CRAINS CHICAGO BUSINESS OCTOBER 1, 2012

45

DINING

Steak, Texas-style
Ill Forks in the New Eastside
PAGE 48

LIFE
THE BUSINESS OF
e-mail: life@chicagobusiness.com

SOCIETY

Meet the new boss

Mellody Hobson fills Maggie Daleys shoes.
PAGE 49

Rock n roll fantasy

Half music palace, half country club, the Shed in Highland Park offers an upscale place to jam
BY STEVE HENDERSHOT
The classic-rock cover band Borrowed Time is settling into a Thursday night rehearsal in Highland Park. The guitars, amplifiers and drums are straight out of rock-n-roll central casting; theres even a painting of ZZ Top overlooking the stage. Yet something about Borrowed Time doesnt eactly scream authenticity. Maybe its the business-casual look of guitarist Michael Sommerfiled. Or the dentists-office scrubs that his brother, guitarist and lead singer Steve Sommerfeld, is sporting. Or its when the practice spaces owner calls out, Whos got the Lexus truck? The lights are on! and drummer Bob Mansfield heads outside because, it turns out, he has left his SUV unlocked and running. Welcome to the Shed: half music palace, half country club. Last winter, Jimmy Schiffman spent $250,000 to trick out an industrial park unit that had been a home-furnishings showroom; the Shed opened in March. Mr. Schiffmans goal is to create a clubhouse for well-off suburbanites who would rather spend their time and discretionary income on electric guitars than, say sailboats, yet who
See SHED on Page 46

FOR US, ITS NOT ABOUT PERFORMING LIVE OR MAKING MONEY. ITS ABOUT FINDING A PLACE TO BLOW OFF STEAM, PLAY MUSIC AND SPEND SOME TIME AWAY FROM REAL LIFE.
Michael Sommerfeld

OCTOBER 1, 2012 CRAINS CHICAGO BUSINESS

SHIA KAPOS
TAKES NAMES

Of the 45,000 runners hitting the streets Sunday for the Bank of America Chicago Marathon, Carl Allegretti is among a small group who isnt looking to shave his time. After finishing 67 marathons, 10 of them in Chicago, its hard to keep track, says the 51-year-old chairman and CEO of Deloitte Tax LLP in Chicago. His times have progressively risen since his best of 3:59 some years ago, but Mr. Allegretti hasnt lost his dedication to the sport he picked up in 1983 after playing football for Butler Univertsity. He wakes at 3:30 a.m. each day to exercise, alternating long runs with biking and weightlifting. Its incredibly stressful to be CEO of a $2 billion business. Running is a way to manage the stress. And its a good way to socialize with younger people, he says. Five years ago, running the Carl Allegretti marathon became more than a stress-buster or icebreaker with younger employees. In 2007, my son was diagnosed with cancer. He was cured by Childrens Hospital (of Chicago), so now I run to raise money for the hospital, he says. Each year, Mr. Allegretti pulls in tens of thousands of dollars on behalf of Childrens. Not surprisingly, other executives on the marathon treadmill have found ways to harness that runners high to broader goals. Robert Marshall, 58, vice president for U.S. restaurant operations at Oak Brookbased McDonalds Corp., started runITS ning as a way to combat his asthma. INCREDIBLY After doing the Chicago marathon in STRESSFUL TO BE CEO 1997, he was hooked. He has run 11 OF A $2 BILLION Chicago marathons and one Boston. In 2006, he organized 34 McDonBUSINESS. RUNNING alds employees to run the marathon IS A WAY TO MANAGE to raise money for Ronald McDonald THE STRESS. Charities. They raised $39,000. On Sunday, 440 employees will have raised Carl $750,000 for the charity. Allegretti Running provides a lot of peace and tranquility in my life, says Mr. Marshall, whose race times range between 4:30 and 5 hours. This year will be different because hes recuperating from rotator cuff surgery. My goal is to finish still wearing my sling, he says. James Jenness, 66, chairman of Battle Creek, Mich.-based Kellogg Co. and former CEO of the cereal company, says it should be no surprise that executives with busy schedules embrace rigorous running regimes come hell or shoulder tears. Running helps with discipline and focus. It keeps you active and engaged, says Mr. Jenness, who lives in Chicago and is chairman of the board of trustees at DePaul University. To illustrate the point, note that in the four weeks leading up to the marathon, Mr. Jenness spent three of them traveling to India, Singapore, the United Kingdom and Bogota, Colombia. He still ran 60 miles a week. The trick is, as soon as youre in the hotel room you dont unpack. You just grab your running stuff and go, says Mr. Jenness, who hopes to finish this years race at 3:45, a little higher than last years 3:42. Robert Pasin, 43, CEO of Chicago-based Radio Flyer Inc., says he falls in that category of no longer wanting to obsess about his race time, though he admits to some bathroom ingenuity to keep his time down. He discreetly slides an empty plastic bottle up his shorts and urinates in it while standing in the corral before the race begins. Mr. Pasin has run 14 marathons, including a 50-miler last year. In 2009, he raced the Chicago Marathon at 3:20, which allowed him entry into the Boston Marathon. Since then, Im just interested in staying in shape. My goal is to be fit enough to run a marathon anytime. If someone calls and says, Lets do a marathon this weekend, I want to say yes. It hasnt happened yet, but Mr. Pasin says hell be ready when it does. Contact: skapos@crain.com

