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Overview: a tale of two decades.

The 20th anniversay of the publication of the BLACK ENTERPRISE 100s is a significant milestone in the unfolding drama of African-American entrepreneurial development. The lists of the nation's largest black-owned businesses is a key barometer of the progress of black entrepreneurs as they navigate the often stormy waters of the American financial and economic system.

BE's Annual Report On Black Business, which features a summary of highlights of the BE 100s companies, offers valuable insight into the interplay between broad trends in the economy, developments in financial markets, changes in public policy, developments within the black community and the growth of major black busineses. The analysis of yearly changes in the list gives a bird's-eye view of how the most successful black businesses do under constantly changing economic, social, and political conditions.

Over the past two decades, the BE 100s has evolved from a listing of small businesses to an annual report on companies firmly rooted in the realm of emerging mid-size businesses. The BE 100s have grown beyond the definition of small business, which are those concerns generating less than $10 million in annual sales. Indeed, the smallest companies on both the BE INDUSTRIAL/SERVICE 100 and the BE AUTO 100 lists posted sales above that threshold. Total sales for the nation's largest black-owned businesses increased by more than tenfold, from about $473 million in 1972 to nearly $8 billion in 1991. BE 100s sales grew at twice the rate of the nation's gross national product (GNP) over the 20-year period.

The character of black business over the past 20 years has been increasingly changing, as reflected in sales growth, industry representation, geographic concentration of the firms and when and how they came into existence. In tracking changes in these and other aspects of the BE 100s, and to better understand the dynamics of black business growth and development, it is useful to recall significant economic and public-policy influences under which the firms have operated.

Early Years: 1973 to 1978

In June 1973, BLACK ENTERPRISE published its first annual listing of the nation's "Top 100," black-owned businesses that grossed more than $1 million in sales in 1972. Total sales of companies on that list were $473.4 million, including eight companies that reported annual sales of $1 million. The No. 1 company on the list: Los Angeles-based Motown Industries, Berry Gordy's legendary music recording company, with sales of $40 million. The largest black-owned auto dealership was Chicago-based Al Johnson Cadillac Inc., No. 7 with sales of $14.5 million.

The first compilation of the BE 100 (the list between the BE 100s in 1988, when a separate list for black-owned auto dealerships, BE AUTO 100 was created), published in 1973, was dominated by manufacturing companies, but included 16 black auto dealers, most of whom started their businesses during the 1960s. Over time, many of these firms lost their positions on the list either because they were acquired by non-minority companies, they went out of business, or because newer and larger black firms emerged. In fact, only seven companies from the original list have appeared on all 20 listings of the BE 100s: Earl G. Graves Publishing Co. Inc. (now Earl G. Graves Ltd.), Johnson Products Co., Johnson Publishing Co. Inc., Al Johnson Cadillac Inc. (now Al Johnson Cadillac-Saab), H.J. Russel & Co., Hollingsworth Group Inc. (now Essence Communications Inc.) and Conyers Ford Inc. (now Conyers Riverside Ford).

The first five years of the BE 100 were characterized by several major national developments that undoubtedly affected the opportunities for black business growth. In 1974 through 1975, for example, the economy experienced the biggest recession of the post-World War II period. Unemployment rose to 8.5% for all workers and 14.8% for black workers, both unprecedented levels at that time. The recession was generated, in part, by the energy crisis. After the 1973 oil embargo by OPEC producers, energy prices skyrocketed. As a result, the consumer price index rose by 50% between 1972 and 1977, with food, beverage, fuel, and utility prices rising at an even faster pace.

During the first five years of the BE 100, total sales, adjusted for inflation, rose nearly 30%. Despite the unfavorable economic climate, during much of that period, the largest black firms held their own. Indeed, the number of black auto dealers expanded significantly during the early 1970s, and by 1978, represented nearly half of all firms on the list. The number of manufacturing companies dropped by nearly half, but still accounted for one-fourth of all BE 100s sales in 1977.

