Global Rankings - Canada - A red-hot economy in the US and Canada has energized Canadian PR, fueling buyouts, mergers and a run-up in revenues

Until a few years ago, the Canadian PR industry could have been defined as a wing of the US. It was dominated by the branch offices of US multinationals such as Hill & Knowlton, Cohn & Wolfe and Edelman, while major clients were often branches of US corporations like Kraft and Microsoft.

Until a few years ago, the Canadian PR industry could have been defined as a wing of the US. It was dominated by the branch offices of US multinationals such as Hill & Knowlton, Cohn & Wolfe and Edelman, while major clients were often branches of US corporations like Kraft and Microsoft.

Until a few years ago, the Canadian PR industry could have been defined as a wing of the US. It was dominated by the branch offices of US multinationals such as Hill & Knowlton, Cohn & Wolfe and Edelman, while major clients were often branches of US corporations like Kraft and Microsoft.

Yet this was hardly surprising. Despite its best efforts to resist the cultural imperialism of the US, most of Canada's relatively small population of just over 30 million people live within a few hours' drive of the border.

Media outlets in the US, from broadcast networks to magazines such as Fortune and Newsweek, saturate the Canadian market.

But while PR practitioners in Canada concede that Americans have long dominated the industry, they say that's changing - to a point. 'Canadian (client) companies now need to address the US market, so it is pretty rare that a client discussion doesn't turn to the US,' says Bruce MacLellan, president of Environics Communications in Toronto. 'It's funny that your market priority is outside your own country.'

What has propelled Canadian PR firms to turn their attention stateside is the red-hot Canadian economy, ignited not only by US markets but by the Toronto Stock Exchange (TSE), which reached record highs this summer.

Fueling the TSE is the emergence of world-class Canadian technology companies like JDS Uniphase and Nortel Networks, both of which are also listed on US exchanges. In addition, Canadian-owned corporations are acquiring US companies, such as the purchase by Montreal-based Seagram Co. of Universal Studios.

As a result, Canadian clients increasingly are asking their PR firms for US capabilities. In an effort to keep those clients from defecting to US agencies, more and more Canadian-owned firms are buying or starting PR shops south of the border. The low value of the Canadian dollar is even helping them win some US clients. Can Canadian firms level the playing field in North America?

Watching their figures

Although accurate financial figures for the Canadian PR industry are hard to come by, and many firms are privately owned, some local companies have reported annual growth rates over the last two years of as much as 75% in the technology sector.

The largest PR agency in Canada is National Public Relations, which has seven offices nationwide and billings of dollars 27 million. Its clients include Glaxo Wellcome and 3Com Canada. (Although independent, National has a loose affiliation with Burson-Marsteller).

The second largest agency in Canada, Omnicom-owned GPC Group, recorded dollars 15.4 million in revenues in 1999. The fourth largest firm, integrated advertising agency Maxxcom, is also Canadian.

For the most part, though, the market is still dominated by large multinationals, including Cohn & Wolfe, Fleishman-Hillard and Shandwick. And they have continued to push into the Canadian hinterland.

To beef up its almost nonexistent tech practice in Canada, Fleishman's Toronto office earlier this year bought High Road Communications, a dollars 3.5 million tech specialist with offices in Ottawa and Toronto, along with a two-person outpost in San Francisco. More than 80% of High Road's revenues come from the US for work done for Canadian and US clients. Fleishman and High Road now refer clients to one another.

Buyers build momentum

Until last year, Hill & Knowlton lacked a strong presence in the province of Quebec, a large French-speaking market that's been difficult to crack.

H&K merged its Montreal office with dollars 3 million local PR shop Ducharme Perron. This past June, it merged again with dollars 2 million Montreal rival Forum Communications & Public Affairs. H&K is now the third largest PR firm in Canada, and its 2000 revenues - expected to reach dollars 25 million - represent a healthy 20% of the total revenues of Hill & Knowlton, North America. With these acquisitions, it can comfortably expect to rise from its current position.

Manning Selvage & Lee has also made waves on the acquisition front, and is emerging as a force. It recently bought Advance Planning & Communications of Toronto, which has a staff of 26 and revenues of dollars 3 million. The two firms had been working together since 1995. Advance Planning's clients include Ontario Realty Corp. and Procter & Gamble.

