Title: Quebec SMEs look toward 2009 with caution, determination

Sub-title: Forecasters say that the Canadian economy is headed for a slowdown next year. But many Quebec entrepreneurs remain optimistic.

 

You’d think that Norman Hébert, president of Groupe Park Avenue, which operates nine Montreal car dealerships, would be quaking in his boots. Consumer confidence is falling and recession talk abounds. In a sign of just how bad things are, last week, the Big Three U.S. automakers’ CEOs even temporarily parked their private jets, to boost their chances of squeezing bailout money out of Congress.  

 

However Hébert seemed barely fazed. “Car sales in Canada have done far better,” explains the industry veteran. “U.S. activity is down almost 20 percent year-to-date, but in Canada, sales are up slightly. In Quebec, where our dealerships are located, sales are up close to 7.0 percent so far this year.”

 

While many analysts are predicting gloom and doom for next year, Hebert is far more reserved. “With all of the negative talk out there, we are naturally being conservative and are preparing for flat sales,” says Hebert. “That’s nothing to write home about. But for a recession year, that would not be a catastrophe.”

 

Hebert counts two BMW dealerships, as well as one from each of Nissan, Honda, Toyota, Volkswagen, Infiniti, Audi and Mini as well as a long-term leasing facility, among the companies he operates. This broad dealership range, which caters to car enthusiasts in a wide variety of income groups and demographic categories, gives Hebert a unique insight into consumer spending patterns.

 

One trend that Hebert has noticed is that while experts say the economy is headed for trouble, in many sectors that outlook is far from certain. “Our dealerships generate close to $300 million in sales each year and our numbers have been up,” says Hebert. “That said we have seen demand shifts. High-end luxury buyers have moderated their tastes somewhat and cars such as the Toyota Corolla that get good gas mileage and have good maintenance records are selling quickly.”

 

Adjusting to a fluctuating loonie

Al Carbone, executive vice-president at Rosmar Litho, a Quebec-based folding carton manufacturer that also conducts operations in the United States sees many of the same trends. “Macro industry indicators such as order backlogs at paper and carton mills show that things are slowing,” says Carbone. “On the other hand many of the people that we talk to in the industry expect a reasonable year during 2009.”

 

Since Rosmar both buys raw materials in the United States and sell and manufacturers finished goods there, one trend that Carbone will be watching closely during coming months is currency fluctuations. “Any rapid movement in the Canadian dollar can create significant disruptions, because they affect the profitability of forward sales and purchase contracts,” says Carbone. “That means we have to be very careful to adjust our hedge positions, as things eveolve.”

 

A mixed picture for luxury goods

One product category that tends to get hit hard during soft markets is luxury goods. But wait a second, says Charlie Crawford, president of Domaine Pinnacle Ice Cider, it depends which luxury goods. “We sell a lot of our product through high-end restaurants and we are seeing less traffic there,” admits Crawford

 

“However there’s an old saying that during tough times people drink more,” says Crawford with a wry laugh. “In fact demand for Ice Cider at SAQ and LCBO outlets remains strong and we expect this to continue into next year.”

 

One wine industry trend that looks to have hit a plateau, at least for the time being says Crawford, is the “trading up,” phenomenon, which saw many consumers drink less product, but to opt instead for more premium brands. As a result, Crawford expects sales to the United States and to several of Domaine Pinnacle’s 40 export markets to moderate somewhat next year.

 

Products that can help businesses boost their efficiency tend to do well even during recession times, says Mario Bouchard, president of Ibwave Solutions, The company develops and markets industry specific planning and design software that helps builders make their projects more cell-phone friendly.

 

The company’s software, although relatively new, is quickly becoming an industry standard and has been sold to more than 100 clients in over 40 countries. That said, “….if construction projects are put on hold, it is clear that demand growth for our tools will slow,” says Bouchard. “However since we operate in a global market, generally we can compensate for sluggishness in some areas, by refocusing effects elsewhere.”

 

As for Hebert, despite his optimism, he acknowledges that in today’s fluid environment it pays to remain flexible. In a sense, Groupe Park Avenue is in a privileged position.  In recent months the big three automakers have drastically tightened their lending, a move that has literally pushed consumers into the arms of the foreign branded dealers such as those that he operates.

 

However he also acknowledges that a falling tide would likely eventually lower all boats. “The Canadian economy has been through tough times before,” said Hebert. “And I am quite sure than we can make it through them again. Let’s just hope that things don’t get too rough.”

 

 

Photo caption: (Norman Hebert sitting on a Toyota Corolla).

 

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