ConAgra's move from Omaha to Chicago shows that big cities still reign

ConAgra Foods' new CEO recently tried telling the people of Omaha that moving the headquarters to downtown Chicago was "not an indictment of Omaha."

They had the good sense not to believe him. Of course it was.

The explanation ConAgra CEO Sean Connolly gave was that the company needed to go to "the heart of one of the world's business capitals." That's where he's got the best shot to attract the kind of top talent his company needs to rebuild its brands and come up with new ideas.

There may have been other factors at play here. Several people in Omaha certainly noted that Connolly lives in the exclusive Chicago suburb of Winnetka.

Yet he's also using the argument for a business location that's more often heard, of wanting to be where the best talent wants to work and live. And the presence of Warren Buffett isn't enough to make Omaha one of the world's business capitals.

What makes this case at least a little unsettling is that no one can claim the Twin Cities is, either. Much like us here in the Twin Cities, the people of greater Omaha thought they lived in a big and sophisticated Midwestern city. It turned out to be not nearly big or sophisticated enough.

To a lot of us, big cities like Chicago primarily look expensive and crowded. But it's long been observed by economists that productivity improves in cities. One reason is that good ideas and know how seem to leak between people who share the same place, even if they work for competitors.

Companies can thrive in places like that, in turn attracting engineers, marketers and other highly skilled people. It certainly helps attract them if the region also has a lot of sports, arts, outdoors and other amenities to make the hours after work more pleasant.

All of that means that in this case Chicago, a big metro area in a state so dysfunctional that its legislature and governor still can't agree on a budget, gets another Fortune 500 company headquarters to add to the 31 already there.

If Connolly's hopes are realized and some fresh thinking can be found in Chicago, ConAgra can certainly use it. ConAgra has a portfolio of brands, names like Reddi-wip, Chef Boyardee and Healthy Choice, that are well known but don't work as well with consumers increasingly seeking fresh and organic foods.

In addition to moving employees into Chicago, ConAgra will cut about 1,500 office jobs, or about 30 percent of its total office workforce.

Those job losses are the capstone to a long story that has to be very painful in Omaha, because if any region really tried to take care of a big local company, it's Nebraska and ConAgra.

ConAgra once was known as Nebraska Consolidated Mills, and Omaha has been its home since 1922. It struggled in the 1970s, then ultimately thrived there as it moved into selling branded consumer products.

ConAgra didn't always act like an enlightened corporate citizen, at least two times threatening to pack up and move if it couldn't wring some concessions out of the city and state.

In 1987 ConAgra said it might go to Tennessee, so Nebraska's legislature responded with LB 775, a program of tax credits, sales tax refunds of property tax exemptions that would induce companies to invest in their operations in the state.

It was also in the late 1980s that the city heard whispers of another potential relocation and bent over backward to make sure that ConAgra's new headquarters got built downtown. The preferred site near the Missouri River happened to already be occupied by a historic district of brick office and warehouse buildings largely built in the early 1900s. The CEO of ConAgra at the time called them "some big, ugly red brick buildings."

The city's staff was direct about the hard choice to be made. In a city with many corporate headquarters, there's no way it'd make sense to sacrifice a historic district like this one. A community like Omaha, though, had to do what it could to keep one of its handful of big companies.

More than 20 of these warehouse buildings got knocked down. Never before had this level of destruction happened to a historic district on the National Register of Historic Places.

In the short run, these things made a difference, and ConAgra stayed. They didn't make much difference in the long run. Nebraska public officials, from the governor on down, were willing this year to give any financial incentive it took to keep ConAgra. It wasn't interested.

And it's hard to imagine that anyone at the company even discussed whether leveling a historic district more than 25 years ago should figure in any way into a 2015 corporate relocation decision.

So next year it's off to Chicago, a metro area that's really not that comparable to ConAgra's longtime hometown. Greater Chicago is closing in on a population of 10 million, more than 10 times bigger than greater Omaha's.

The demographic profile of the two areas also supports Connolly's case. The Chicago area population is younger than Omaha's. Greater Chicago also has a higher percentage of people with a college degree and a much higher percentage of people with a professional or advanced degree.

Because dynamic urban areas like Chicago are becoming increasingly important as a driver of economic activity, analysts have been trying to figure out which city-based economies seem poised to do well.

In one of the more widely known rankings, by the Economist Group of London, Chicago was projected to remain a top-10 globally competitive city, one of just two North American cities in the top 10. This list by the Economist was its best shot at ranking metropolitan areas by their ability to attract businesses, population and capital.

Omaha, of course, appeared nowhere on this list of 120 globally competitive cities. In case you are curious, the Twin Cities didn't, either.

lee.schafer@startribune.com • 612-673-4302