Marathon men in the corner office

10 OCTOBER 1, 2012 CRAINS CHICAGO BUSINESS

New group of investors supporting entrepreneurs

INCUBATORS from Page 3

technology equipment and services company CDW, which sponsors Excelerate. BlueCross BlueShield Venture Partners L.P. has a more traditional approach, taking a small ownership stake that could become a larger investment. But its also using the programs to survey innovations. What I thought was attractive about it was that the Blues could have this front-row seat at the frontier of innovation, says Paul Brown, managing director of BlueCross BlueShield Venture Partners, which has invested in a health care-oriented accelerator called Healthbox. Yael Hochberg, an assistant finance professor at Northwestern Universitys Kellogg School of Management, recently produced a list of the top accelerators. Only

one Chicago program, Excelerate, made the list. Many others were either too new to include or didnt meet certain criteria, such as offering a demonstration day for potential investors. Valuable programs connect founders to venture capitalists, she says. What some of these programs do is keep in business certain startups that should be failing right away, says Ms. Hochberg, who wasnt referring to any specific groups. While some programssuch as Silicon Valley venture capitalist Adeo Ressis Founder Institute Inc.are based outside Chicago, most of the citys programs are homegrown. Open Table Inc. founder Chuck Templeton is leading Impact Engine LLC, an accelerator with a social bent supported by Leo Burnett and Coinstar. Lightbank Start, a program

created by Groupon Inc. backers Eric Lefkofsky and Brad Keywell that targets university student entrepreneurs, offers as much as $100,000 in exchange for half a startups ownership. But most programs provide less funding and take a smaller stake. Many of the venture capitalists backing the programs mainly want an opportunity to get to know

founders and be first in line for a follow-on investment. Others charge for their services. Founder Institute requires a $900 payment for its fourmonth course, and gives participants a single-digit share of collective class returns. Extraordinary Success LLC charges $299 to $499 per month for space and varying levels of access to men-

toring and events. We dont have a funding avenue for them at this point, says Jason Jacobsohn, director of the year-old Chicago chapter of Mountain View, Calif.-based Founder Institute. Most of them arent ready for that at this point anyway. Contact: lmarek@crain.com

Beam bets drinking tastes will turn to whiskey, bourbon

BEAM from Page 3

Northrop Grumman Corp.s plant in Roling Meadows won a contract to develop a next-generation anti-missile system.