It is worth noting that the BE 100s were -- and continue to be--dominated by a relatively new group of black entrepreneurs. Nearly two-thirds of the firms on the list in 1978 were started during the 1970s. But the top 10 firms on the 1978 list primarily included mature black businesses that were organized during or before the 1960s. Also, the top 10 firms accounted for slightly more than one-third of the sales for all BE 100 firms in 1977.

First Decade: 1973 to 1983

By the end of the first decade for the BE 100, three companies on the list had broken the $100 million sales barrier; no company had even half that level of sales in 1972. Total sales for all firms on the 1973 list topped $2 billion.

The perennial top 10 sale leaders, which included Motown Industries, Johnson Publishing Co. Inc., and Fedco Foods Corp., were joined by two Georgia-based construction companies, Atlanta's H.J. Russell Construction Co. Inc. and Thacker Construction Co. in Decatur. In 1983, the top 10 firms still accounted for a disproportionate share of sales: 36% of the total.

In 1983, auto sales and service firms were still heavily represented on the list; the 27 auto dealers accounted for nearly 25% of the $2.3 billion in total sales.

Between 1978 and 1983, several major developments in the national economic and public-policy environment affected black business opportunities. In 1976, former Georgia Governor Jimmy Carter was elected President with a substantial number of black votes. The Carter administration, hospitable to black aspirations for economic development, supported measures designed to include black businesses in work financed by the federal government. As a result, black contractors benefited significantly from the massive public works and economic development projects supported by the U.S. Department of Commerce.

Other minority purchasing programs were expanded under prodding from Congress, through legislation sponsored by then Rep. Parren Mitchell (D- Md.). Amendments requiring minority and female participation in defense and domestic purchasing contracts were added to major appropriatons bills.

Through such efforts, the U.S. Department of Defense and other federal agencies opened up the contract bidding process more widely than before to increase their purchases of products and services from minority business suppliers. When combined with the set-aside programs adopted by federal, state and local government, the private sector minority purchasing programs significantly increased the market opportunities available to black-owned businesses.

An inspection of the lsit in 1983 would reveal that several of the firms expanded their horizons and diversified into lines of business beyond their core interests. Such diversification, sometimes through the acqusition of other firms, helped explain the steady growth of H.J. Russell and Johnson Publishing, two longstanding BE 100 firms that together reported more than $200 million in sales in 1982.

The 1983 list also indicated a shift in the industry mix of BE 100 companies. The dominance of manufacturing firms was significantly diminished when compared with the first published list. Only 25 manufacturing firms, most in nondurable goods industries, such as food an beverage, made the list in 1983. Manufacturing firms accounted for 26% of total sales.

The shifting consumer preferences took a toll on sales of American-made automobiles, a development that adversely affected black auto dealers. The number of such firms on the list dropped from 42 to 27.

Toward the end of the decade, the nation entered another recession. The 1981-82 downturn would replace the 1974-75 recession as the most severe economic contraction of the postwar period. The unemployment rate rose to a high of more than 10% in late 1982, and personal income slowed to its lowest rate in 40 years. The recession was preceded by persistent inflation, and interest rates reached unprecedented heights. In response to the serious problem of inflation, the Federal Reserve Board clamped down on the money supply -- an action that virtually assured a recession.

Former California Governor Ronald Reagan, a Republican, succeeded Democrat Jimmy Carter as president in 1980. Public policy in support of economic progress for minorities shifted toward less proactive measures, as reflected in the Reagan administration's new policy in the Small Business Administration (SBA). The SBA adopted a policy designed to "graduate" minority firms out of the 8(a) set aside program. The new SBA policy was part of a federal government shift away from measures such as affirmative action, a policy that consciously used race as a criterion for allocating resources and tried to improve social and economic opportunities for racial minorities.

In 1983, however, the BE 100 list included a number of firms with a solid industry base, auspicious growth potential and aggressive management. By the end of the list's first decade, the BE 100 were poised to meet the challenges of the next 10 years of growth and diversity.

