APRIL 1994 Economic Digest - Importing and Exporting

APRIL 1994 Edition

HIRING

            Canadian companies are in more of a hiring mood than their U.S. counterparts this year according to a joint survey by the Canadian and U.S. Purchasing Management Associations. About one-fifth of Canadian companies canvassed said they would add employees this year while two-fifths said they would continue to trim workers. Only a 10th of the U.S. companies said they planned to add workers, while three-quarters expected further downsizing. The survey represented the views of 39 Canadian and 59 U.S. purchasing executives for companies that buy about $140-billion (U.S.) worth of goods a year. Executives in both countries listed global competition and productivity as the top concerns facing their companies, followed by environmental regulation and training. Asked about the NAFTA, U.S. purchasers said their companies expect to benefit more from dealing with Mexico than with Canada. About 45 per cent said they would buy more raw materials and finished goods from Mexico, but only 15 per cent anticipated higher purchases from Canada.

WINE

            Weeding out poor grapevines has paid off for Okanagan wineries and growers. Less than five years ago, the end of government subsidies under new global trade rules forced a huge pullout. Now there are 26 B.C. wineries instead of 12 and there are projections for 50 by the year 2000. The Ontario government has  signed bilateral agreements with British Columbia to remove existing inter-provincial barriers on wine, spirits, spirit coolers and ciders which will give these products increased market access and allow consumers in both provinces the ability to choose from a wider selection of products.

CROSS BORDER TRIPS

            Same-day trips by Canadians to the U.S. totalled a seasonally adjusted, 3,441,000 in January, down 10.4 per cent from 3,842,000 in December, the largest month-to-month decline in such trips in more than a decade. The January figure was the lowest for any month since April 1989. Same-day trips reflect the level of cross-border shopping excursions and the downward trend has mirrored the fall in value of the Canadian dollar. Car trips of one or more nights also continued to decline in January, dropping 4.9 per cent.

THE BAY

            Despite increased competition in the Canadian retail market, the Hudson's Bay Co. posted record profits in 1993. With 92 Bay stores and 290 Zellers stores, Hudson's Bay had sales of $5.15 billion in 1993. Canada's oldest retailer has now unveiled plans for a new push into China and other parts of the cash-rich Asian market, which they describe as being the largest untapped retail distribution opportunity in the world. This may be accomplished through a joint venture company or by incorporating a new company in Asia though a number of large, Asian based organizations have expressed interest in joining the Bay which is recognized throughout Asia where it has been a buyer since the early 1970s. The company plans to establish hybrids of its Bay and Zellers stores in downtown areas and its Zellers discount chain in suburban locations. Store clerks will be indigenous while key positions will be staffed by Canadians.

MANUFACTURING

            Canada came sixth in overall quality when 20,000 consumers in 20 countries were asked to rank the manufactured goods of 12 nations. Japan had the highest ranking with 38.5 per cent of respondents rating its goods as either "excellent" or "very good." In comparison, 18.3 per cent rated Canada's goods as top quality. After Japan, Germany ranked second followed by the U.S., Britain and France. The manufactured products of Canada were rated highest--"excellent" or "very good"--by Canada (52 per cent), Hungary (36 per cent), and the U.S. (33 per cent), and lowest by Taiwan (4 per cent), Italy (5 per cent) and the Dominican Republic (8 per cent). Canadians gave goods from Japan (47 per cent), and Germany (42 per cent) the highest ratings after Canadian goods. The lowest ratings went to products from Russia, Mexico and Spain.

           

TRUCKING

            Moving freight is always a good barometer of how the economy is doing. One major Ontario company will hire at least 140 drivers this year and is buying 195 highway tractors and 360 trailers. Seventy-five of the trucks will be operated by pairs of drivers so they can be used round the clock on long haul routes. Each truck will be equipped with satellite communications equipment so the company can reach drivers any time, day or night, and divert them to new customers. The company is experiencing dramatic growth--33 per cent in the Canadian operations and 30 per cent in the American--because of booming Canadian exports and free trade. Business is increasing because the Canadian economy is picking up and fewer U.S. trucks are coming to Canada because they are busy at home. 