Boeing, Navistar brace for defense cuts

anti-missile system that the Army and Marines want on every helicopter and is competing for a production contract worth upward of $2 billion in years ahead. Their ability to land new contracts in the face of cuts is important not only for their own bottom lines but also the regions myriad defense subcontractors. While other states are far more dependent on military outlays, George Mason Universitys Center for Jeff Palombo Regional Analysis in Arlington, Va.,a says Illinois would lose 23,245 defense-related jobs and 30,411 nondefense jobs by 2015 if Congress begins slashing $1 trillion from military outlays over the next nine years. When we talk about how we protect ourselves around the Defense Departments budget, its about engineering and manufacturing jobs, says Jeff Palombo, senior vice president and
DEFENSE from Page 3

general manager of Los Anglesbased Northrops 50-acre, 2,100employee plant in Rolling Meadows, by far the states largest defense contractor in terms of employment. Northrop built the suburban Chicago factory in 1968 shortly after it acquired Hallicrafters Co., a privately owned radio manufacturer in Chicago, which now makes electronic gear that protects aircraft from heat-seeking missiles and warns pilots when they are detected by enemy radar. The anti-missile system for helicopters is already being tested in the lab, says Mr. Palombo, adding that the Army wants mature, low-risk technology to avoid cost overruns and were much more mature than others. Budget pressures also could help Boeing sell more Super Hornets, which at roughly $60 million apiece cost about half as much as a Joint Strike Fighter. A few years ago, the idea of more F-18s seemed quite improbable, but now it seems more likely, says Loren Thompson, chief operating officer of Lexington Institute, a military think tank in Arlingt-

on, Va. The Navy knows the plane and likes it at a time when its replacement is looking pretty pricey. As now planned, Boeing will receive $15.5 billion for research, production and upgrades of the Super Hornet between last year and 2017, but funding declines at 10 percent a year, according to Avascent Group, a defense consulting firm in Washington. To keep costs down, any additional Super Hornets need to be ordered soon because it takes a long time to obtain some parts and materials. Production of the F/A-18 at Boeings St. Louis plant is now slated to end in 2015. For Navistar, defense had been one of its few bright spots. No longer in the running on the Armys troop transporter, the company will have to look elsewhere for a return to defense sales that leapt to $1.5 billion in 2007 and $4.8 billion in 2008. Sales held well above $1 billion for three more years but are winding down. Contact: pmerrion@crain.com

joined the company in 2009 from the United Kingdoms Cadbury PLC, says the distillers future depends increasingly on new products. Were agile, he told analysts at a conference in early September. Were entrepreneurial. Red Stag shows the payoff of trend-riding innovation. Sales of the black-cherry-flavored whiskey have increased more than 30 percent annually since it was introduced in 2009 to compete with flavored vodkas. That outpaces even Makers Mark, whose sales rose 29 percent in the first half of this year from a year earlier. (Beam also has had a smash with its ready-to-serve, low-calorie Skinnygirl drink line; its sales more than quintupled last year.) Red Stag is winning over the Skinnygirl crowd, too. While women consume 20 percent of traditional bourbon, they account for 40 percent of flavoredbourbon sales, according to Beam. The companys newest product, Jacobs Ghost, which has been in the works for two years, will launch in January. The liquor replicates founding father Jacob Beams unaged white whiskey, which Beam executives hope also will appeal to the same market not entirely sold on bourbonvodka drinkers and women. Many consumers have rediscovered bourbon, and the development of both flavored bourbons and offerings in the super-premium category conWHITE WHISKEY

tinue to pique their interest, says David Ozgo, chief economist at the Distilled Spirits Council of the United States, a Washington-based trade association. Plenty of advertising helps. Beam has boosted its marketing outlays by double-digit percentages in each of the past three years, to $358.7 million in 2011. It plans another double-digit hike this year, to 16.5 percent of revenue. Thanks mostly to growing sales in the U.S., Mr. Shattock says Beams earnings per share should rise more than 10 percent this year. Annual sales are on track to increase 8 percent, to roughly $2.45 billion. Beam emerged as a pureplay spirits company with 3,300 employees last October after Fortune Brands split in three, spinning off Fortune Brands Home & Security Business Inc., also based in Deerfield, and selling its Acushnet golf unit. Its stock, which as Fortune Brands had lagged its liquorindustry peers and the Dow Jones food and beverage index, is up 12 percent this year. But rivals still are doing better. Brown-Forman has gained 20 percent, while Diageo is up 30 percent and Constellation Brands Inc. has surged 58 percent. As you talk about innovationstaying ahead of the curve, taking advantage of trends and not only reacting to them, but staying ahead of themBeam has done a good job of this, Technomics Mr. Henkes says.
MARKETING SURGE

