This Minnesota food company is part of rising profit-sharing trend with $27M payout over past five years

Four times a year, managers at KLN Family Brands shake hands with employees and give out profit-sharing checks — $27 million in the past five years — to the people making NutriSource pet food, Wiley Wallaby licorice and other brands.

Last year, the family-owned company in Perham, Minn.,handed a record $7.5 million to about 600 employees.

“People are at a premium, good people even more, so I’m proud of what we’re doing,” CEO Charlie Nelson said.

Among all U.S. businesses, 8% offer profit sharing, but the number is increasing, according to the U.S. Bureau of Labor Statistics. A decade ago, 5% of companies offered the incentive plan.

“Profit sharing really had its origins in manufacturing,” said Alan Benson, a professor at the University of Minnesota’s Carlson School of Management. “And profit sharing in manufacturing really is one of the great American success stories.”

A relatively steady 14% of manufacturing employees had access to profit sharing over the past decade, government statistics show.

Benson pointed to Lincoln Electric in Ohio, which has long used hefty profit-sharing checks as a big part of employees’ total compensation.

“That has uniquely let them weather some of the incredible changes in the economy over the past 100 years,” Benson said.

“The profit sharing is credible because they’ve been giving out enormous checks every year. And it gives workers the autonomy and incentives to fix their own problems.”

The practice has spread to other industries since the 1980s, Benson said. And it’s not solely attributable to sweetening the pot in the current tight labor market.

Kwik Trip has long paid 40% of its pre-tax profits to employees annually. Last week, Delta Air Lines distributed $1.4 billion of its profits to employees in a program that began in 2007. Minnesota window and door makers Marvin and Andersen have touted their profit-sharing payments for decades.

Studies have repeatedly shown benefits for workers and bosses.

“Today, there’s still a sense that when a company does well the workers feel their contributions should be rewarded as well,” Benson said.

“For businesses it’s also attractive because it allows them to offload risk and cut labor costs. Funded as a percentage of profits, it can help them navigate business cycles.”

Employee ownership and profit sharing, which economists call shared capitalism, “is linked to lower turnover and greater loyalty and willingness to work hard,” according to a National Bureau of Economic Research paper.

For KLN Family Brands, there’s a simpler reason to maintain a profit-sharing program.

“It’s truly about our people,” Nelson said. “That was the first thing out of my dad’s mouth, and that’s the first thing out of mine.”

All employees at the 63-year-old company, which has manufacturing plants in Perham and Delano, Minn., are eligible for profit-sharing checks after a year of service. The checks have been given out for 25 years.

“When we walk up to an employee for the first time, it hits them,” Nelson said. “It really is fun to get out and shake hands with them.”

About 60% of KLN’s business is making its own pet food and candy brands, including NutriSource and Wiley Wallaby. The rest is co-manufacturing for other brands and retailers.

“We’ve gotten more efficient as a company,” Nelson said about this year’s increased profit-sharing sum. “For everything that’s going well, there’s plenty to work at and worry about.”

But the plants have been busy, and that’s good, he said.

As a result, KLN is already looking at expanding in Delano, where a pet food plant opened in 2020.

Whatever it takes to make profits — and thus, profit-sharing checks — even larger.