GATT AGRI-FOOD

            Exporters looking for information on the General Agreement on Tariffs and Trade (GATT) and the Canadian agri-food industry can now turn to a 1-800 number for help. Through the toll-free line, set up by Agriculture and Agri-Food Canada, callers can have their questions answered and access fact sheets on GATT and its impact on agriculture. The toll-free line, 1-800-668-1266, is available Monday to Friday from 7am to 8pm (EST).

OTTAWA

            The federal government has launched a plan to make it easier for Canadian companies to gain a toehold in international markets. Ottawa spends more than $500 million a year on trade development which involves 18 government departments and agencies. By co-ordinating efforts between different levels of government and making information more accessible and eliminating duplication, Ottawa hopes more companies will be able to make sales in markets opened through the completion of the NAFTA and the GATT. The business plan includes a strategic overview that lists 1,300 international events, such as trade shows, which support export development activities. In the past, there have been times when two levels of government were simultaneously mounting trade shows aimed at the same market. About 60 per cent of all Canadian exports are made by just 100 firms, and less than 8 per cent of Canadian businesses are involved in selling outside the country.

CASCADIA

            In a recent economic analysis, the B.C. Credit Union has come out in favour of Cascadia as a trading bloc. Cascadia encompasses Alaska, British Columbia, Washington and Oregon. For governments, this will mean on-going and directed co-operation among state and provincial governments and requires the continued development of the regional infrastructure. According to the U.S. Department of Commerce and Statistics Canada, Cascadia's Gross Domestic Product share by member is: Washington, 39 per cent, B.C., 31 per cent, Oregon, 22 per cent and Alaska, 8 per cent. The population share is:

Washington, 43 per cent, B.C., 27 per cent, Oregon, 25 per cent and Alaska 5 per cent.

A major Cascadia advantage lies in its international makeup which gives the region access to the benefits provided by the strengths and national characteristics of both countries.

            British Columbia and, in particular Vancouver, also brings a secure and international financial system to Cascadia. Vancouver already has legislation in place making it an international financial centre. And NAFTA ensures Canadian access to the soon-to-be-reformed U.S. banking system, and America's unequalled capital markets. This may give Vancouver the inside track to become the international banking centre on the West Coast, a position which by most accounts remains unfilled.

ADVICE

            The Toronto-Dominion Bank has announced a plan which will give small businesses facing financial ruin last ditch advice from an advisory panel. It will be based on a mediation process aimed at keeping a company alive. The process, which starts in April, will be open to customers who have loans under $250,000, who can't meet their payments and who may well be on the verge of bankruptcy. The mediation panel will have three members, one chosen by the customer, one by the bank and a third selected jointly from a list of independent mediators. The panel could decide, for example, that the bank restructure the company's loan to give it more breathing room, or suggest that the business cut employees. The recommendations are not binding. More than 90 per cent of the bank's business customers have lines of credit under $250,000.

CALIFORNIA

            California has a larger economy and population than Canada and the San Francisco Bay area is the fourth-largest market in the U.S. A strategic alliance with a North California firm could be an ideal way to gain access to this huge market and some of the nation's most advanced technology. With this in mind, the Investment Division at the Canadian Consulate General, Los Angeles, in co-operation with the provinces of Quebec, Alberta and British Columbia recently sponsored the latest in a series of business matchmakers in Pleasanton (just southeast of Oakland) and Sacremento. The response by local firms was encouraging resulting in 19 expressions of serious interest in partnerships with Canadian firms. For further information, contact the Canadian Consulate Trade office in San Francisco, Tel: (415) 543-2550, ext. 22 or Fax: (415) 512-7671.

RETAIL

            The super-charged supermarket competition in Atlanta is about to heat up again as Winn-Dixie Stores Inc. gets ready to launch an on-line computer ordering service this spring. Archrival Kroger Co. which quit its own on-line service three years ago because of a lack of subscribers is getting ready to try again. The Winn-Dixie version will enable customers who are subscribers of the America Online computer network to electronically order from a list of more than 10,000 products. Deliveries, including prescriptions will be made Monday through Friday in the afternoon or evening for a $9.95 fee. The service is being offered to give more supermarket shopping options to professionals with little time, and housebound customers. And can Canada be far behind?