20

OCTOBER 1, 2012 CRAINS CHICAGO BUSINESS

ravel & Leisure magazine ranks the Waldorf Astoria Chicago the best large-city hotel in the continental U.S. and the 22nd-best hotel in the world. Meanwhile, Cond Nast Traveler readers give the Waldorf Astoria a 98 percent service score; the next-highest in Chicago is the Peninsula Hotel, at 95 percent. Waldorf Astoria managers know they have plenty of competition in Chicago. Were in the luxury market, says Richard Evanich, 54, general manager at the Gold Coast hotel, which until earlier this year was the Elysian. Everyone has great rooms, great bedding and beautiful suites. What will separate us from the competition? The answer is personal, focused service. The trick to carrying out that service: hiring people who delight in making others happy, and hiring a lot of them. The hotel employs 308 people, making the ratio of staff to customers about 2-to-1, which is the standard in the luxury hotel market.

Waldorf Astoria: Keep workers happy

ing to front desk, meet to discuss service, and bring comments and suggestions from staff. One example: A hostess at Balsan, the hotels restaurant, said she was too busy to personally greet all breakfast customers each morning. The solution: The hostess would send a single text mes-

Richard Evanich, center at left, at one of two daily manager meetings on customer service. At right, a toothbrush for scrubbing the shower is one of Liyouwork Ayalews bathroom-cleaning tools; bartender Mike Kennedy gets ready for lunch service

THAT IMPULSE TO CARE ABOUT SOMEONE ISNT SOMETHING YOU CAN TEACH.
Reneta McCarthy, senior lecturer, Cornell University School of Hotel Administration

The hotel hires painstakingly.Only 30 percent of applicants make it through the first interview, during which Kathryn Day, head of guest services, tries to discover whether the applicant has a servant heart. She asks them the nicest thing theyve done for anyone and how they react when someones angry. Then she listens for detail and observes how candidates process the question. Experts say its the right way to hire in the hotel business. That impulse to care about someone isnt something you can teach, says Reneta McCarthy, senior lecturer in operations management at Cornell Universitys School of Hotel Administration in Ithaca, N.Y. Promising applicants sit for as many as six interviews, and the last is with Mr. Evanich. I want to see everyones face, he says. Once theyre on board and trained, employees are coddled almost as much as they coddle guests. Their opinion matters. Twice a day, 15 managers, from housekeep-

CRAINS CHICAGO BUSINESS OCTOBER 1, 2012

21

WALDORF ASTORIA CHICAGO

General manager: Richard Evanich, 54 Number of rooms: 188 Number of employees: 308 Rack rate: $595 in high season, $555 during off season Service secret: You have to take care of your internal customer, Mr. Evanich says. Why it works: Ultimately it is the employees who take care of the guests, right? says Reneta McCarthy, senior lecturer in operations management at Cornell Universitys School of Hotel Administration in Ithaca, N.Y. If the managers take care of their employees, then the employees can do what they were actually hired for and take care of the guests.

