HSBC Spotlight on U.S. Trade
An examination of relative growth rates of international and domestic companies
Upstate New York
A lake freighter transferring its last load of grain before Lake Erie freezes.
Buffalo Skyway in the background.
Spotlight: Upstate New York
Upstate New York has been an important part of the
economic history of the United States, with business in
the region undergoing recent transformation. Perched over
the Erie Canal, the region was the major thoroughfare for
transporting goods from the East Coast to Western United
States by way of the Great Lakes. i Growing out of the
prosperity that came with the boom of transports, the region
cultivated a manufacturing sector in the 19th and early
20th centuries that was competitive on a national scale.ii
Upstate New York is not only a manufacturing hub. The
region is also home to a diverse array of well-established
businesses representing the food and beverage industries,
and a wide range of professional services firms ranging from
environmental consulting to payroll processing. The economic
prospects for the region are bright. New York State fared
better economically during the Great Recession than the
nation as a whole, and better than nearly all other states.iii In
2012, Governor Cuomo pledged an investment of $1 billion to
revive the economy of Buffalo and western New York state.iv
Exports of precious stones and metals, machinery, medical
technology, and pharmaceuticals are driving air cargo growth
in the region. In 2012, this part of the country alone exported
$9.3 billion in machinery by water to markets including China,
India, Germany, South Korea, and Saudi Arabia. According to
the Weissman Center for International Business, New York is
“within distance” of Los Angeles to become the largest trade
region in the nation, and is positioned to potentially even
surpass Los Angeles in that title.v When it comes to opening
the floodgates of trade, Upstate New York would do well to
allow history to repeat itself.
One of the main strengths we’ve found in
Upstate NewYork has been a great labor pool
and a strong work ethic.There are people that
have worked here a long, long time. And we
offer a very exciting place where they can
build a career.
Kevin Neumaier
President
About the Report
Spotlight on U.S. Trade, sponsored by HSBC and the World Trade Center
The purpose of this research is to analyze the following themes with regard
Buffalo Niagara, is a series of reports and analysis of publicly traded companies
to international trade in the region:
in key regions throughout the U.S. The inaugural report is focused on the
• The impact of international trade on the top companies in the region
top 30 publicly-held, non-banking businesses headquartered in Upstate
New York, in the region that includes the greater metropolitan areas of
Rochester, Syracuse, Buffalo-Niagara Falls, and the Capital District (AlbanySchenectady-Troy).
To access the report online, visit: us.hsbc.com/spotlightuny
Detailed methodology is located at the end of this report.
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• The differences between companies with international trade and
those that only sell products/services in the U.S.
• Strategies for continued global expansion and success stories relevant
to other business leaders
Global Businesses in Upstate
New York Fare Better than
Domestic Businesses
Most of the top 30 publicly traded companies in Upstate
New York have grown over the last five years, despite a
challenging economic environment. Global businesses in
Upstate New York have fared better than businesses with
U.S.-only sales, and revenue data for the top 30 publicly
traded companies headquartered in the region demonstrate
that global businesses in the region:
• Enjoy a greater growth rate than domestic businesses
• Earn more net and average revenue
• Continue to widen the revenue gap between global and
domestic businesses
We’re always looking to be opportunistic and
we really don’t let borders get in our way.
David Klein
Senior Vice President, Treasurer
Inside Perspective: Constellation Brands’
approach was to strategically utilize mergers and
acquisitions or invest in joint ventures to grow its
brands internationally. Through the right acquisitions
and resulting insights, Constellation was able to tackle
the unique challenges of each market and find the best
partners, such as financial services, tax and legal
experts, for its needs without having to identify
everything on its own. The company notes that
while this was certainly an advantage, there was
still a lot of work that went into identifying the right
markets, acquisitions and investments, and that their
extensive market research is essential to their success.
Growth Rate Almost 3x Greater
for Global Companies
From 2007 through 2011, global companies in the region have
consistently earned more revenue than domestic ones, even
through the global financial crisis. Both global and domestic
companies were on the decline from 2008 to 2010, and then
posted revenue growth in 2011. In fact, the percentage growth
for global companies in Upstate New York from 2010 to 2011 is
almost three times the growth rate for domestic companies in
the region, 4.59% compared to 1.69% respectively. At the current rate, revenue growth for domestic companies in Upstate
New York is on track with U.S. GDP growth.
