Minority business: the new wave - includes related bibliography - Cover Story

Nation's Business, Oct, 1995 by Sharon Nelton

College enrollments of African-Americans nearly quadrupled in less than one generation-from 300,000 in 1965 to 1,107,000 in 1980--says Timothy Bates, professor of labor and urban affairs at Wayne State University, in Detroit. Whereas education was the popular major among blacks in 1965, he says, business had become the most popular field of study among graduating black males by the mid-1970s.

Most entrepreneurs launch substantive businesses while in their late 30s or their 40s, after having gained 15 or 20 years of experience, says Bates. "Thus, the full impact of the educational gains of the late 1960s and 1970s is reflected in the number and the nature of the business formations under-taken by African-Americans in the late 1980s and 1990s."

Well-established companies are buying from minority businesses as never before. Corporations that are members of the National Minority Supplier Development Council now purchase more than $23 billion in goods and services annually from minority firms--compared with $86 million in 1972, when the council was chartered.

Other companies are forming effective alliances with minority businesses. When PepsiCo, Inc., sent a message to its divisions that it wanted to strengthen its efforts in minority-business development, Frito-Lay, Inc., its snack unit, decided to find a way to increase minority purchasing in the areas where it spent the most money, such as corn, potatoes, seasonings, and packaging. When the company could not find a minority supplier in the area of packaging, it decided to help create one.

Bob Johnson was with Sears when Frito-Lay urged him to accept an invitation from Bagcraft Corporation of America, a white-owned company in Chicago, to buy a controlling interest in its Atlanta flexible-packaging manufacturing plant, a Frito-Lay supplier. Johnson purchased 51 percent and recruited Rhonda to join the resulting firm, Bagcraft-Atlanta, Inc., and learn the business.

When Frito-Lay needed a newer packaging technology, however, the partnership with Bagcraft was dissolved, and in 1991, at Frito-Lay's suggestion, the Johnsons formed a joint venture with Thomas J. Bryce of the Bryce Corp. The Bryce firm, a white-owned flexible-packaging company in Memphis, had the technology Frito-Lay needed.

The Johnson family owns 51 percent of Johnson Bryce, which is located near the Bryce facilities and purchases some services, including technical and engineering support, from Bryce. While Frito-Lay did not finance the new venture, it did commit to being Johnson Bryce's first customer. Johnson Bryce has since added Procter & Gamble to its client list.

"It's such a win-win type of situation," says Bob Johnson, who now works with Johnson Bryce full time. "[Frito-Lay] gets the same product at the same cost as they would get anyplace else." In addition, he says, Frito-Lay gets the satisfaction of knowing it has assisted in minority-business development, the banks benefit from a good loan, and the Bryce Corp. participates in a profitable business. And Johnson and his family "get the opportunity to participate in this very vital, central part of America."