sage, Crunch at Balsan, to the entire staff, including Mr. Evanich and Ms. Day, as a signal that she needed help greeting and seating guests. Today, the crunch text is used throughout the hotel, whenever a department needs a hand GENEROUS PRAISE Employees who deliver stellar service are praised, and often. Mr. Evanich reads complimentary comment letters aloud at weekly management meetings and pins the letters on a staff bulletin board. Employees also are treated to summer picnics and boat cruises, and get a birthday card signed by management. The recognition piece is really big, Mr. Evanich says. He learned his management style from J.W. Marriott Sr., when Mr. Evanich worked at the Camelback Resort in Scottsdale, Ariz. He said, Take care of your employees, and your employees will take care of your guests, Mr. Evanich recalls. He was right. Employees take criticism to heart. A guest asked for a description of the artwork hanging in the hotels public areas. Edward Tobin, 50, chief concierge, gave the guest a black-and-white photocopy listing the art. Later, the guest told Mr. Tobin that the blackand-white copy was disappointing. Mr. Tobin had a four-color brochure printed, mailed one to the guest at his home and enclosed a handwritten letter thanking the guest for his feedback. Waldorf Astoria employees reward for delivering this service is praise from their bosses and their paychecks; the hotel does not permit tipping. The idea is to make people feel like guests in the true sense of the word. You wouldnt tip at a friends house, would you? Ms. Day says. Customers say they feel the love the Waldorf Astoria be-stows on employees. Chad Hardy, a health care consultant who lives in Spring, Texas, spends 160 nights a year in Chicago on business. Mr. Hardy, 38, usually stays near OHare International Airport, but last spring, he brought his family and splurged on the Waldorf Astoria. It was Mr. Hardys first stay at the hotel. Three days before they arrived, Mr. Hardy got a call from Raoul, his personal concierge at the Waldorf. When asked if there was anything he needed, Mr. Hardy requested cereal bowls for the Quaker Oatmeal Squares he has for breakfast every day. Raoul delivered the bowls and spoons, and the entire staff responded to service requests from Mr. Hardy in three minutes, not 30, he says. It seems folks always knew what they were doing.

4 OCTOBER 1, 2012 CRAINS CHICAGO BUSINESS

THE INNOVATORS

Abbott Laboratories is trying to shrug off a serious ethical breach that calls into question the fitness of the top executive in its multibillion-dollar pharmaceutical business. Investors shouldnt let it get away with that. As my colleague Andrew Wang reported Thursday, Abbott falsely stated in nine federal filings over a six-year period that Executive Vice President Richard Gonzalez held degrees in biochemistry from the University of Houston and the University of Miami in Florida. In fact, he never earned a degree anywhere. The revelation comes at a particularly sensitive time for Mr. Gonzalez and Abbott, which is spinning off its pharmaceutical business into a separate company, to be called AbbVie, with Mr. Gonzalez as chairman and CEO. Asked about discrepancies in Mr. Gonzalezs bio, an Abbott spokeswoman says it was only an administrative error. I dont buy it. The false information came from somewhere,

There are good reasons they take such care. First of all, theres that old-fashioned concept of honesty. When you make a statement, you should do your best to verify that its true. Then theres the legal obligation under securities laws, which prohibit material falsehoods in company statements to investors. People go to prison for intentionally misleading shareholders. Statements about educational degrees are among the most easily verifiable assertions around. A quick call to the university in question will tell you if its true or false. Abbott wont discuss its efforts, or lack thereof, to verify the educational credentials ascribed to Mr. Gonzalez in SEC filings from 2002 through 2007, when he retired briefly from the company. My guess is nobody checked. More likely, everyone simply relied on the word of Mr. Gonzalez or one of his underlings. Abbott learned at some point it wont say when that Mr. Gonzalez never earned the degrees ABBOTT NEEDS TO DO MORE TO previously credited to him. Recent descripEARN BACK INVESTORS TRUST. tions of his background have been reand Mr. Gonzalez has to be at worded to say he attended the top of the list of likely the University of Houston. Abbott needs to do a lot sources. And if he didnt gild his rmore than that to earn back sum himself, its a stretch to the trust of investors. It should imagine that he didnt someconduct a thorough investigahow know the falsehoods were tion to determine who providpublished. The only way he ed the false information. It couldnt have known is if he, should also examine its interthe No. 2 executive at Abbott, nal procedures to find out how went for six years without the information went into reading his biographical inforproxy statements unchecked mation in the companys proxy for years. statements. Those responsible for the While this might exculpate misstatements must be held him from dishonesty, it would accountable. That includes Mr. be a lapse that doesnt exactly Gonzalez if he was the source, engender faith in his judgment or if it is determined that he or attention to important matknew false information about ters, things investors rightly exhis credentials had been pubpect from a CEO. lished and he said nothing. It would raise similar quesRank-and-file employees who tions about the companys inare found to have falsified inforternal controls. Companies mation on job applications rouhave detailed procedures for tinely are dismissed from their preparing annual proxies and jobs. There should be no excepverifying their accuracy before tion for senior executives. theyre sent out to the investing public. Contact: jcahill@crain.com
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Should you trust this Abbott executive?