During times of decline over the last five years, the drops for
global companies were not as steep as those for domestic companies, with one exception. Domestic companies managed to
increase revenues between 2007 and 2008, potentially not
feeling the effects of the recession as quickly as global companies. From 2007 to 2008, domestic companies on the whole
posted 6.2% growth, while global companies felt their steepest
decline for the five year timeframe, with a decline of -7.19%.
All told, based on the revenue share of global businesses in
the region compared to domestic businesses, it is expected
that we will continue to see global businesses post higher
revenues and greater growth. This would be consistent with
the “two-track economy” (domestic and global) described by
many analysts watching the Dow Jones Industrial Average.vi
Revenue Growth ofTop 30 Publicly Held, Non-Banking Businesses
Headquartered in Upstate NY; U.S. GDP Growth, 2007-2011
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Snapshot of the Region
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Percentage of Top 30 Companies that are
Global vs. Domestic
Revenue Gap is Widening Between Domestic
and Global Companies
A little more than half of the top publicly traded companies
based in Upstate New York earn revenue overseas. Of
the thirty businesses reviewed for this report, seventeen
have international revenue, and thirteen earn their
revenue strictly through domestic sales.
For each year between 2007 and 2011, the top global
businesses in Upstate New York have generated more
revenue than the top domestic businesses. In 2011, global
businesses earned nearly $2.7 billion more than domestic
businesses. The gap between global businesses and
domestic businesses has been steadily widening since 2008.
Top 30 Publicly Held, Non-Banking Businesses
Headquartered in Upstate NY
Industry Categorization of Top 30 Non-Banking Businesses
The majority of businesses on this list report revenues
of less than $1 billion, with an elite few earning well
over this threshold.
Among the top 30 public companies headquartered in
Upstate New York, business services constitutes the
largest industry segment by revenue with $3.4 billion
in combined total revenue, the second largest segment in terms of the number of companies in that industry. Companies that fall into the business services
segment are varied and include Computer Task Group,
Synacor, Paychex, Home Properties, Sovran Self Storage, and OP-TECH Environmental Services.
Headquartered in Upstate NY
The next largest industry presence in terms of revenue is
beverages, with revenue of $3.3 billion, occupied solely
by alcohol manufacturer Constellation Brands. The third
largest segment in the region is aerospace, with Moog
Inc. and Astronics Corporation representing the industry.
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The reality is, if we limited ourselves to
the U.S. market, we would not have
developed the technology that makes us
as strong as we are in the U.S.
Robert Brady
Chairman and CEO
Inside Perspective: Moog began developing
its international business in 1965 when Bill Moog
established the first wholly-owned subsidiary outside
of Stuttgart, Germany. Subsequently, he established
wholly-owned subsidiaries in England, Japan, Italy,
France and Sweden, which all served to build
momentum towards the global scale that Moog
enjoys today. Robert Brady does not consider Moog
to be a U.S.-based company that happens to do
business outside the U.S.; instead, he views it
as an international company that happens to be
headquartered in the U.S. Nevertheless, he recognizes
that business is done differently depending on where
you are: for example, it’s different in Germany than it
is in Italy or France, Japan and China are nothing
alike, and Korea is still different yet. As such, it was
critical that the American employees who were working
for Moog abroad get acquainted with the nuances of
doing business in the different countries.
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Majority of Global Companies
Rose Above Economic Environment
The great news for the Upstate New York region is that most
businesses analyzed have grown since 2007, despite the
challenging economic environment. All but two of the top
manufacturing businesses based in the region have grown
during this period, such as the global distributor of test and
measurement instruments, Transcat, Inc., which posted a
7.6% net growth. All but one of the business services providers
have posted growth over the last five years, with Synacor, a
global provider of internet software tools and portals, showing
the highest net growth in the global set at 18.28%. The
aerospace industry, represented by Moog Inc. and Astronics
Corporation, has grown almost 10% each (9.26% and 8.65%,
respectively). Other noteworthy growth over this time period
includes IEC Electronics Corp.’s 25.28% net growth. IEC
is a domestic provider of electronic manufacturing services
primarily for military and defense systems, transportation
products, wireless communication systems, and medical
systems and instruments.
