REGIONAL FOCUS CANADA: Bordering on growth

The Canadian economy has stood up to the US recession, with many firms reporting gains, and a number of corporations upping their PR.

The Canadian economy has stood up to the US recession, with many firms reporting gains, and a number of corporations upping their PR.

The Canadian and US economies generally move in lockstep with each other. But last year something unusual happened. While the US zigged into an economic slump, Canada's economy zagged into continued growth. The result was a relatively good year for the Canadian PR business. Corporate PR departments, with some notable exceptions, continued with business as usual or, in some cases, increased their efforts in 2002. And corporate scandals south of the border served as a wake-up call for companies to focus on reputation management and corporate integrity. MasterCard Canada, for example, had done little but defensive PR in the past, responding to issues as they arose. Last year, it hired Environics as its PR agency of record and began proactive efforts to address corporate integrity and demonstrate its openness to consumer concerns, notes Walt Macnee, president of MasterCard Canada. "I think there were tremendous shocks to the system with integrity issues last year," says Macnee, speaking of US business scandals. MasterCard's new proactive PR means "we are trying to be very straightforward with the government and with the public. Our approach is: 'Ask us anything. We'll tell you whatever you want to know.'" Petro-Canada, a longtime Hill & Knowlton client, also has been focusing on corporate reputation issues in response to what it sees as public concerns, says Ron Andras, senior director, corporate communications for the Calgary-based oil company. "Although this is a relatively calm place, people in Canada are looking for reassurances from businesses they have relations with," says Andras, adding that senior managers at Petro-Canada are committed to answering such concerns. "We're getting a good response from the executive floor on working with our agency on reputation building." Says Hershell Ezrin, chairman and CEO at public affairs specialist GPC International, "CEOs certainly feel a lot more vulnerable today." With Canada's economy fueled by consumer spending last year, consumer goods companies were actively pursuing PR initiatives. "Our business continues to expand," says Lynda Kuhn, VP of investor relations at Maple Leaf Foods. "I don't see any decline in PR activity." The Toronto-based company works with Fleishman-Hillard. Northern climb, despite the tech fall Technology business lagged, although not as drastically as in the US. "Canada didn't have as big of a dot-com rush," explains Bruce MacLellan, president of Environics. "That real orgy of dot-com spending never got to the same heights here. As a result, we did not have as far to fall." Many point to Nortel Networks as the one-time poster company for Canadian technology. The telecom equipment maker has reported 12 straight losing quarters but is predicting a return to profitability in the second quarter of this year. Nortel switched agencies last year, dropping Fleishman and picking up Magnet Communications. And while tech business dropped, segments such as consumer and reputation management, healthcare, and government picked up the slack for many agencies. "The year was fairly good across the country," says Daniel Granger, president of the Canadian Public Relations Society. "Although people were expecting the year to be different, quarter after quarter we were pleasantly surprised." But with US-Iraqi war clouds looming, Canadian PR people are unsure if they'll be able to record positive growth again in 2003. "This year is a big question mark because of the war threat and the US economy," says Granger, who serves as the Montreal GM for Edelman. "The feeling is we've been lucky." Some agency heads say new business has been flowing in at unprecedented levels in recent weeks. While Fleishman-Hillard had a flat 2002, it's seen the busiest January for new business in 10 years, according to Linda Smith, EVP, senior partner and regional director for Fleishman-Hillard Canada. New clients include Scott Paper, Frito-Lay, and the Multiple Sclerosis Society. Edelman saw Canadian business climb 13% last year thanks to public affairs, healthcare, and issues management work. It picked up Best Buy as a client for its Canadian brand rollout, and also grabbed Krispy Kreme in Canada. National Public Relations, which is affiliated with Burson-Marsteller, saw growth of more than 10% last year as it worked with clients on trade issues while also representing Canada Life as it fights a hostile takeover offer from Manulife Financial, another major Canadian insurer. Working for Proctor & Gamble in Canada, along with healthcare clients such as Hoffmann-LaRoche