TRAVELLING

            Canadians spent $7.7 billion more travelling outside Canada than visitors to Canada brought in according to StatsCan. But total payments by Canadians travelling in Canada and visitors reached record levels in 1993--bringing the travel deficit down from a total of $8.2 billion in 1992. Total payments reached $16.4 billion, up 1.1 per cent from 1992. Spending by Canadians in the U.S. decreased 3.5 per cent to $10.6 billion, while payments from trips to all other countries increased 10.8 per cent to a record $5.8 billion. Visitors to Canada spent $8.7 billion--8 per cent more than in 1992. The biggest increase came from Americans, who spent a record $5 billion, up 9.5 per cent.     

AMTRAK

            This U.S. rail corporation and the state of Washington will shortly launch a test run of a luxury rail service in the Pacific Northwest corridor and hopes to re-establish service between Seattle and Vancouver by October providing Amtrak can get $560 million from the U.S. Congress to offset service losses. The Burlington Northern Railroad has allocated about $3 million to the project and has started to upgrade tracks north of the border, while the state of Washington has assumed costs of track work between Seattle and the border. Customs and Immigration details have yet to be worked out but it is hoped travellers will use the train for one-day business trips between Seattle and Vancouver. The service will offer white-tablecloth dining, free newspapers and movies.

TRIVIA

            In the U.S., legalized gambling is a $30 billion a year business, twice as much as movies and TV combined.

MARCH 1994 Economic Digest - Importing and Exporting

MARCH 1994 Edition

CROSS-BORDER TRIPS

            In 1993, according to Statistics Canada, Canadian residents made 48.3 million same-day car trips to the United States, down 15.2 per cent from 57 million in 1992, and down more than 10 million from the record 59.1 million in 1991 when studies indicated Canadian retailers lost $3.5 billion to $5 billion in sales to cross-border shopping. The 1993 figures are the lowest since 1989 when Canadians made 43.3 million same-day trips by car.

WORK

            The Japanese work several hundred more hours than European and U.S. residents, with one in six putting in hours that could kill them, says a Japanese government study. Japanese workers clocked an average 2,124 recorded hours in 1990, about 200 hours longer than Americans and Britons. And real working hours were even longer, with most Japanese probably putting in a daily average of 1.5 hours of so-called "service overtime," extra work that is unrecorded and unpaid. One in six males worked more than 3,100 hours in 1992, a level that doctors say can kill.

            The United States is the only Western nation that has not reduced factory work time in the past 30 years, says The Detroit News. By contrast, Canadian hours declined to 1,827 a year in 1990 from 1,933 in 1960.

NETWORKING

            Two Toronto businessmen have started BIG (Bishop Information Group), an electronic bulletin board that offers inexpensive direct marketing lists, ready-made designs for newsletters and business forms, and a variety of software programs and information sources that are useful to small enterprises. While the larger on-line information services are growing rapidly, they are expensive and none have specifically targeted the needs of small businesses.

            BIG charges $150 a year which entitles users to comb through the system for an hour each day, seven days a week. Direct marketing lists have 120,000 names and include lawyers, doctors, TV and film executives and many others. Lists are available for about $10.00 each. They offer, free of charge, templates for commonly used business forms such as newsletters, letterheads and business cards. The partners are talking to a variety of government agencies, business associations and trade organizations many of whom are interested in listing information about their small business programs on the bulletin board. For example, the Ontario government will soon post information explaining to entrepreneurs how their employees can be placed in training programs at little cost. Other provincial and federal offices may follow suit. Entrepreneurs can "test drive" the system for a week, at no charge, by calling 416-364-8770.

           

METRIC

            Since February, U.S. Federal Trade Commission rules require that new labels printed for consumer products must include metric as well as the British units customarily used on American products. Manufacturers will be allowed to use up their old supplies of labels so it may be a while before the label change becomes obvious. Products covered by this rule include such items as soap, toilet paper, foil wrap, plastic bags, detergents, mops, deodorants, shampoo, batteries and light bulbs. The Food and Drug Administration is developing labelling rules requiring the addition of metric measurements on foods, drugs and cosmetics. Many products already include metric measurements, especially alcoholic beverages and soft drinks. The move is the latest step under the U.S. Fair Packaging and Labelling Act which also requires that a product label disclose the contents of the package and the name and place of business of the manufacturer, packer or distributor.