Krafts winning squeeze play

What makes liquid drink-mix dispenser Mio a hit? Its the bottle
BY KATE MACARTHUR

The grocery business is brutal: Nine of every 10 new products never amount to anything, according to market research. So when a Kraft Foods Inc. employee pitched the idea of a concentrated liquid version of powdered drink mixes, the bosses would have been justified in taking a pass. Instead, they drafted a duo of product developers to create a pocket portable dispenser to better its chances. In March 2011, their hip little squeeze bottle made its debut as Mio, which roughly translates to mine in Italian. The launch was Krafts biggest in more than a decade. Within a year, sales hit $100 million. Mio also helped establish a new product category, an adjunct to Krafts Kool-Aid and Crystal Light, which dominate the $1 billion-a-year powdered beverage business.

The notion for Mio came out of Krafts 2010 Innovation Days, an annual science fairtype expo where employees bring their product ideas to management. From there it went to Shelley Markoulis and Gary Albaum of the beverage research, development and quality team to produce package prototypes for consumer testing. Ms. Markoulis, 51, is a senior group leader who has worked at the Northfield-based company for 22 years. Mr. Albaum, 41, is a senior associate principal engineer; hes on his second tour of duty at Kraft after a four-year stretch at Clairol, now owned by Procter & Gamble Co. Their aim was to fashion a container that would be easy to carry, open, dispense its flavored content and reclose. They also wanted the device to be intuitive. People said, I dont want to have to learn how to use this, Mr. Albaum says. They just wanted it to work. To stand out on store shelves, Mios bottle also had to reinforce the idea of a liquid concentrate in a cool way. We were really chall-

enged to make it look like a drink. Ms. Markoulis says. Above all, the bottles had to be spillproof to prevent messy leaks in a pocket or purse. People said, Theres no way I will carry this if its not secure, she says. With help from an outside design team, some 18 R&D colleagues built and tested an array of shapes. They finally decided on a water-drop-shaped, flip-top bottle that could survive bumps and falls during shipping and three pounds of pressure without leaking. Reaching $100 million in firstyear sales is an achievement, even for a packaged-foods giant like Kraft. Just one in 200 new products soared that high over the past decade, according to SymphonyIRI Group Inc., a market researcher in Chicago. Packaging can make a huge difference in a consumer products fate, says John Sicher, editor and publisher of beverage trade newsletter Beverage Digest in Bedford Hills, N.Y. One need only recall the multidecade impact of Cokes contour bottle. Years from now that may be true of Mios shapely bottle, too.

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RideAlong Enclosed in Edition 02.

CRAINS CHICAGO BUSINESS OCTOBER 1, 2012

45

LIFE
THE BUSINESS OF
e-mail: life@chicagobusiness.com

Rock n roll fantasy

Half music palace, half country club, the Shed in Highland Park offers an upscale place to jam
BY STEVE HENDERSHOT
The classic-rock cover band Borrowed Time is settling into a Thursday night rehearsal in Highland Park. The guitars, amplifiers and drums are straight out of rock-n-roll central casting; theres even a painting of ZZ Top overlooking the stage. Yet something about Borrowed Time doesnt eactly scream authenticity. Maybe its the business-casual look of guitarist Michael Sommerfiled. Or the dentists-office scrubs that his brother, guitarist and lead singer Steve Sommerfeld, is sporting. Or its when the practice spaces owner calls out, Whos got the Lexus truck? The lights are on! and drummer Bob Mansfield heads outside because, it turns out, he has left his SUV unlocked and running. Welcome to the Shed: half music palace, half country club. Last winter, Jimmy Schiffman spent $250,000 to trick out an industrial park unit that had been a home-furnishings showroom; the Shed opened in March. Mr. Schiffmans goal is to create a clubhouse for well-off suburbanites who would rather spend their time and discretionary income on electric guitars than, say sailboats, yet who
See SHED on Page 46