and Mead Johnson, led Advance Planning/MS&L to a record profit year, notes Paul Curley, managing director. Curley had run Advanced Planning & Communications, which merged with MS&L in 2000. Weber Shandwick saw Canadian growth on consumer and corporate work, but also developed a healthcare practice, handling Canadian work for Pharmacia. As 2003 moves into its third month, "We're getting more business right away," says Liane Robertson, EVP and managing director, Weber Shandwick Canada. While tech has been a weak business sector at most agencies, "There are some pockets out there where technology is still growing," says Geoffrey Rowan, managing director at Ketchum Canada. Ketchum bought a Canadian shop in late 2001 after snagging IBM's business. It's also now working for Sony PlayStation. Hill & Knowlton is expecting gradual business improvement this year, says Mike Coates, president of Hill & Knowlton Canada. The agency did better than it had expected last year by snagging government work and public affairs assignments. Many agencies have been hiring staffers: Environics plans to increase staff by 10% this year. It currently has 50 people in Toronto. Edelman hired four new staffers in January and has been looking for four more. Ex-patriot Canadian PR pros who headed south to Silicon Valley in the halcyon days of US tech PR are returning home to find work. But many firms are finding it difficult to hire PR people with 12 to 15 years of experience. Salaries at that level have risen as high as $130,000 (US) in some cases. Cautious optimism Not everyone is expanding their PR staff. At Royal Bank of Canada, David Moorcroft, SVP, corporate communications, is hoping he can trim a position or two from his 34-person staff this year. The bank also has PR people in two US locations. Royal Bank last year asked agencies to take 10% fee cuts. It's not planning to seek cuts this year, though. "We are keeping our corporate communications budget flat," says Moorcroft. Canadian banks have been hurt by exposure to South American loans, while the Canadian financial services sector in general has lagged the rest of the economy, notes Peter Hall, associate director, national forecasts, at the Conference Board of Canada. Like other economists, Hall is optimistic about the Canadian economy this year, assuming the US economy recovers by around midyear (see sidebar). How long the Canadian economy can continue on its own way without a US recovery, however, is the question on everyone's mind across the great northland. "If you're a wise Canadian, you're one who goes to bed at night and prays that the US economy grows in 2003," says Edward Gould, managing partner in Toronto for National Public Relations. Says Nancy Croitoru, president, GCI Group: "I think its going to be a careful year. I think clients are going to spend carefully, and they're going to demand more." If the US doesn't see renewed economic vigor, the good times for Canadian PR may grind slowly to a halt as this year progresses. ----- Why is Canada's economy countering the US? Traditionally the US and Canadian economies have been joined at the hip - or the border, to be more exact. But that began changing a decade ago. To find the roots of current Canadian growth, economists are looking back to 1990. The recession Canada experienced in the early '90s was deeper and longer than its US counterpart, explains Peter Hall, associate director, national forecast for the Conference Board of Canada. A 7% national Canadian sales tax imposed in 1991 added to the country's recession woes, as did the coming of open trade with the US, Hall contends. By 1996, the Canadian government was cutting spending as well, further contributing to a sluggish economy. So while the US was in the midst of a decade-long expansion in the 1990s, Canada didn't see a major economic pickup until 1997. All those years of slow growth left a great deal of pent-up consumer demand in Canada. Once consumers started spending in 1997, they propelled Canada into an economic expansion that is still under way. Canadian GDP growth reached an impressive rate of 5.7% in the first quarter of 2002 before slowing to 3.1% in the third quarter. "In Canada, the economy did slow down a bit but not very much," says Mario Seccareccia, a professor of economics at the University of Ottawa. Hall estimates the Canadian economy expanded at a 3.2% rate for all of last year and will maintain that pace this year - assuming a US recovery begins by midyear. The Canadian economy created 560,000 new jobs last year, and Hall is predicting an additional 380,000 this year. The jobs are coming in manufacturing, a red-hot housing construction sector, and in services, he says. Canadian exports of cars and lumber to the US have remained strong as US auto and homes sales remain robust.

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