HELP WANTED

            The Canadian Department of Foreign Affairs and International Trade (DFAIT) is reviewing the investment policies of Japan and the European Community (EC), and would like to hear from Canadians who have experienced government barriers in these countries affecting their investment or plans to invest.

            Barriers could include measures that favour a domestic investor over a Canadian investor, or grant special status to some foreign investors but not to Canadians. Unclear administrative requirements may also impede investment. As well, the Department would be interested in hearing about investment restrictions in certain sectors or industries that have deterred Canadian investment.

            These reviews will examine how barriers to foreign investment may hinder efforts by Canadian firms to globalize, diversify, and gain access to new markets and technologies. To discuss these or other kinds of government barriers, or other opinions regarding investment in the EC or Japan, please contact Tim Miller, Tel. (613) 996-4921, or Steve Rhealt-Kihara, Tel. (613) 992-9094, Economic and Trade Policy Branch (DFAIT). Fax: (613) 944-1679. (Source: CanadExport, Vol 12, No 2.) 

INNOVATION

            The big difference between very successful small companies and those with less impressive growth is innovation, according to a Statistics Canada survey of 1500 companies. They give high priority to technology and spent more on research and development. They also stress inventory control, process control, reducing energy costs and their use of materials, old and new.

            The average company responding to the survey had 44 employees and sales of $6.6 million. As a rule, government programs designed to help business ranked last on the companies' list of contributors to their success. The only ones they seemed to like  were R&D tax credits and export subsidies that helped them explore and develop new markets.

            Key differences showed up in the kind of things top companies emphasized more than their less successful counterparts:

* Developing new technology--a 21 per cent higher score.

* Refining the technology of others--16 per cent higher.

* Improving their own technology--7 per cent higher.

* Just-in-time inventory control--17 per cent higher.

* Process control--26 per cent higher.

* Using new materials--19 per cent higher.

* Using existing materials more efficiently--14 per cent higher.

* Reducing energy costs--15 per cent higher.

WASHINGTON--OREGON

            Some interesting statistics have been released by the B.C. Trade Office in Seattle. If one is to break up total B.C. origin exports to the U.S. into geographic regions and rank them against our major offshore markets, exports of $2.56 billion to Washington\Oregon are second only to $4.11 billion to Japan. California and the European Community are far behind at $0.88 and $1.34 billion respectively.

            Excluding the resource and commodity products, such as dimensioned lumber, pulp, mineral concentrates, coal and natural gas, the data is even more surprising. Washington and  Oregon emerge as the single most important market by a factor of more than two, at $520 million. California is next at $183 million, followed by the EC and Japan at $102 and $100 million respectively. For more information call Michael Clark at (206) 628-3024. 

RESTRUCTURING

            A study by Wyatt Co. of 148 Canadian companies shows that some companies cut too many jobs and are now having to rehire. The survey says 51 per cent of companies that shed staff in recent years had to refill some of the jobs dropped. Other findings show that only 61 per cent of respondents that wanted to cut costs managed to do so; only 37 per cent reached their goal of increased profit and only 17 per cent increased competitiveness. Customers didn't get much out of restructuring either. Only 27 per cent of companies said restructuring helped them boost customer satisfaction.    Employers who choose to cut staff must pay close heed to the needs of survivors if they want to benefit from restructuring, the consultants say. Those who botch the job may find morale taking a nose dive, production sliding and valuable staff fleeing to other employers. In most cases it takes more than six months for surviving staff to recover from restructuring.

WATER

            Japanese consumers are developing a taste for bottled water and sales are surging, especially from Europe and particularly from France. Imports of foreign mineral water rose last year by 31 per cent to a record 54 million litres. Sales growth was even higher rising 49 per cent to $23.6-million (US). Overall, imports now account for 13 per cent of Japanese mineral water consumption up from 1.4 per cent in 1986.  The perception among consumers is that the quality of tap water is deteriorating. It is even seeping into the very foundation of the Japanese diet--rice, and people are increasingly switching to mineral water in the kitchen. The Japanese External Trade Organization predicts Japan's per capita consumption will triple in the next few years from the present three litres. In Italy it is 118 litres and 30 in the United States

            Meanwhile, in Britain, where demand for bottled water surged 1000% over the last 10 years and 520 million litres were sold last year, tap water is subject to more rigorous treatment than bottled water which contains more bacteria than tap water and is lower in mineral content.

