Growth is slow, but a consumer boom augurs well for the Canadian PR industry.Last year, souvenir shops across Toronto started hawking T-shirts sporting the slogan "I survived Toronto." Under that proclamation was a list of crises that had battered the Canadian economy: SARS, mad cow, the blackout, and a second round of SARS. For many PR companies, survival was also the name of the game in 2003. While some PR firms enjoyed increased business from clients looking for infectious-disease policy or tourism clients looking to reclaim lost visitors, much of that spike was short-lived. Whether it was the forest fires in British Columbia or the fast-rising value of Canada's loonie against US currency hurting exports, crisis after crisis had the effect of slowing what was expected to be an economic recovery far more robust than in the US. Gross domestic product last year is estimated to have increased by roughly 2%, down from the 3.2% initially forecast. SARS alone is believed to have sucked a staggering $1 billion (Canadian) out of Toronto's economy. Recovery efforts continue in Canada's largest city: In mid-February, Conan O'Brien taped a few episodes of his late night talk show there, an expense that cost $1 million (US), half of which was covered by the Ontario government. "Scoring celebrities has helped turn these challenges into a celebration not just of Toronto, but the whole country and all its strengths," says Mark LaVigne, president of the Canadian Public Relations Society (Toronto) and of Hunter LaVigne Communications. The federal government had earlier paid $3.5 million (Canadian) to stage a summer concert headlined by the Rolling Stones declaring Toronto SARS-free. "The first half of 2003 was a pretty stressful few months before things started to pick up in the summer," says Boyd Neil, SVP and national corporate communications practice leader for Hill & Knowlton Canada. Concurs Linda Smith, EVP, senior partner, and regional director for Fleishman-Hillard Canada, "It wasn't a growth year. We had clients in the meat and tourism industry, so we did see a short-term spike. But net there was a decline." Growing revenue The branch offices of US multinationals, including Hill & Knowlton and Edelman, have long dominated the Canadian PR industry. But while those firms might have struggled as global PR budgets were tightened, independently owned Canadian agencies more than survived in 2003. Maverick Public Relations, for instance, grew revenues to $3.5 million, up from roughly $2.8 million the previous year. Apex Public Relations, which boasts a client roster that includes Coca-Cola Canada and Harvey's, recorded a revenue increase of 26% to $6.2 million. "The international firms are now taking the independent firms pretty seriously, as opposed to just seeing their competition as the other international firms," says Pat McNamara, president of Apex. National Public Relations, in which Burson-Marsteller is a minority stakeholder, is Canada's largest PR agency, with 300 staff in six offices across Canada, and small offices in New York and London. Although he won't disclose overall revenues, Edward Gould, managing partner of National Public Relations Toronto, says the Toronto office grew revenues modestly to $14 million last year. Certainly, by all accounts, 2004 will be a much better year. Both multinational branch offices and homegrown independents are forecasting double-digit growth, with the consumer marketing side igniting much of that increase. "The consumer side is booming. There has been a shift of dollars from advertising to PR," says Bruce MacLellan, president of Environics Communications, one of the few Canadian-owned firms to have US offices, in Washington, DC, and New York. Last year, Environics' revenues rose 6% to $8.8 million. "We have consumer clients who are raising their PR budgets while cutting ad budgets. Given the magnitude of what they spend on advertising, if they only shift a tiny fraction of it to PR, that has a dramatic effect on the budget." Kadi Kaljuste, SVP and national marketing communication practice leader at H&K Canada, agrees. "We are sitting with an RFP from a company that has a branded leader in its category that has never done PR but is now looking for an agency," says Kaljuste. "I think we will see more of that skepticism of the heavy spend in traditional marketing lifting the PR industry." Certainly some clients are jacking up budgets, especially among those companies that market products that might be perceived as contributing to the obesity epidemic in Canada. Labatt Breweries of Canada hired H&K Canada last fall after a competitive review and used only PR to launch a low-carbohydrate beer called Labatt Sterling. "Our PR budgets have increased over the past few years, and will be up again this year," says Nigel Miller, Labatt's PR director. "The value of PR is something we don't need to be convinced of." Spending in the consumer market is also hot, thanks to Vancouver winning the right to host the 2010 Winter Olympics. Companies including telecommunications provider Telus and Coca-Cola Canada already have deployed communication programs around the successful bid. "That win was massive for us," says Loring Phinney, a Vancouver-based EVP of Optimum PR, a division of Canada's largest ad agency, Cossette Communication Group. "The Olympics has become the most dominant component in terms of growth of our consumer PR business." Branching into consumer PR In a competitive market, every PR firm wants to enjoy that boom, which is why once specialized shops are broadening their capabilities. Created largely as a tech firm, Maverick Public Relations opened a consumer division last fall, headed by Gillian Lowe, who previously ran her own boutique agency in LA with such clients as Vivendi Universal Games. "We always had consumer clients, but our technology work overshadowed everything else we did," says Maverick president Julie Rusciolelli. "When we talked to packaged goods companies, they said, 'How can you understand targeting the tween market?' That's why we officially launched a consumer practice." One of Maverick's most recent consumer wins came from Toronto-based Lemontonic.com, a rival to online personals firm Lavalife, which will launch in Canada first before pursuing the US market. MoXie PR & Communications is one of the few new firms recently launched in Canada, and it is aimed at the consumer market. After co-managing the consumer marketing practice of Advance Planning/MS&L for six years, Martin Waxman and Louise Armstrong created the firm in November "to be more nimble." Toronto-based MoXie already is working on product launches for Procter & Gamble. Also booming, though to a lesser extent, is corporate communications. That has been fueled not only by such accounting scandals in the US as Parmalat, but a scandal involving Canada's federal government. The Liberal government has come under fire for its now defunct sponsorship program in which advertising firms connected with the party received $100 million in commissions and fees in exchange for little or no work. "The fallout of that is more companies are paying attention to issues such as being transparent and exhibiting behavior that is perceived as being responsible in the marketplace," Neil says. The Quebec market also continues to expand. Lucie-Anne Fabien, president of the Quebec chapter for the Canadian Public Relations Society and a PR consultant of Montreal-based Marco DDM, says, "there are more organizations looking for PR." But she says the French-speaking PR landscape is not well understood, especially among companies with headquarters in English Canada. To gain a better understanding, the Quebec chapter is working on a study with Danielle Maisonneuve, a PR professor at the Universite du Quebec a Montreal, to be released in June "examining what the Quebec industry is all about." Leveling the playing field The fight for new business is perhaps more intense than it has been in recent years, given that the fast-rising Canadian dollar has meant few agencies are distracted by competing in the once-lucrative US market. "The dollar hasn't been a positive in terms of exporting our services," Rusciolelli says. "For a US-based company, the exchange rate used to mean hiring a Canadian firm was the deal of the century. While the cost is still relatively cheap, the value is not what it used to be." Environics' US business, anchored by offices in New York and Washington, DC, also reported flat revenue growth in 2003. "We're in a holding pattern right now," says MacLellan. "The Canadian PR environment has been a lot more positive than in the US." Also leveling out the competition between the multinationals and smaller Canadian independents is that few clients seem to care about hiring a PR firm with offices outside Canada. RBC, the country's largest bank, parks its business with Advance Planning/ MS&L, but only uses the Toronto office for its Canadian efforts. It uses a small boutique in New York to penetrate the US market. "While it sounds great on paper that you'd be able to deal with one agency worldwide, what happens is that every agency, just like every bank branch, is only as good as the local staff," says David Moorcroft, RBC's SVP, corporate communications. "We want to hire the best people in the market we're doing business in."