The average net revenue growth for a top global company in
the region is 2.76%, compared with 1.98% average growth
for domestic companies. We may see even greater growth
for those businesses who now operate domestically but are
showing signs of international expansion, such as Paychex,
Inc. and Plug Power Inc. As noted, Paychex already has a small
operation in Germany, which accounts for less than 1% of
their revenue. Analysts continue to watch the company to see
if it will expand further overseas. Plug Power Inc., a fuel cell
company that currently dominates the North American market,
announced a joint venture in 2011 with French gas distribution company Air Liquide, a move that hasn’t yet yielded
revenue but is noted by some analysts to have the potential
to triple its market share by making the move to sell their
products in Europe.vii
Net Revenue Growth by Company, 2007-2011
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Revenue from Abroad
Continues to Grow
In 2011, there were ten businesses reporting international
revenue close to, or well above the average of 29% for
2011. Those businesses earning just around the average for
the peer set include Ultralife Corporation (31%), Ecology &
Environment (32%), and Anaren (33%). Moving further
above the net average for international revenue are
Constellation Brands (37%), Columbus McKinnon (40%),
Albany Molecular Research (43%), Moog (45%), Taylor
Devices (45%), Performance Technologies (46%), and
Greatbatch (55%). Among these ten businesses, all but
two posted overall revenue growth from 2010 to 2011.
Global Revenue Average, Global Companies, 2007-2011
If I’m a U.S.-only player, I’ve limited the scope
of my growth because the U.S. is only going
to grow at a certain rate. If you’ve got a product
that can compete globally, why wouldn’t you
compete globally?
Greg Rustowicz
Chief Financial Officer
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The Ceiling is Higher
for Global Companies
Total Revenue Distribution, Global vs. Domestic Businesses,
Based on 2011 Revenue
Standard deviation analysis demonstrates that companies
with international sales have a significantly higher revenue
range than domestic companies. The top end of the range for
global companies is $2.5 billion, compared to $1.9 billion
for domestic companies. In addition, the mean revenue
for global businesses is $59 million higher than the mean
revenue for domestic businesses—$642 million compared
to $583 million respectively.
Breakdown of Foreign Revenue
The reported geographical sources of revenue varied widely
from company to company. Based on available data, Europe
was the region with the most reported sales between 20072011. However, sales to this region have declined over this
period. The next largest revenue-generating regions are
roughly equal, and include Canada, Australia/New Zealand
(which is largely a function of Constellation Brands’ heavy
presence in the region), and Asia. Asia is the region showing the most growth across the international revenue data
available. Trade to Canada and Australia/New Zealand has
been relatively steady over the last five years.
Global Revenue by Geographical Region, Global Companies, 2007-2011
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Advice from the Top
When asked about the counsel they would offer U.S.-based
business executives considering global expansion, business
leaders in Upstate New York with considerable global
footprints offer a cautious and measured approach. The unanimous response, is not surprisingly, “do your homework.”
Executives make it very clear —this is difficult work with
considerable hurdles, but it’s work that can benefit your
business exponentially.
More specific advice from business leaders includes:
• Learn the business environment to the best of your
ability – do market studies, get boots on the ground.
• Enlist the help of experts, specifically for financial
services, tax, legal and labor issues.
• Understand the culture and discern the most appropriate
ways to engage the community where you will be
doing business.
• Know that each country is different – there is no one
size fits all for global expansion.
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Go there and understand about what
the business environment is. And get
excellent tax and legal advice.
Get your passport ready, and be ready
to travel. Business is done differently,
depending on where you are.
John Mye
Chief Financial Officer
Robert Brady
Chairman and CEO
You’re not in America anymore, and the
differences in culture, compensation and
go to market strategies need to be adapted
by country. Even very sophisticated
companies make mistakes.
Commission a market study to understand
the market, the size of the market,
who the players are, what the product
needs are, and what you have to do
to be competitive in that market.
David Klein
Senior Vice President, Treasurer
Greg Rustowicz
Chief Financial Officer
Spotlight on
Top Companies in
Upstate New York
On the following pages are the global stories of two of
the largest, publicly traded non-banking businesses in
Upstate New York. Constellation Brands is the largest
global business, with over one-third of its revenue earned
from overseas sales in 2011. Paychex is the top domestic
business in Upstate New York, however, its story is rather
different from the perspective of global vs. domestic.