ALCOHOL

            The alcohol sold by liquor and beer stores continued a dramatic four-year decline in the 1991 fiscal year according to Statistics Canada. The biggest drop was in the volume of spirits which fell by 5.5 per cent that year. Wine sales dropped 2.1 per cent and beer by 1.7 per cent. Authorities link the drop to the recession, higher prices, cross-border shopping brew-your-own businesses, changing drinking patterns and tax increases. It is estimated that Canadians buy four million bootleg cases of liquor each year which costs government $1-billion in revenue.

FRAUD

            A six-country survey by KPMG Peat Marwick Thorne of Toronto shows Canadian businesses second only to U.S. companies in being victims of fraud. About 1,000 Canadian companies were sent questionnaires and 290 responded. 56 per cent of executives surveyed said their companies had been victimized in the past year. The rate was 76 per cent in the U.S., 52 per cent in Bermuda, 44 per cent in Australia and 40 per cent in Ireland. The Netherlands had the lowest rate with 22 per cent. The most commonly reported type of fraud was misappropriation of funds. Respondents agreed that internal controls were the main factor in uncovering fraud but few corporations said they planned to review or improve internal controls.

DUMPING

            A U.S. Federal Trade Commission study  finds that unfair trade practices such as "dumping" bring minimal damage to U.S. companies. Less than a third of the 179 dumping cases the FTC studied resulted in industry revenue losses greater than 5 per cent and only 21 involved losses greater than 10 per cent. The study analyzes the effects on U.S. industry of dumping and foreign government subsidies between 1980 and 1988. It concludes that for 90 per cent of the cases filed with the International Trade Commission, the injury to the U.S. industry is less than 10 per cent of industry revenue. Dumping occurs when foreign firms charge lower prices in the United States than in their own markets or charge prices below the cost of production. If the ITC discovers a case of dumping it can impose additional duties on the unfairly imported products to try to right the imbalance.       According the Morris Morke, co-author of the report, "We're finding that a lot of the time, the problem is in our own backyard. Industries aren't responding fast enough to changes in the marketplace, and it is easier to blame foreign competitors than to change."

MEXICO

            Having just agreed the NAFTA with the United States and Canada, Mexico has now negotiated a free-trade pact with Venezuela and Colombia which are known in Latin America as the Group of Three.

FEBRUARY 1994 Economic Digest - Importing and Exporting

FEBRUARY 1994 Edition

NAFTA

            We have included a NAFTA Supplement with this Digest issue. Since NAFTA came into effect, readers may have noticed articles and advertisements in the business press which offer, at a high cost, software featuring the text of NAFTA including details on the new Regional Value Content, Certificate of Origin and unfamiliar terms such as "De Minimis" and "Accumulation." The majority of this information is freely available from A & A Contract Customs Brokers and other sources.

TEAM CANADA

            The federal government needs a cohesive "Team Canada" style of export policy to sustain the economic recovery, says the Canadian Exporters Association in a recently released report. Canada risks falling behind other major trading nations unless scarce trade support and promotion efforts are focused on Canada's strengths, the report warns. Among the 80 recommendations:

* Draft a national export strategy.

* Eliminate duplication between provinces and Ottawa and federal ministries.

* Close more provincial trade offices and move the work to consulates and embassies.

* Let business decide on trade promotion and support needed.

* Create a new vision for Export Development Corp.; maintain EDC's equity base and encourage co-operation among private sector lenders.

* Increase the money available through Canada Account financing.

* Offer export tax incentives similar to those provided by U.S. Foreign Sales Corp and harmonize the GST with provincial sales taxes.

* Consult exporters before applying trade sanctions and establish a compensation plan for firms affected.

* Simplify transportation and customs regulations.

