REGIONAL FOCUS: CANADA - Vive la difference. Corporations are

Last summer was something of a rollercoaster ride for BruceMacLellan, the founder and president of Environics, an independentagency with offices in both Canada and the US. North of the border, inthe Toronto-centric PR market, business was on the up with big-spendingclients such as Goodyear signing on the dotted line. Meanwhile, techclients in the US were cutting budgets and new business prospects werefew and far between.

Last summer was something of a rollercoaster ride for Bruce MacLellan, the founder and president of Environics, an independent agency with offices in both Canada and the US. North of the border, in the Toronto-centric PR market, business was on the up with big-spending clients such as Goodyear signing on the dotted line. Meanwhile, tech clients in the US were cutting budgets and new business prospects were few and far between.

"It was like running two completely different companies, says MacLellan.

"The difference between the two markets in the last year was not subtle, but significant. The US had two-quarters of negative growth, while technically we did not actually have a recession at all."

Others feel the difference was less marked, but noticeable nonetheless.

"We've certainly done better than our American colleagues in growth terms, says Michael Coates, president and CEO of Hill & Knowlton Canada, the country's second largest agency. "The Canadian economy didn't tank the way the US economy did."

Coates' counterpart Luc Beauregard, who runs the biggest agency, National Public Relations, agrees. "If we had a recession at all it certainly wasn't as pronounced as in the US. We were reading about many PR firms going out of business in the US, but that didn't happen here."

While there are limited statistics on Canada's PR economy, the advertising spend figures - which tend to be a strong indicator of marketing spend in general - support Coates' and Beauregard's feelings about the market.

A recently released report from Campaign, the leading European advertising magazine, shows total advertising spend in Canada rising last year. Admittedly, it rose a modest 2.5%, but that still compares favorably with ad spend in the US, which declined between 2%-9% (depending on the source of the statistics).

Cross-border dependence

Any difference between the PR markets in the two countries is surprising as the Canadian economy is generally expected to follow the US economy lockstep. Canada does around 80% of its export business with the US. The US, which in turn does almost a quarter of its trade with its friends to the north, also dominates the import scene, supplying around 75% of goods and services consumed in Canada. The dependence is clear and has even been described by some commentators as risky.

But Canada was less exposed to the dot-com and hi-tech markets, and subsequently did not experience the same highs - or the same lows - as the US. As Linda Smith, SVP and GM of Fleishman-Hillard, puts it: "Last year we were lamenting that US firms had more of the dot-com business than we did. Now we don't mind so much."

Geoffrey Rowan, managing director of Ketchum in Canada, adds: "It is not that we didn't see increased hi-tech PR activity during the dot-com era, but just that the craze wasn't as crazy or the funding as intense."

Nonetheless there were casualties, with several of the firms that spoke with PRWeek having been forced to make redundancies, and another - Toronto-based tech shop Pydea - closing its doors. The bigger agencies felt the pinch too: at the start of 2001, hi-tech PR accounted for 38% of Hill & Knowlton's revenues, now it comprises only 28% of the firm's business.

And, as in America, the telecomms sector suffered huge setbacks. Telecomms giant Nortel Networks, the biggest Canadian corporation by revenue, took a pounding due to the ever-shrinking demand for telecomms equipment.

In the third quarter it announced losses of $3.6 billion and, over the course of the year, it slashed its workforce almost in half, cutting back from 94,500 to 45,000 employees. Accordingly, Nortel's PR budgets, like those of many other telecomms companies, are said to have been slashed.

The Nortel layoffs, combined with a period of economic stagnation following September 11 - a period in which Western Star Trucks, Bombardier, and Air Canada made redundancies too - led to a nervous period for Canadian PR firms in the third quarter of the year. "In the fall, people certainly stopped committing budgets, says Jeffrey Goodman, president and CEO of Goodman Communications. "Given that we had been experiencing growth of between 12%-20% for the best part of a decade, 2001 was very flat, partly because RFPs simply stopped coming through in the last quarter."

Roxanne Cramer, president of recruitment consultancy Cramer & Company, had a similar experience as companies put a freeze on communications searches in September. "I had 10 contracts in September that were all put on hold until January, she says. "Combined with the telecomms and tech fallout, the events of September 11 hit the general economy pretty hard."

For Cramer, however, the market bounced back pretty quickly in the new year - the major financial, pharmaceutical, and consumer sectors having remained strong throughout - and since then she has found that some corporations are taking on more communications staff than originally expected. "On a few occasions, I've shown a corporate client four good candidates for a position and they've decided to take on two of them. They have realized the importance of communications in this global economy and they know that now is a good time to staff up."

