Chicago May be Losing Cachet, but Buffett Still Likes It

(MoneyWatch)  An October 2000 cover story in BusinessWeek magazine caused quite a stir. Chicago is a "great, livable city," the magazine declared, but it was losing its status as a global business center.

That was five years before the takeover of the storied retailer Marshall Field by Macy's and eight years before Monday's news that an even more iconic Chicago company, Wm. Wrigley Jr. Co., would be taken over by Mars. Inc.

Such deals carry a lot of symbolic weight, of course, but that doesn't mean they are meaningless. As Reuters pointed out Monday, the $23 billion deal "also chips away at Chicago's claim that it is the chocolate and candy capital of the United States, after losing such nationally recognized brands Fannie May and Brach's."

A look back at that BusinessWeek article makes it clear that this is part of a pattern. Once, Chicago was the rail capital of the country. No more. It was arguably the king of retail cities. No more. Once a money center, Chicago has lost bank after bank, as well as industrial giants such as Morton International and Inland Steel, which have either gone away or been taken over. Such massive departures are far worse than the admittedly sad prospect of the Wrigley Building being renamed or the Cubs playing anywhere but in a place called Wrigley Field. (On the other hand, the South Side White Sox never won a World Series while it played in Comiskey Park, but they did after they started playing in the hideous monstrosity with the horrifying name "U.S. Cellular Field.")

As for food, Chicago still boasts several big names, among them Kraft Foods, McDonald's, and Sara Lee. But even those companies have been struggling, to one degree or another.

Still, Chicago still has many strengths, some of them glossed over by BusinessWeek and other doomsayers. Chiefly, its economy is highly diverse, which in some respects puts it ahead of such industry towns as Hollywood or Silicon Valley. Its manufacturing and service sectors are broad and deep, and have maintained their strength. The city might lose big names, but the small and medium-sized ones tend to take up the slack.

And certainly, Warren Buffet seems to like investing there. As Crain's Chicago Business pointed out Monday, Mr. Buffett, who teamed with Mars on the Wrigley deal, has put big money into Kraft Foods Inc., USG Corp. and Marmon Group, as well as private companies like Pampered Chef and Precision Steel Warehouse.

Mr. Buffett, who has a particular liking for food companies that fit his investment criteria ?€" well-known brands, solid management, good cash flows ?€" might also be interested in Sara Lee or Tootsie Roll Industries, Crain's speculated.