WAL-MART IS COMING

            The recent announcement that Wal-Mart was to enter Canada by buying 120 Woolco stores sent a ripple through the stock market causing Hudson's Bay and Canadian Tire Corp. stock to drop by 10 per cent. This retail giant is expecting sales of $67 billion (U.S.) for the year ending January 31.

            Founded in 1962, Wal-Mart is the world's largest retailer. A non-union operation, it boasts nearly 2,400 stores employing 520,000 people full and part time. What separates Wal-Mart from the rest of the pack is alleged to be rock-bottom prices and a single-minded emphasis on service.

            A factor behind the company's breakneck growth has been cutting-edge distribution methods that drive down costs, thereby reducing prices to the customer. That allows Wal-Mart to increase market share, which in turn gives it more clout with suppliers, which leads to even lower prices.

            The way the company replenishes inventory is the centrepiece of its competitive strategy. It is known as "cross-docking," a largely invisible logistic technique. Goods are continuously delivered to Wal-Mart's warehouses, where they are selected, repacked, and then dispatched to stores, often without ever sitting in inventory. Instead of spending valuable time in the warehouse, goods just cross from one loading dock to another in 48 hours or less.

EDUCATION

            The piece of paper earned at an educational institution is not a guarantee of a job, but it certainly helps. This is the employment record for 1993 when the total number of jobs went up. There were 153,000 more jobs (up 8 per cent from 1992) for those with a university degree; 144,000 more jobs (up 4 per cent) for those with a college diploma or trade certificate; 28,000 more jobs (up 1 per cent) for those with a high school diploma but 182,000 fewer jobs for those who failed to graduate from high school.

            The figures are even more dramatic for the three-year period from 1990 to 1993 when total employment fell by 189,000 from the peak before the recession. 308,000 more jobs (up 17 per cent from 1990) for the university graduates; 170,000 more jobs (up 5 per cent) for those who completed other forms of post-secondary education or training; 16,000 fewer jobs (down 0.4 per cent) for high school graduates and a staggering 651,000 fewer jobs (down 19 per cent) for those who dropped out before finishing high school.

TECHNOLOGY

            McKesson Corp. has become the world's largest pharmaceutical distributor. One reason: it connects U.S. and Canadian drug stores to its Econolink-Pharmaserv data base ordering system.

            As soon as a pharmacist sends an order from an in-store terminal, a blue plastic shipping box slips onto a conveyor system in one of their three warehouses. Bar-code scanners route it through an automatic order-picker. Prompted by the computer, the machine tosses drug packages from the racks into the blue box. Rarely ordered items are taken from bar-coded shelves by people wearing computerized gloves with infrared scanners, which help identify the correct products.

            A computer printer spits an itemized invoice into the shipping box and robots label, seal it and convey it onto a waiting truck. Orders are filled every five seconds, with 100 per cent accuracy, and delivered overnight.

            Union Pacific constantly has more than 1,000 trains in transit, which it monitors by sensors connected to fibre-optic cables along the tracks. The rail network has become an information network, boosting on-time delivery to 94 per cent from 48 per cent. To avoid "losing" cars in sidings or rail yards, the company is applying bar-codes. Trackside scanners, like those at supermarket checkouts, identify the cars as they pass.

FORESTRY

            Lumber supply is already being constrained by factors such as changing forest practices and more wilderness areas being protected by government. The B.C. timber supply has peaked and pressures on wood supplies will increase in 1994 as the B.C. government begins planned reductions of up to 20 per cent in the annual harvest. B.C. sawmills are now importing wood from Alberta and Saskatchewan and will continue to do so as long as supplies hold up. Total North American production of softwood lumber is 58.1 billion board feet annually, 24.6 billion in Canada and 33.5 in the U.S. Western Canada accounts for 16.7 billion board feet with B.C producing 14.4 billion feet of this amount.  

STEEL

            Things are looking up for Canadian steel makers because of the U.S. auto industry's resurgence and the weaker dollar. North American car makers are the biggest customers for Canadian steel. Almost two million vehicles were made in Canada during 1993 with 85 per cent of the total shipped to the U.S. Still awaited are a pickup in housing and appliances, which are also major steel consumers, and a wider industrial demand for steel.