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Global Importer/Exporter:
Constellation Brands
Constellation Brands is the largest public company headquartered in Upstate New York. The company originated as a
bulk wine trader in 1945 and has become one of the leading
international producers and marketers of wine, spirits and imported beer. Headquartered in Victor, New York, Constellation
Brands has grown through many U.S. and global acquisitions.
In addition to its range of products, Constellation Brands essentially serves as both an importer of foreign wines, as well
as an exporter of U.S. wines across the globe. International
sales account for 37% of Constellation’s 2011 reported revenue,
a figure which has fluctuated slightly over the past five years,
as revenues have declined since the economic crisis took
hold in 2008. The table below illustrates that the portion of
sales that accounts for Constellation Brands’ international
revenue is significantly higher than the average for its peers
in the region. The company derives most of its international
revenue from Canada, Australia and New Zealand.
Constellation Brands, Percentage of Revenue from
International Sales Compared to Average Percentage
of International Revenue for Peer Set
For us it’s figuring out how to get the
balance right between having an appropriate
investment in assets and people in
international in a foreign geography
where we can get a return.
David Klein
Senior Vice President, Treasurer
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Increasing consumer demand in the wine market for AsiaPacific prompted Constellation Brands to open a Hong Kong
office in 2011, where Datamonitor reports the company
already has a strong presence.viii According to Constellation’s
Senior Vice President in Asia, Phillip Kingston, “the China
market, along with the broader Asia region, is very important
to the company.”ix Based on conversations with Constellation’s
Treasurer, it is clear that the company will take a measured
approach to China expansion, developing a business strategy
with copious on-the-ground insights.
America’s Business...
Is Paychex Heading Abroad?
Paychex is a leading provider of payroll, human resource, and
benefits outsourcing solutions for small to medium-sized
businesses. Thomas Golisano founded Paychex in 1971 in
Rochester, New York, with “just $3,000 and a good idea – to
make payroll outsourcing easier and more affordable for small
businesses.”xii The business grew significantly in the late eighties
and early nineties, with multiple service expansions as well as
substantial acquisitions. Currently, Paychex has more than half
a million customers nationwide, and represents a broad range of
industries. The company receives many accolades for its human
resources management and employee training programs, and
has been recognized multiple times by Fortune magazine as one
of “America’s Most Admired Companies.”
Paychex is primarily a U.S. business – it reports income only
for the U.S., though it has operations in Germany that account
for less than 1% of its 2012, 2011, and 2010 revenue. While
Paychex is doing better financially than its closest competitor
ADP, analysts cite that Paychex’s primary concentration
in the U.S. is a potential weakness or hindrance to future
growth. This begs the question – will Paychex seek to expand
internationally? The company’s 2012 annual report entitled
“America’s Business Is Our Business” makes no assertions
of a global expansion strategy, and analysts watching the
company note that they are eager to know what the company’s
plans are, the topic having come up many times over the years.
In their first-ever Investor Day held on July 18, 2012, CEO
Martin Mucci responded to a question about what conditions
would have to be in place for Paychex to more aggressively
seek international expansionxi:
I think we’ve probably been a little bit shy of
going outside the U.S. during the recession,
but I think that we’ve proven that we can do it
in Germany. I think we’ve learned a lot there,
that it took longer than expected...
Martin Mucci
Chief Executive Officer
William Blair analyst, Timothy McHugh, notes in his report
following the Paychex Investor Day that “management does
sound a little more open to the idea than we would have
said a couple of years ago,” but that he still puts “low odds
on the company actually expanding internationally.”xii The
world will just have to wait and see.
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In Summary: Considerations for
Companies in Upstate New York
Today’s economic landscape is constantly shifting, and
old paradigms of stability and growth no longer hold true.
Emerging populations and fresh demands have buoyed
companies partnering with international markets, as
evidenced by higher growth rates and increased revenue.
The research shows that companies that have expanded
internationally frequently are more successful in finding
new revenue streams, capturing loyal new customers, and
becoming inspired by ideas in other markets.
In looking toward the future of Upstate New York business,
consider what participating in the global economy can do to
unlock the growth potential that emerging markets offer
businesses. Research prospective countries and tap the
right strategic partners, including tax, legal and financial
services, to make sure you get the best advice and handson experience in determining the opportu-nities that will
strengthen and build your business.
