It’s time to think outside the traditional wood box in marketing Canadian lumber
By Tony Kryzanowski
My travels often take me through independently owned sawmills, flooring plants, and secondary wood product manufacturing facilities. Sometimes, the variety of products and production methods are nothing short of astounding. However, probably the most frustrating aspect of some of these visits is just how little effort is put toward product promotion to expand markets and increase income.
“People know who we are mainly through word of mouth. So we really don’t promote ourselves all that much.” I hear that explanation a lot. It leaves me wondering just how many outstanding wood products and manufacturing techniques have died with the inventor or innovator.
The reason why so many seem reluctant to market their products more openlyor to a larger audienceis quite simple and understandable. Ask these individuals about their raw material and production techniques and they can talk your ears off. But ask them how they market their products and it’s as though you’ve asked them a question in a foreign language. That’s because they are “production guys.” Writer Garrison Keillor described these personality types as people “who change their own oil and get their deer every year.”
Thinking outside the box can be difficult for some people, but you have to wonder sometimes why these people don’t focus more on marketing, especially with so much assistance available to safely take their wood product businesses into uncharted territory.
A good example of that is the accounts receivable insurance program offered to small business by Export Development Canada (EDC) to guard against non-payment when exporting to certain markets. EDC is a federal Crown corporation that provides financing and risk management services to Canadian exporters and investors in up to 200 markets worldwide. Its accounts receivables insurance will pay up to 90 per cent of a client’s losses if their buyers don’t pay. EDC even offers political risk insurance where shipments or payments could be disrupted by war, insurrection, or other political disturbances.
Insurance offered by EDC has other advantages, especially for companies wanting to finance, for example, a plant expansion to accommodate higher volume demand from an international client. According to EDC, insurance is often used by Canadian companies to acquire working capital from banks because the bank is confident that the exporter will collect payment from either the buyer or EDC.
EDC functions much like a private sector insurer, underwriting business across a broad array of risks. This allows the corporation to support exporters without cost to Canadian taxpayers. It reinvests profits back into the business. It seems to function a lot like crop insurance. Farmers buy this type of insurance to guard against the financial loss that can occur as a result of a disastrous weather event. The main factors that go into calculating insurance premiums are:
• volume insured;
• the credit risk of the buyers;
• the number of customers seeking insurance from a particular sector;
• EDC’s prior experience in the particular industry and segment;
• the terms of the sale;
• the credit practices of the client; and
• the number of years that the client has been an EDC customer.
In 2007, EDC’s services and deal structuring capabilities helped to facilitate $78 billion in transactions for nearly 7,000 Canadian companies. Approximately 84 per cent of customers were small to medium-sized businesses. Yet the level of participation by wood product manufacturers is still very low.
Why aren’t Canadian wood product manufacturers taking greater advantage of these types of programs? According to the EDC, Canadian manufacturers are still very focused on the low hanging fruit, that being the American market. Because buyers in the US represent a lower risk, insurance against non-payment is often not required.
Given the current state of the North American forest industry, maybe it’s time to start marketing our wood products more globally. For example, a huge market has been identified for basic disaster or poverty relief housing in countries like Indonesia, Pakistan, India, China and continental Africa. These would consist of modest wood-based housing units similar in wood volume to a garage package, but constructed in prefabricated modules in Canada and shipped for assembly overseas.
So there is help and a security safety net against non-payment available for those with great products interested in testing new markets. Hopefully, the sub-prime mortgage crisis in the United States is teaching us about the dangers of depending too much on one market. Butand this can be a big one there has to be willingness to change and for that, I close with the immortal words of that grand old sage, Red Green, and the Possum Lodge prayer, “I’m a man, but I can change, if I have to . . . I guess.”