            Stelco Inc of Hamilton has announced it will resume paying dividends on preferred shares after a three year break. In October, Stelco reported third quarter earnings of $2 million compared with a year-earlier loss of $58 million. Shares in Dofasco, another large Canadian steel maker, are expected to rise by 35 per cent by the end of the year.

            Co-Steel, also of Ontario, is considering building a mini-mill in the U.S. Midwest to tap new customers and a large supply of scrap metal there. Co-Steel's New Jersey operation is the largest producer of wire rod in the U.S. but sells nothing west of the Mississippi River and has even had to turn away business east of the river recently. Last year, imports represented about 30 per cent of the seven million ton U.S. market for steel rod and bar which is used for such products as bolts and coat hangers.

CATCH-22

            For a decade tobacco consumption in Canada has been on the decline. For the first 11 months of 1993, legal sales of domestic cigarettes dropped 14.6 per cent from a year earlier but exports increased more than 80 per cent. Even the tobacco industry accepts that most cigarettes exported to the U.S. return to  Canada as contraband. It is estimated that tobacco smuggling in Ontario alone is costing the federal and provincial governments around $1 billion in lost revenue a year and that 70,000 cartons enter the province illegally each day. A trailer load of cigarettes purchased in the U.S. for $600,000 can be sold illegally in Canada for $2 million. The reason for the smuggling is a revolt by consumers against high tobacco taxes. The federal Department of Health now predicts that cigarette consumption will actually rise by 5 per cent in 1994 because of the easy availability of cheap cigarettes.      

ECR

            "Efficient Consumer Response" (ECR) is a new U.S. grocery industry strategy that could save the industry $30 billion and require 41 per cent less inventory. The ultimate goal of ECR, an Electronic Data Interchange (EDI) application, is a responsive, consumer-driven system in which distributors and suppliers work together as business allies to maximize consumer satisfaction and minimize cost. Accurate information and high quality products flow through a paperless system between manufacturing line and check-out counter with minimum degradation or interruption both within and between trading partners. By focusing on the efficiency of the total grocery supply systems rather than the efficiency of individual components, they expect to reduce total systems costs, inventories and physical assets while improving the consumer's choice of high quality, fresh grocery products. Grocery supply chain inventories will drop as products move more quickly from packaging line to the check-out counter. In dry goods, it will cut the supply chain inventory from 104 days of supply to 61 days.

TOURISM

            Japanese tourists spent more money in Canada last year than other overseas visitors. The British ranked first in trips to Canada but Japanese tourists spent $434-million--an average of $174 a night. Japanese tourists accounted for 13 per cent of trips to Canada compared with 18 per cent for the British. In terms of total spending however, Japan accounted for 17 per cent of the total compared to the U.K.'s 15 per cent. B.C., traditionally the most popular province for Japanese visitors, strengthened its position during the past ten years, accounting for 41 per cent of overnight provincial visitors in 1992 compared with 38 per cent in 1982, Ontario gained slightly to stand at 30 per cent, Alberta slipped to 17 per cent from 20 per cent a decade earlier. A total of 392,000 Japanese spent one or more nights in Canada last year.

USER PAYS

            A British businessman took out his bank manager for lunch and found that his account had been charged $220 for two hours and 40 minutes of the man's time. The bank was unrepentant saying that the manager had to read up on the file before lunch and do a lot of paperwork afterwards.

AD AGENCIES

            The new president of the Association of Canadian Advertisers has warned that agencies will have to change considerably over the next few years to keep up with the shifting needs of tight-fisted clients. Agencies can expect their fees to continue to dip because many advertisers are no longer prepared to pay their agencies the traditional 15 per cent commission rate. Already, many advertisers are negotiating flat fees with agencies, or other special arrangements. Many advertisers are shopping around for the most cost effective way to communicate their message, which may not necessarily be with one ad agency.

            One Toronto agency has created considerable interest by offering a money-back guarantee for its work. The advertiser pays the agency its overhead and staff expenses but provides its profit only if the advertiser's targets are met. The first advertiser to try this offer was a small brewery. The agency redesigned the brewer's packaging and launched a new ad campaign in December of 1992. Sales soared 50 per cent in the following two months after stagnant sales in 1992 and sales in 1993 were up 40 per cent. This success earned the agency income that was about 60 per cent greater than if it had charged the fee.