FOR US, ITS NOT ABOUT PERFORMING LIVE OR MAKING MONEY. ITS ABOUT FINDING A PLACE TO BLOW OFF STEAM, PLAY MUSIC AND SPEND SOME TIME AWAY FROM REAL LIFE.
Michael Sommerfeld

SOCIETY

SPECIAL

DINING

Meet the new boss

Mellody Hobson fills Maggie Daleys shoes.
PAGE 49

Pull Out Poster

Guide for Start-ups and entrepreneurs
PAGE 47

Steak, Texas-style
Ill Forks in the New Eastside
PAGE 48

10 OCTOBER 1, 2012 CRAINS CHICAGO BUSINESS

Beam bets drinking tastes will turn to whiskey, bourbon

joined the company in 2009 from the United Kingdoms Cadbury PLC, says the distillers future depends increasingly on new products. Were agile, he told analysts at a conference in early September. Were entrepreneurial. Red Stag shows the payoff of trend-riding innovation. Sales of the black-cherry-flavored whiskey have increased more than 30 percent annually since it was introduced in 2009 to compete with flavored vodkas. That outpaces even Makers Mark, whose sales rose 29 percent in the first half of this year from a year earlier. (Beam also has had a smash with its ready-to-serve, low-calorie Skinnygirl drink line; its sales more than quintupled last year.) Red Stag is winning over the Skinnygirl crowd, too. While women consume 20 percent of traditional bourbon, they account for 40 percent of flavoredbourbon sales, according to Beam. The companys newest product, Jacobs Ghost, which has been in the works for two years, will launch in January. The liquor replicates founding father Jacob Beams unaged white whiskey, which Beam executives hope also will appeal to the same market not entirely sold on bourbonvodka drinkers and women. Many consumers have rediscovered bourbon, and the development of both flavored bourbons and offerings in the super-premium category conWHITE WHISKEY BEAM from Page 3

tinue to pique their interest, says David Ozgo, chief economist at the Distilled Spirits Council of the United States, a Washington-based trade association. Plenty of advertising helps. Beam has boosted its marketing outlays by double-digit percentages in each of the past three years, to $358.7 million in 2011. It plans another double-digit hike this year, to 16.5 percent of revenue. Thanks mostly to growing sales in the U.S., Mr. Shattock says Beams earnings per share should rise more than 10 percent this year. Annual sales are on track to increase 8 percent, to roughly $2.45 billion. Beam emerged as a pureplay spirits company with 3,300 employees last October after Fortune Brands split in three, spinning off Fortune Brands Home & Security Business Inc., also based in Deerfield, and selling its Acushnet golf unit. Its stock, which as Fortune Brands had lagged its liquorindustry peers and the Dow Jones food and beverage index, is up 12 percent this year. But rivals still are doing better. Brown-Forman has gained 20 percent, while Diageo is up 30 percent and Constellation Brands Inc. has surged 58 percent. As you talk about innovationstaying ahead of the curve, taking advantage of trends and not only reacting to them, but staying ahead of themBeam has done a good job of this, Technomics Mr. Henkes says.
MARKETING SURGE

Boeing, Navistar brace for defense cuts

anti-missile system that the Army and Marines want on every helicopter and is competing for a production contract worth upward of $2 billion in years ahead. Their ability to land new contracts in the face of cuts is important not only for their own bottom lines but also the regions myriad defense subcontractors. While other states are far more dependent on military outlays, George Mason Universitys Center for Regional Jeff Palombo Analysis in Arlington, Va., says Illinois would lose 23,245 defense-related jobs and 30,411 nondefense jobs by 2015 if Congress begins slashing $1 trillion from military outlays over the next nine years. When we talk about how we protect ourselves around the Defense Departments budget, its about engineering and manufacturing jobs, says Jeff Palombo, senior vice president and general manager of Los What I thought was attractive about it was that the Blues could have this front-row seat at the frontier of innovation, says Paul Brown, managing director of BlueCross BlueShield Venture Partners, which has invested in a health care-oriented accelerator called Healthbox. Yael Hochberg, an assistant finance professor at Northwestern
DEFENSE from Page 3