But the US has not had it all its own way when it comes to expansion.

Canadian-owned agencies are turning the tables. Two years ago, National opened an office in New Jersey because, according to partner Colin Buchanan, 5% - and growing - of its business is international. Last year National won the global PR assignment from pharmaceutical giant SmithKline Beecham for its largest brand, the anti-depressant Paxil/Seroxat, beating out the New York office of Cohn & Wolfe and English agency Shire Hall.

Buchanan says National has been able to compete on a North American stage with the help of a not-so-secret weapon: the low value of the Canadian currency in comparison to the US dollar. This means, in effect, that its services are on sale. 'It is very exciting for a Canadian to go out and play on the international stage,' he says. 'We compete with London and New York hourly rates that would be dollars 350. It's not our primary sales message but it is an important side effect of hiring us. Clients are getting used to our rates being a whole lot less painful.'

National is not the only Canadian-owned company making inroads in the US. Toronto-based agency Maxxcom, which owns mostly specialized marketing firms such as healthcare PR agency Veritas Communications in Toronto, went public on the TSE in April, netting it about dollars 40 million. It is using some of that money to expand into the US market, which already accounts for 75% of the company's dollars 82 million in revenues. (Its 1999 revenues, up 113%, included dollars 9.7 million in PR income.)

Beverley Morden, Maxxcom's president and chief executive officer, says the company plans to build a platform of PR firms across the US. Currently, it has stakes in the dollars 70 million PR and ad shop Fletcher Martin Associates in Atlanta, and in Colle & McVoy Marketing Communications in Minneapolis.

PR makes up about 12-15% of Maxxcom's revenue.

'We'd like that percentage to be higher,' she says. 'We are very keen on acquiring a public relations firm on the East Coast, between New York and Atlanta, over the next few months.' She says Maxxcom intends to list itself on a US stock exchange in 2001 to further finance its expansion plans.

In addition to Maxxcom and National, there are a few other Canadian-owned or -originated firms aiming to open US shops.

Ones to watch

Environics, which has about dollars 4 million in revenues (30% of which is from US work), was in 1996 the first Canadian PR firm to land on US soil. It has an office in Stamford, CT and 'we're intending to open a second,' says president Bruce MacLellan, 'but we are considering a less obvious place than San Francisco or Boston.'

Optimum Public Relations, the PR arm of Cossette Communication-Marketing in Quebec City, the largest ad agency in Canada, already has an office in Washington, DC, and plans to use money Cossette received from an IPO last summer - about dollars 30 million - to grow further. 'It is interesting to see that we and Environics have been able to break into the US market,' says Marcel Barthe, Optimum's president. 'We've done it slowly and surely, as Canadians do, but the results so far have been very positive.'

Just before it was bought by the Omnicom Group, Toronto-based GPC International, which has also established a strong European public affairs presence, last year made its first US acquisition. The agency purchased McDermott/O'Neill & Associates, which has offices in Washington, DC, Boston and Providence, RI. 'The US is the primary expansion market for us,' says Nadine Saby, GPC senior vice president and general manager. 'It only makes sense not to sit still, but to expand our sights in the US to serve our Canadian clients and create those across-the-border revenues.' Although no longer technically Canadian-owned, GPC still operates independently.

What has helped send Canadian PR agencies into the US is a new breed of Canadian technology firms, which were slower to receive venture capital financing than their US counterparts. Karin Scott, manager of public and media relations for Strategic/Ampersand in Toronto, a PR firm with 15 tech clients, says, 'Canada is experiencing the growth that Silicon Valley PR had two years ago. Most of our clients, even if they are Canadian-based, want to talk to US press and analysts because that's where they want to expand.'

Indeed, High Road opened a two-person office in San Francisco this year to handle its US work. Among the US business that the agency has won is the North American PR account for Eloquent Inc., a Silicon Valley-based communications software maker whose clients include Microsoft and AT&T.

The new climate

Enjoying this new climate are a string of startups. Julie Rusciolelli, who was technology VP at Cohn & Wolfe in Toronto, started Maverick Public Relations 16 months ago and has already racked up 20 clients, including Excite Canada and e-mail transformation company Metamail Inc., both of Toronto. Maverick did a US press and analyst tour for Metamail through Boston, New York and Silicon Valley.

