Big firms cite financial interests in hiring minority suppliers
Most big companies these days want to boost the number of women- and minority-owned firms they do business with, but the reason has nothing to do with altruism. Big firms say diversity among their business partners helps the bottom line.
Last year, U.S. corporations bought more than $100 billion in goods and services from minority-owned and operated firms. Businesses are well aware of America's changing demographics. Minority populations are growing and by 2050, it's expected only about half of Americans will be non-Hispanic whites.
Rosemary Ugboajah and her two partners started Zydeco Design in the Twin Cities about a year ago. Ugboajah was born in London to Nigerian parents. Her partner Alan Tse is from China. Her other partner is a woman, Nathalie Wilson.
Their combined experience includes working with giants like Cargill, Target, Best Buy, and Macy's. Ugboajah doesn't promote her firm as "diverse," but she said the diversity in her tiny firm can help Big business avoid big mistakes.
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Ugboajah said she's caught certain things like noticing something you can't broadcast or not putting a billboard in a certain neighborhood.
"There are innuendos that go with that. Just because I brought a different sense to the table, my perspective is different," Ugboajah said. Ugboajah wants Zydeco Design to be known as a company that performs well and happens to be women- and minority-owned.
"It's the solution we deliver to our clients that is the first thing," she said.
But getting clients can be hard for minority businesses. They may lack the connections and relationships key to landing contracts. They may also be too small to meet the needs of large companies.
But there are a variety of efforts designed to help minority firms clear such hurdles.
Last month, Ugboajah and about 200 women and minority business owners or their representatives attended a networking fair in St. Paul intended to connect them with potential corporate customers. They were able to pitch their products and services to the likes of Target, Best Buy, Medtronic, Supervalu and General Mills.
Big businesses typically require firms to get a certification verifying they are minority owned. But Justin Chase with the Midwest Minority Supplier Development Council says it's in the self interest of businesses to hire minority suppliers.
"As they continue to do business with certified minority owned firms and suppliers, ultimately they're creating a community," Chase said. "They're creating a customer base. They're creating jobs within the community, and they're creating a market for their goods and services."
That message is not lost on some firms, and budgeting for minority vendors can be hefty.
Supervalu hopes to spend nearly $1 billion this year with diverse suppliers, about 2 percent of its revenue.
"It behooves us to do business with them so that they can grow," said Michael Byron, the grocery company's vice president for supplier diversity.
Byron said the benefit is suppliers will shop at Supervalu stores. He said the company's minority and women vendors range from an independent photographer to a janitorial service that cleans 1,000 stores.
General Mills spent about $600 million with women- and minority-owned firms last year -- about 4 percent of sales. The food maker's James Momon said doing more business with women and minority firms is fundamentally the right thing to do, but there other reasons as well.
"We would not be putting the resources and time against this if there was not a bottom-line impact for our shareholders," Momon said.
General Mills declined to quantify the bottom-line impact, calling it "more of a qualitative benefit."
Momon said minority suppliers can help the company win over minority customers.
"They have insight into that consumer space that can be relevant and valuable for a company like us," he said.
That consumer space is getting too big to ignore for many companies. A University of Georgia report projects minority buying power will surpass $2 trillion by 2014, up 30 percent in just five years.
