Tunheim Group       **       5,034,475     4,816,144      5

5    5    Carmichael

          Lynch Spong         *        4,922,000     3,418,000     44

6    6    Fleishman-Hillard   *        4,384,000     3,171,000     38

7    7    Karwoski & Courage  **       2,750,000     2,650,000      4

8    9    Morgan & Meyers     *        2,526,217     1,157,548    118

9    8    Goff & Howard       **       2,163,942     2,014,100      7

10   10   LaBreche Murray     **       1,204,442     1,129,919      7

11   11   Maccabee Group      **         537,000       468,000     15

12   N/A  PR 21               **          65,027           N/A    N/A

          TOTALS                      59,840,175    50,596,492     18


Rk        Agency Name          US income     MN%      US income     MN%

                               (dollars)              (dollars)

99   98                             1999      99           1998      98

1    1    Shandwick          153,429,000      12     91,485,000      18

2    2    Padilla Speer

          Beardsley            8,112,045     100      7,334,781     100

3    3    Colle & McVoy        7,100,000     100      6,400,000     100

4    4    Tunheim Group        5,034,475     100      4,816,144     100

5    5    Carmichael

          Lynch Spong          4,922,000     100      3,418,000     100

6    6    Fleishman-Hillard  181,152,000       2    136,272,000       2

7    7    Karwoski & Courage   2,750,000     100      2,650,000     100

8    9    Morgan & Meyers      7,559,850      33      5,628,780      21

9    8    Goff & Howard        2,163,942     100      2,014,100     100

10   10   LaBreche Murray      1,204,442     100      1,129,919     100

11   11   Maccabee Group         537,000     100        468,000     100

12   N/A  PR 21                7,047,625       1      3,509,305     N/A

          TOTALS             390,208,004      15    270,507,334      19


Rk           Agency Name             Location

99   98

1    1       Shandwick               Bloomington

2    2       Padilla Speer

             Beardsley               Minneapolis

3    3       Colle & McVoy           Minneapolis

4    4       Tunheim Group           Minneapolis

5    5       Carmichael

             Lynch Spong             Minneapolis

6    6       Fleishman-Hillard       Minneapolis

7    7       Karwoski & Courage      Minneapolis

8    9       Morgan & Meyers         Minneapolis

9    8       Goff & Howard           St. Paul

10   10      LaBreche Murray         Minneapolis

11   11      Maccabee Group          Minneapolis

12   N/A     PR 21                   St. Paul

             TOTALS

Source: PRWeek 2000 Agency Rankings Auditing: * denotes a full audit or

review; **  compilation audit;  unaudited statements approved by either

the CFO or CEO/partner. A random audit process will be used for agencies

providing unaudited figures.



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