Commentary

What N.B. Economic Developers Can Learn From Nestlé’s Approach On The Big Turk

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David Campbell writes a blog about economic development in Atlantic Canada called It’s The Economy, Stupid.

One of the most oft-repeated mantras in economic development is the need to focus.

“We can’t be all things to all people.”  “We have limited resources so we need to focus our efforts.”

I had a conversation with a budding politician the other day and he told me we must focus on one or two key industries. That would be the key to success.

I’m not so sure. As I have mentioned before I changed my mind on this issue a decade or so ago when I was working with Clare, Nova Scotia, on an economic development strategy. During a session with tourism industry folks, I asked them to brainstorm economic opportunities they thought could work in the community.

I heard about the need for more accommodations, tourism operators such as kayaking, and experiential fishing. In all, the group identified at least a dozen tourism opportunities that might work in Clare. If the community could convince entrepreneurs to invest in a handful of these opportunities it would have provided a small but important boost to the local economy.

So I asked which organization was working to develop these opportunities.

Crickets.

At the time there were at least seven related economic development organizations active in Clare. NSBI had a body. ACOA had a body. The municipality had a body. The local tourism industry had an association. One of the big universities had an operation in the community that helped budding entrepreneurs with business and marketing plans. The French-language economic development group RDÉE Canada had a body. There was a regional economic development group that covered Digby to Yarmouth. In addition, there were several other provincial government departments with some interest in tourism.

None were doing anything to proactively try and attract tourism investment to Clare.

It was my light bulb moment. It was then and there I realized that economic development efforts should be focused more on opportunities than on functions. Identifying opportunities would help focus efforts. Big opportunities might require more effort but smaller, relatively limited effort opportunities were just as important. It was all a matter of the relative cost and effort to develop them.

It would have taken very limited effort to package up those dozen tourism investment ideas into separate business cases, book a room at a hotel in Toronto and invite interested entrepreneurs to come and take a look.

But no one did it because for most, economic development is not about proactively developing and pitching ideas, it is about waiting for the phone to ring (or the email to arrive). Once a potential entrepreneur is interested, then there is an army of support.

ACOA has funding. NSBI has funding. BDC has funding. The university will help with a business plan.  The regional agency will help. The tourism industry association will help. The municipal economic development officer will help – an army of support – after the entrepreneur walks through the door.

The Big Turk Approach

You might call this the Big Turk approach to economic development. The Big Turk is a Canadian chocolate bar. It ranks in the top 20 in Canada but isn’t exactly Smarties. I can’t find annual volume for the bar but I would be surprised if it generated more than a couple million in sales per year across the country.

Why would Nestlé, a company with more than $90 billion worth of annual sales and over 300,000 employees, “focus” on the Big Turk? Why the Big Turk and its 0.0033% of global sales?

Following the wisdom of the economic development gurus, they should put all their effort into Kit Kat.

In reality, Nestlé offers thousands of smaller regionally focused products because they see opportunity. The issue is not the volume of sales. It’s the profitability of the opportunity. And there are other benefits such as shared overhead, distribution, R&D, packaging and other costs.

There is a lesson here for economic developers.

Developing the maple syrup sector in Albert County is not a billion-dollar opportunity but it could be a $30-million opportunity. Attracting 50 immigrant farmers is not a billion opportunity but could help strengthen an important industry in the province.

Identifying tourism investment opportunities in and around the Fundy Trail is not going to save the New Brunswick economy but it might yield important economic benefits. Promoting the development of tourism-related housing along the Bay of Fundy and convincing the Yanks to buy (or fractionally own) these houses creates a permanent base of tourists that visit here multiple times per year.

Determining if there are firms doing warehousing out of Montreal that would have a better economic case to do it out of Moncton isn’t going to solve the province’s long term demographic crisis, but it would be taking advantage of a core economic asset of the hub city.

I used to joke that there must be economic opportunities along the Plaster Rock-Renous highway. There must. But who is looking at it? No one.

If a budding entrepreneur just happens along then the whole system kicks in with support, but no one is seriously poking around the swamps of central New Brunswick looking for opportunity.

Again, I’m not suggesting that governments own businesses or provide significant subsidies to industries they like or anything so heavy handed. I’m saying there is information asymmetry between the potential opportunities and the potential entrepreneurs/investors, and economic developers would be better off playing in this intermediary space.

Obviously there needs to be a rigorous focus on ROI. If it costs $1 million to develop a $50,000 opportunity, don’t do it. But what would be the cost to develop a program to attract 50 immigrant farmers to the Salisbury area? What would be the cost to flesh out new tourism investment opportunities in Greater Saint John?

I have said, somewhat facetiously, in the past that we should go through all 900+ NAICS industry codes. Do we have a business case for NAICS 712120 – historic and heritage sites? Is there some historical or geographic attribute we can exploit? Where are NAICS  624310 – vocational rehabilitation services happening? Who is getting the economic benefit?

Are we losing out of NAICS 623110 – nursing care facilities opportunities? My wife suggested there should be a mini-assisted living facility in Upper Blackville so that elderly people don’t have to leave the community. Maybe?

Do we have enough NAICS 541215 – bookkeeping, payroll and related services providers or are we losing business to other jurisdictions? Is there opportunity for NAICS 487110 – scenic and sightseeing transportation? Do we need more NAICS 311811 – Retail bakeries or are we satisfied bringing in fresh bread and doughnuts from Montreal?

Is there any potential for NAICS 112410 – sheep farming? Okay, this one might be a stretch.

I can tell you right now that a lot of old timers in the economic development biz are rolling their eyes as they read this.

But I truly believe the competition for investment, entrepreneurs and people attraction is more heightened then at any time in the past. We can try and go after video game development firms or film production or aerospace manufacturing just like everyone else or we can focus on the opportunities that make the most sense in our community – large or small.

Huddle publishes commentaries from groups and individuals on important business issues facing the Maritimes. These commentaries do not necessarily reflect the opinion of Huddle. To submit a commentary for consideration, contact editor Mark Leger: [email protected]