Talent stays home

One of the reasons that the pool of PR experience has grown stronger in the last year is that it is no longer being drained by the talent-hungry US tech PR market, according to Pat McNamara, president of Apex Public Relations. "It was really just a blip, but for a while quite a few people did seem to head to California or New York to take what looked like better-paying jobs in the US. That's stopped now, as the US has made it tougher to enter and people have realized that it's expensive to live in those places. Toronto (the hub of the Canadian PR market) is safe and clean, and pay is decent. Most people have come back."

Those who have returned are likely to find an appreciative home, feels Catherine Vize, SVP of IR and communications at Brasscan Corporation.

"Recognition of the need for good corporate communications is definitely growing, and more smaller corporations are getting communications people on board. CEOs, even in these smaller corporations, saw the importance of crisis planning last September and they're seeing the importance of looking after their reputations."

National's Beauregard has noticed a similar phenomenon. "Corporate communications departments are definitely growing, he says. "Particularly in growth industries such as aeronautics and biotech. They're beefing up. McNamara agrees: "Corporations are under more pressure to communicate well internally and to be proactive in their issues management. Not only are they staffing up in these areas, but they've worked out where to go for external help too."

Public affairs practices are also staffing up, according to Hill & Knowlton's Coates. "We're getting great growth in public affairs, he comments. "Everyone turns to government when the economy slows a bit. Companies want to sell to the government because it has to keep spending and it pays its bills. In addition, several public affairs outfits, including J&K, are winning business from the forestry industry, which is battling the US over a debilitating 28% tariff on Canadian softwood lumber.

Financial relations and IR, one of the worst hit sectors for many US PR agencies, remained reasonably strong in Canada too. "The financial sector is very concentrated, says Ketchum's Rowan, "and it remains extremely robust. Foreign ownership of Canadian banks is restricted (there are also laws limiting foreign ownership of media and telecomms), which means the banks are likely to remain in Canadian hands, rather than becoming branch plants of international banks. This in turn makes them good potential clients for Canadian agencies, opines MacLellan. And, while IPO work has slowed in recent years, the market for M&A work has remained strong.

The pace of consolidation in the PR market itself has slowed in the last 12 months. Ketchum has taken full ownership of its former affiliate Langdon Star Ketchum, while MS&L acquired Advance Planning in Toronto. But the breakneck proliferation of agencies and acquisition of independents by the multinationals seems to have dipped.

Given that the prospects for the Canadian PR market look good, the big players may yet go on another buying spree. Agency chiefs report a boom in RFPs in recent months and several refer to "room for expansion in the market. Apart from the strong corporate communications, public affairs, and financial relations sectors, there are reports of a boom in military and defense communications and a thriving biotech sector. As the bullish MacLellan puts it, "It's a good time to be in Canadian PR."

QUEBEC: still a market of its own

"Canada epitomizes our marketing philosophy of thinking global but acting local. You can't necessarily use the same shop in Toronto that you use in Quebec. That's why a lot of people turn to independent practitioners in Quebec, because you really need to regard it as a different market."

Wendy Kubota, director of corporate communications, Coca-Cola Canada So what makes Quebec so different? That was the question that research giant Ipsos-Reid tried to answer in a major survey, the results of which were presented to the Marketing into Quebec conference on May 28.

Ipsos-Reid found that the gap between the demographics in Quebec and the rest of Canada has closed. "Thirty years ago, people of Quebec had much larger families, but that has changed, says Martin Redfern, VP of research at Ipsos-Reid. "Today, the birth rates are very similar in Quebec to the rest of the country.

The research did find, however, that income per household was still much lower in Quebec than in the rest of Canada. In Ontario, the average income per home is $63,000, in Canada in general, it is $56,000, but in Quebec it is still below the $50,000 mark.

Additionally, says Redfern, Quebecians tend to have less disposable income, but spend more on food and housing. "I don't know if it relates to their French roots, but they certainly seem to have an unrivaled joie de vivre. The research also found that the people of the province are less future-focused, and therefore typically less prepared for retirement and less interested in savings plans.

Quebec has also turned away from the strict Catholic Church that dominated its culture just 40 years ago. Only 4% of people attend church in Quebec, compared to 20% in the rest of Canada. Redfern comments that it is still, however, "way more traditional in terms of inter-generational dependence, much more like the Spanish community in the Southwest US.

"Economically they are proud of what they've achieved, he adds. "They run themselves very successfully and they do so in French, having turned back the tide of Anglicization. One third of their consumption is of Quebecian-produced products, whereas the rest of the nation buys almost entirely national and international brands. Quebec is culturally unique and successful with it."

For more information on the survey go to: www.ipsos-reid.com.

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