Northrop Grumman Corp.s plant in Roling Meadows won a contract to develop a next-generation anti-missile system.

Angles-based Northrops 50-acre, 2,100-employee plant in Rolling Meadows, by far the states largest defense contractor in terms of employment. Northrop built the suburban Chicago factory in 1968 shortly after it acquired Hallicrafters Co., a privately owned radio manufacturer in Chicago, which now makes electronic gear that protects aircraft from heat-seeking missiles and warns pilots when they are detected by enemy radar. The anti-missile system for helicopters is already being tested in the lab, says Mr. Palombo, adding that the Army wants mature, low-risk technology to avoid cost overruns and were much more mature than others. Budget pressures also could help Boeing sell more Super Hornets, which at roughly $60 million apiece cost about half as much as a Joint Strike Fighter. A few years ago, the idea of more F-18s seemed quite improbable, but now it seems more likely, says Loren Thompson, chief operating officer of Lexington Institute, a military think tank in ArlingUniversitys Kellogg School of Management, recently produced a list of the top accelerators. Only one Chicago program, Excelerate, made the list. Many others were either too new to include or didnt meet certain criteria, such as offering a demonstration day for potential investors. Valuable programs connect founders to venture capitalists, she says. What some of these programs do is keep in business certain startups that should be failing right away, says Ms. Hochberg, who wasnt referring to any specific groups. While some programs such as Silicon Valley venture capitalist Adeo Ressis Founder Institute Inc.are based out-side Chicago, most of the citys programs are homegrown. Open Table Inc. founder Chuck Templeton is leading Impact Engine LLC, an accelerator with a social bent supported by Leo Burnett and Coinstar. Lightbank Start, a program created by Groupon Inc. backers Eric Lefkofsky and Brad Keywell that targets

ton, Va. The Navy knows the plane and likes it at a time when its replacement is looking pretty pricey. As now planned, Boeing will receive $15.5 billion for research, production and upgrades of the Super Hornet between last year and 2017, but funding declines at 10 percent a year, according to Avascent Group, a defense consulting firm in Washington. To keep costs down, any additional Super Hornets need to be ordered soon because it takes a long time to obtain some parts and materials. Production of the F/A-18 at Boeings St. Louis plant is now slated to end in 2015. For Navistar, defense had been one of its few bright spots. No longer in the running on the Armys troop transporter, the company will have to look elsewhere for a return to defense sales that leapt to $1.5 billion in 2007 and $4.8 billion in 2008. Sales held well above $1 billion for three more years but are winding down. Contact: pmerrion@crain.com university student entrepreneurs, offers as much as $100,000 in exchange for half a startups ownership. But most programs provide less funding and take a smaller stake. Many of the venture capitalists backing the programs mainly want an opportunity to get to know founders and be first in line for a follow-on investment. Others charge for their services. Founder Institute requires a $900 payment for its four-month course, and gives participants a single-digit share of collective class returns. Extraordinary Success LLC charges $299 to $499 per month for space and varying levels of access to mentoring and events. We dont have a funding avenue for them at this point, says Jason Jacobsohn, director of the year-old Chicago chapter of Mountain View, Calif.-based Founder Institute. Most of them arent ready for that at this point anyway. Contact: lmarek@crain.com

New group of investors supporting entrepreneurs

INCUBATORS from Page 3

technology equipment and services company CDW, which sponsors Excelerate. BlueCross BlueShield Venture

Partners L.P. has a more traditional approach, taking a small ownership stake that could become a larger investment. But its also using the programs to survey innovations.