The Second Decade:

1983 to 1991

The second decade of the BE 100 was characterized by vigorous growth in the size and diversity of the nation's largest black-owned companies. Total sales rose from $2.3 billion to almost $8 billion.

Average sales per company rose from $17 million to $45 million during the decade. Black-owned companies with sales exceeding $20 became increasingly common beginning in 1984.

However, BE INDUSTRIAL/SERVICE 100 sales are still dominated by the largest firms on the list. In 1991, the top 10 companies accounted for $2.6 billion, or 57.5% of total sales. Over half of the top 10 sales, however, were accounted for by TLC Beatrice International Holdings Inc., the $1.5 billion sales leader on the list. Excluding TLC Beatrice, the top 10 companies still accounted for $36.5% of all 1991 BE INDUSTRIAL/SERVICE 100 sales.

During the second decade, service companies gained a more prominent place on the list relative to firms in other industries. These companies, including firms such as Los Angeles-based Motown Industries, New York-based Inner City Broadcasting Corp. and Atlanta's The Gourmet Cos., demonstrated black entrepreneurial savvy in industries that were among the strongest growth sectors in the American economy.

For the most part, service-sector firms replaced the auto dealers previously included on the list. But the status of manufacturing companies did not change during the decade, although there was some year-to-year shifting between durable-goods and nondurable-goods firms. The number of companies engaged in constructin activity also fluctuated, but remained at about 10% of all firms on the list throughout the period.

The decade also saw a slight geographic redistribution among the largest black-owned companies. Southern states gained in the number of companies, mainly at the expense of Western states. In 1991, half of all BE 100s companies were located in 11 states throughout the South.

Another interesting observation: Over time, the BE 100s have become less concentrated in cities with large black populations. This undoubtedly reflects the broadening industrial diversity of the companies, and especially the emergence of new firms that do not rely on the resources of the black community for their support. As BE 100s companies continue to grow, they are found increasingly in the mainstream of American business and industry.

To a considerable degree, the BE 100s list demonstrates the coming of age of black entrepreneurship. Especially during the last decade, companies added to the list were formed through skillful dealmaking, acquisitions and the opportunistic successes of market-wise risk-takers. For example, the 1991 list included 49 companies that were started during the 1980s; only nine companies on the list were established before 1960. In comparison, the lists published over a decade ago included many more pre-1960 companies.

The Business and Public-Policy Climate

of the 1980s

In many ways the 1980s might be considered unfavorable to black business development and growth. The Reagan and Bush administrations did not support special efforts to advance the economic status of minority populations. While some of the institutional mechanisms for promoting minority business, such as the Office of Minority Business Development in the U.S. Department of Commerce, were kept intact, the support programs within the agencies were not vigorously implemented. Moreover, in some cases, policies such as SBA 8(a) "graduation," that were harmful to black business growth were adopted. Perhaps the best example of this was the U.S. Supreme Court decision in the case of J.A. Croson v. The City Of Richmond, which altered, if not virtually eliminated, set-aside programs in the public sector. The Croson decision labeled state and municipal set-aside programs for minority-owned businesses unconstitutional without specific documentation of past discrimination. Such policies created an additional hurdle for black entrepreneurs attempting to gain business opportunities.

On the other hand, the 1980s saw the longest period of uninterrupted economic growth in the postwar period. About 18 million jobs were created; the rate of inflation, as measured by the consumer price index, was cut in half from more than 10% to less than 5%; interest rates fell from double digits to less than 7%; and corporate profits more than doubled exceeding $301 billion.