'We got them on CNN and Bloomberg Television, and we hit that from Canada,' says Rusciolelli. 'Tell me what the multinationals can do that we can't.

Metamail came to a local market - Toronto - to get US exposure. They did not hire a US agency.'

Another new venture involves father-and-son team Armand, 63, and Jean-Claude Torchia, 34, who also left high-profile positions. Armand was chairman of Edelman Canada in Toronto while Jean-Claude worked in the London office, where he managed the global public relations program of British American Racing on the Formula One world circuit. The two left Edelman in August 2000 to open their own firm, called Torchia Communications. It has offices in Montreal and Toronto and will focus on promotions, special event management and sports, arts and entertainment sponsorships.

Because the Torchias' split with Edelman was amicable - and because Armand had folded his previous agency into Edelman in 1990 - Torchia Communications took with it 30 Edelman employees and some clients, including Imperial Tobacco and Brown & Williamson.

'I've mortgaged the house and have nothing left in the bank,' says Jean-Claude. 'But it has motivated us and given us a shot in the arm.' To compete internationally, the company is finalizing an affiliation with a major US-based agency; the Torchias would not disclose its name.

Talent shortage

But pros and other industry observers say a drought of good talent is holding back the rapid growth of Canadian-owned firms, especially on the technology side, where some companies have been forced to turn away clients.

'Finding the right people in our business is brutal,' says National's Buchanan. 'There's horrific competition.'

Sandra Matteson, principal of Toronto-based PR executive search firm Matteson Management, says it takes several months, or about as twice as long as it did three years ago, to fill a hi-tech PR position. She has tried to attract staff from the US, but says Canadian salaries don't compare to those in the US.

'If you are trying to recruit someone from the West Coast, because that is where the tech people are, they don't want the weather or the snow,' she says. 'And the money isn't enough to overlook that.'

Meanwhile, the other threat to Canadian PR comes from international ad giants. Maverick's Rusciolelli, Strategic/Ampersand's Scott and Environics's MacLellan all say they have been approached to sell. 'These monoliths like WPP and Omnicom have voracious appetites, and there are few independents in Canada left today,' says MacLellan.

And even with so much cross-border business, pros are sometimes tripped up by the differences in cultural institutions between the US and Canada.

Robert Waite, senior VP of corporate communications and public affairs at the Canadian Imperial Bank of Commerce (CIBC) in Toronto, has worked for both the Canadian and US divisions of IBM and Ford, and was press secretary to former Sen. Bob Dole.

'You would be surprised by how many people in the US just assume that the holidays are the same for both countries,' says Waite. 'Thanksgiving is a holiday in Canada, too, but it's in October, not November.' He says such oversights can foil the impact of a North American PR campaign launch in Canada.

Waite is planning to hire a PR agency to promote CIBC Worldmarkets, the bank's investment banking and brokerage arm, in North America. So, will it be a Canadian firm?

'We are not looking for a Canadian firm with offices in New York,' he says, 'but rather a strong US player that has more knowledge of the local US market. Of course, it wouldn't hurt if they had an office in Toronto.'

CANADA PR AGENCY RANKINGS 2000

Ranking Agency Name Canada Income (dlrs) %

99 98 99 98 chge

1 N/A National Public Relations 27,000,000 N/A N/A

2 N/A GPC Group 15,443,856 N/A N/A

3 1 Hill & Knowlton 11,830,000 10,900,000 9

4 4 Maxxcom 9,753,622 4,584,404 113

5 3 Shandwick 8,759,000 6,598,000 33

6 2 Edelman 8,038,593 8,478,912 -5

7 5 Fleishman-Hillard 4,121,000 3,405,000 21

8 7 Porter Novelli 3,042,000 1,210,000 151

9 N/A Environics 2,863,275 N/A N/A

10 6 GCI Group/APCO 2,428,292 1,895,929 28

TOTALS 47,972,507 37,072,245 29

Sources: PRWeek Top Agency Rankings; PRWeek UK European Rankings

Notes: National Public Relations estimated in income 4 Maxxcom Includes

US Income







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