About HSBC
HSBC Bank USA, National Association
HSBC Bank USA, National Association, with total assets of $196bn as of 30 September 2012 (US GAAP), serves 3 million
customers through retail banking and wealth management, commercial banking, private banking, asset management, and
global banking and markets segments. It operates more than 250 bank branches throughout the United States. There are
over 165 in New York State as well as branches in: California; Connecticut; Delaware; Washington, D.C.; Florida; Maryland;
New Jersey; Pennsylvania; Oregon; Virginia; and Washington State. HSBC Bank USA, N.A. is the principal subsidiary of
HSBC USA Inc., an indirect, wholly-owned subsidiary of HSBC North America Holdings Inc. HSBC Bank USA, N.A. is a
member of the FDIC.
HSBC Holdings plc
HSBC Holdings plc, the parent company of the HSBC Group, is headquartered in London. The Group serves customers
worldwide from around 6,900 offices in over 80 countries and territories in Europe, the Asia-Pacific region, North and
Latin America, and the Middle East and North Africa. With assets of US$2,721bn at 30 September 2012, the HSBC Group
is one of the world’s largest banking and financial services organisations.
Interested in growing your trade business? HSBC provides financial services to the majority of the companies that
conduct international trade in Upstate New York.
Contact:
Kevin B. Quinn, Senior Vice President, Head of Corporate Banking for Upstate New York, HSBC - North America
e-mail: [email protected]
telephone: 716.841.2556
About World Trade Center Buffalo Niagara
World Trade Center Buffalo Niagara is an international business development organization that offers worldwide membership affiliation and helps companies expand internationally, find new markets, and increase competitiveness. WTCBN is part of
a network of 300 World Trade Centers in over 100 countries and uses its distinct consulting capabilities to strengthen the competitive international position of companies in Western New York, the Southern Tier, the Finger Lakes, and southern Ontario. Information online at www.wtcbn.com
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Methodology
The companies covered in the report were identified using Hoover’s business directory to compile the initial list of
companies. The companies were sorted by most recent total revenue and the top 30 non-banking institutions were
selected for the analysis. Total revenue and international revenue data was then collected for the five year period of
2007 through 2011, using the Capital IQ data platform. All efforts were made to include all available data for each
company, including Form 10-K reviews, and outreach to specific companies for missing figures. Any missing figures
are noted in the report.
For the purpose of this study, companies are distinguished by whether or not they report revenue from outside the
U.S. and defined as one of the following:
(1) Global – companies with reported revenue from outside the U.S.
(2) Domestic – companies with no reported revenue from outside the U.S.
In addition to data compilation, secondary research was conducted on the Upstate New York business community,
as well as primary research among business executives who represent five of the top 30 companies included in the
report. Business executives from Columbus McKinnon, Constellation Brands, Ecology & Environment, and Moog,
Inc. participated in 30-minute telephone interviews to discuss the business climate in Upstate New York and share
their perspectives on their experiences with international trade. Insights from these interviews are included and cited
throughout the report.
Multiple additional research sources were consulted, and are referenced throughout the report.
Endnotes
i
Regional Plan Association, “Why Western’s Future Matters to New York,” August 11, 2005
ii
The Economist, “Back in business,” June 30, 2012
iii
Fiscal Policy Institute, “New York State Economic and Fiscal Outlook 2012-2013”
iv
The Economist, “Back in business,” June 30, 2012
v Weissman Center for International Business, “International Trade through the New York and New Jersey Region,” May 2012
vi Lahart, Justin. “Divided by Two-Track Economy.” The Wall Street Journal, September 7, 2010
vii http://seekingalpha.com/article/310039-plug-power-cuts-deal-with-gas-giant-air-liquide-to-expand-in-europe
viii Constellation Brands, Inc. Company Profile. Datamonitor. February 14, 2011
ix “Wine Class is in Session.” Beverage World (online). April 4, 2012
x
http://www.paychex.com/corporate/about-us.aspx
xi http://seekingalpha.com/article/734761-paychex-s-ceo-hosts-investor-day-conference-transcript?page=34&p=qanda&l=last
xii McHugh, Timothy. “Paychex,, Inc. No Significant Surprises, but Investor Day Demonstrates Improvements to IT and
Sales.” William Blair Equity Research, July 19, 2012
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