The 1982 to 1990 expansion was fueled, in part, by massive defense spending that generated substantial opportunities in business services. Computer information systems, in particular, were a major growth area, and black entrepreneurs found lucrative business opportunities in that field. Technology-driven companies, many of which depend heavily on defense-related work, comprised 25% of all firms on the 1991 list, and accounted for nearly 20% of total sales.
 INDUSTRY 1973 1977 1982 1987 1992 (**)
Automobile Dealers 16 37 29 53 100
Commodities 0 0 0 0 1
Computer/Technology 12 4 8 5 23
Construction 10 11 14 8 8
Energy Related 1 5 11 4 2
Entertainment 3 2 3 2 2
Food/Beverage 14 19 16 10 15
Health/Beauty Aids 3 2 4 5 5
Maintenance/Security 2 0 1 0 2
Manufacturer (misc. products) 9 6 5 0 20
Media 10 10 5 5 11
Miscellaneous 18 4 3 8 7
Telecommunications 0 0 0 0 0
Transportation 2 0 1 0 3

Skillful dealmaking was also evident in the sucess of firms that now occupy commanding positions on the list. A preeminent example of the acquisition-oriented entrepreneur is Reginald F. Lewis, who acquired TLC Beatrice International Foods, the first billion-dollar company on the BE 100s list, in 1987. Also included in this category, are Philadelphia Coca-Cola Bottling Co.'s CEO J. Bruce Llewellyn, Pepsi-Cola of Washington D.C. CEO Earl G. Graves and the late Stanley Scott, the former CEO of Crescent Distributing Co., the New Orleans beer distributorship. These black business owners have benefited from entrepreneurial skill, access to capital, and the vision and determination to seize opportunities wherenever they are found.

Looking Ahead, Defying The Odds

As the BE 100s move into their third decade, it is tempting to speculate on how the list might change. While no one can prdict with certainly which industries will produce the most successful black-owned businesses, some observations based on the past might be instructive.

Current trends suggest that the road ahead will not be easy. Economic growth through the 1990s is expected to be modest compared with the experience of the last decade. The continuing presence of a large federal budget deficit, coupled with major problems in real estate and financial institutions, will place a damper on economic growth which, in turn, will affect the opportunities available to black business owners. At the same time, an increasing number of black professionals, many with advanced degrees in business, finance and law, are gaining valuable experience in management, financial planning, marketing and other business operations. These aspiring executives have a strong interest in becoming business owners, and will undoubtedly seek such opportunities.

There is also evidence that the CEOs of the BE 100s are interested in opportunities for growth through acquisition. While mergers and acquisitions between firms on the list are rare, the larger black-owned companies show strong interest in expansion through acquiring smaller black-owned or non-black-owned companies in the same or related industries. Several BE INDUSTRIAL/SERVICE 100 companies, such as The Maxima Corp. and H.J Russell, have grown largely through this method.

Finally, as the nation's economy continues to evolve with strong growth in the service sector, it is likely that several new firms from that group will be added to the list in the next decade. In particular, one or two major black-owned health care providers could make the list within the next few years. Another industry to watch is entertainment, where a new cadre of black filmmakers and distributors, cable companies and radio and television station owners are making their mark. (Note the emergence of Black Entertainment Television Holdings Inc., Granite Broadcasting Corp., Rush Communications and American Urban Radio Networks on the BE INDUSTRIAL/SERVICE 100 list.

The experience of the past two decades demonstrates the ability of black entrepreneurs to take advantage of business opportunities and to find a way to succeed against the odds. Despite often unfavorable economic conditions, barriers to capital markets and inhospitable public policy, many black business owners have steadily increased the size, diversity, and market share of their firms. Progress made by black businesses during the past decade, in particular, should inspire optimism about the potential for the BE 100s to continue their growth and diversity into the 21st century.

Bernard E. Anderson, a member of the BE Board of Economists, with additional reporting by Alfred A. Edmond Jr.
COPYRIGHT 1992 Earl G. Graves Publishing Co., Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:20 Years of Black Business Leadership; includes related article on black economic achievements since June 1973
Author:Anderson, Bernard E.
Publication:Black Enterprise
Date:Jun 1, 1992
Previous Article:A decade in review.
Next Article:Where are they now?

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