Why Canadian Exporters Are Playing Catch-Up

Even the country's most iconic brands show a dispiriting lack of interest in global markets. Why can't we sell Timbits in Taiwan?

Written by Murad Hemmadi

Back in the 1980s, the highlight of a two-hour trip to the city for me was the stop at Tim Hortons on the way home. My sister and I were allowed three doughnuts each. I took my allotment in Boston Creams. They never lasted the full ride.

That was three decades ago. I still crave that combination of chocolate icing, fried dough and custard filling. All that binge eating corrupted my dopamine system, which is responsible for human desire. Pleasure is a separate chemical response; that is why heroin, caffeine and sugar addicts continue to want their drug of choice even if they no longer like it. Dopamine is the biochemical on which the quick service restaurant industry was built. Tim Hortons was as good at harnessing it as anyone.

MORE DOUGHNUTS: Branding Secrets from Tim Hortons »

Fortunately, I have been able to avoid Tim Hortons as my hair greyed and my metabolism slowed. It hasn’t been difficult. I have lived mostly abroad for the past decade, and Tim Hortons—like most of Canada’s local corporate heroes—dislikes the riskiness of foreign markets. At the end of the second quarter, 80% of the company’s 4,776 outlets were in Canada. The rest were in the U.S., notwithstanding a redoubt of 65 restaurants in the Persian Gulf.

That’s a choice based on timidness. The rise of Starbucks is evidence that there is global demand for what Tim Hortons is selling. Krispy Kreme, of Winston-Salem, N.C., has a small-town origin story that is similar to that of Tim Hortons. The difference is that Krispy Kreme has successfully left the nest. As of the end of its second quarter, more than 750 of its 1,045 shops were located in 24 countries outside the U.S.

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There is a complacency in Canada that too often equates international success with ice hockey and free trade with the world’s biggest economy next door. David McKay, CEO of Royal Bank of Canada—one of the country’s most profitable companies—told a Wall Street audience earlier this year that he didn’t see a way to make it in Asia. It was an incredible statement, given that Asian economies as a whole are projected to grow at an annual rate in excess of 6% for the next 20 years, while growth in Canada and the U.S. putters along at about 2%.

The idea of Canada as a great trading nation is a myth we keep telling ourselves. The country’s share of global merchandise trade was 2.5% in 2013 compared with almost 4% a decade earlier, according to the World Trade Organization. Some argue that too much emphasis is put on the movement of goods, as services actually bring in more money. Canada isn’t a world-beater at that game, either: It accounts for about 1.7% of the trade in commercial services, barely enough to make the Top 20. Belgium, Singapore, Ireland, the Netherlands and India are among the countries that do better.

MORE COMMERCIAL TRADE: Why Services Are the Future of Canadian Exporting »

In 2012, Mark Carney, the former Bank of Canada governor, said the country’s traders were suffering not because they were uncompetitive, but because they were “underexposed” to the markets that were responsible for half the world’s imports. Carney’s observation came too late to do anything about the short-term damage. Only now are non-energy exports showing signs of life, and that is because the U.S. economy is growing strongly again. But advanced economies, including the U.S., will grow at slower rates as growing numbers of baby boomers retire, and there will also be more export competition from developing upstarts such as Mexico and Vietnam. Making money in the future will require speaking a language other than English.

There is reason to be hopeful. Canadian foreign direct investment surged to a record high in the second quarter, a sign the country’s companies are chasing demand. Even the Brazilian private-equity firm that merged Tim Hortons and Burger King last year says selling Timbits to the world is a priority. These nascent signs of a new-found entrepreneurial spirit should be encouraged. International markets are difficult, and Canada has lost first-mover advantage. These days, not far from where I live in Mumbai, I can get my Boston Cream fix any time—at a Krispy Kreme.

Kevin Carmichael is a journalist and senior fellow at the Centre for International Governance Innovation. This article is from the Fall 2015 issue of Canadian Business. Subscribe now!


Do you agree? Do Canadian companies need to raise their global ambitions? Share your thoughts and exporting experiences by commenting below.

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