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Will PEI’s four-point plan help it achieve economic self-sufficiency?

When I asked Prince Edward Island poet Deirdre Kessler for her observations about the character of her province, she responded, “There is something about islands. There’s a kind of pride that comes from being cut off from the mainland, and a sense of independence, too.” Kessler believes geography and history have contributed to the development of this characteristic Island perspective. “PEI was once self-sufficient. We could grow everything we needed, and without importing could be self-sufficient.”

Kessler, however, isn’t a hopeless romantic. “There’s no such thing as being independent in the same way as in the 19th century, but there’s a leftover vestige of that culture, that mentality of deep down being self-sufficient, not needing the mainland.”

Without intending to do so, her sentiment characterizes the approach taken by the provincial government when it created Innovation PEI. Allan Campbell, minister of innovation and advanced learning, says the crown corporation will help PEI “…build sustainable economic prosperity for our …Island community.”

Traditionally, economic self-sufficiency on the Island referred to fishing and farming, particularly potato farming which accounts for half of all farm cash receipts. Together, these economic sectors remain the backbone of the Island economy, with farming worth $400 million (or 15 per cent of PEI’s gross domestic product) and fishing worth $140 million annually. The fishery alone employs 9,500 people. But things are changing and quickly. If the government is right, future economic prosperity depends upon diversification away from the sectors that have historically sustained Islanders and shaped their collective personality.

Through the government’s innovation strategy (Island Prosperity: A Focus for Change), Innovation PEI is supporting the growth of four key economic sectors: aerospace, bioscience, information technology and renewable energy. The plan includes an investment of $200 million in these sectors over a five year period from April 2009 to March 2014. Half of that will go towards what the strategy refers to as ‘innovation’. In addition to tax incentives, this part of the strategy includes three funds. The Pilot Fund will support high risk ventures. The Discovery and Development Fund will assist with research, development and commercialization. And the Prototype Fund is designed to move promising ideas towards commercialization as quickly as possible.

Another $60 million is earmarked for economic infrastructure and will, among other things, guarantee universal broadband internet service across the Island, modernize high school labs and offer training and research into renewable energy, especially on the western side of the Island where the potential for wind generated electricity is greatest. A good chunk of economic infrastructure funding will go toward the construction (already under way) of the PEI BioCommons Research Park and Business Accelerator near Charlottetown and to support an E-Health Centre of Excellence near Summerside.

Innovation PEI will spend the final $40 million on human resources by training workers for these sectors, funding graduate and post-doctoral awards and academic research chairs and attracting highly skilled immigrants and international students. This, in the province that already enjoys the highest immigration rate in the country as a percentage of the total population at 12.6 per cent.

Of course, no government concerned about re-election would embark on such an ambitious, short-term strategy without a significant certainty of success. One of the reasons the government singled out these particular sectors has something to do with the head start each of them enjoys. Pharmaceuticals, aircraft parts and video games are already manufactured on the Island, a significant amount of wind energy is already generated. In effect, what the government has done by creating the Prosperity Strategy is to plan for growth in each of four already entrenched Island economic sectors.

Bioscience
Take the bioscience sector, the roots of which go back 40 years to a company started by a UPEI professor, Dr. Regis Duffy. Today, the Island’s 30 bioscience companies manufacture products like medical diagnostic kits, drugs and other health products used in the treatment of diseases including cancer, fish vaccines and specialty oils used as additives in foods and personal care products. These companies enjoy revenues of $80 million or 1.6 per cent of PEI’s GDP. Companies in the sector are already well integrated into the Island economy, some of them operating out of research facilities like the National Research Council on the UPEI campus, others from facilities in the West Royalty Business Park in Charlottetown and elsewhere on the island.

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Manufacturers go high-end for market success

“We do have fun,” says Sheela Curley, the tour sales manager at Cows Creamery in Charlottetown who starts my tour with a mooing noisemaker and an announcement on the store’s P.A. system. “Good afternoon, ladies and gentlemen and welcome to Cows Creamery Factory Tour. Our next tour leaves in two minutes. If you’d like to join us, mooooove on over to the tour booth.” Elvis croons Blue Christmas in the background as I sample Cows’ new award winning clothbound cheddar.

Cows has managed to thrive on a perfect balance of pride, clean fun and aggressiveness without coming off as arrogant, obnoxious or blindly ambitious. Take their new Creamery location on the edge of Charlottetown. Apropos the company’s image, it’s a white barn with a brightly lit store for shoppers and tourists, but it also houses their t-shirt silk screening operation, ice cream plant, cheese storage cooler and second floor offices for their 13 locations across PEI and Canada.

At first glance, the whole concept seems ridiculous, a business idea that should have been laughed right out of the bank manager’s office: produce a perishable, high end commodity like hand-made ice cream on an island off the east coast of the world’s widest country and sell it on the opposite coast over 4,000 kilometres, a prairie and a mountain range away. But, with stores in Charlottetown, Halifax, Niagara-on-the-Lake, Whistler and Banff, that’s exactly what this plucky little Prince Edward Island company has managed to do. Oh, and in case the laughter subsides too soon, add to that business plan the selling of the staffs’ uniforms right off their backs (that’s how the t-shirt operation got started), an expansion into oysters and perhaps the creation of the chocolate-enrobed potato chip. The salty-sweet snacks are flying off the shelves, even at $5.50 a handful.

Cows is just one of the PEI-based manufacturers bucking a trend. While overall manufacturing statistics for PEI show a recent decline, new manufacturers like Cows have started up and expanded with unusual product lines in unexpected ways, creating an exciting time in a sector that’s diversifying quickly. PEI’s economy is expanding from the traditional, still vital farming, fishing and tourism sectors into everything from cancer drugs to airplane parts, from vodka to animal vaccines. Cows, along with two other small food and drink companies (Honibe and Prince Edward Distillery), characterize PEI’s new breed of manufacturers. They take pride in the quality of their products, manufactured on-island using PEI-sourced raw materials. Honibe (pronounced honey bee) makes dehydrated honey products with Island white clover honey. Prince Edward Distillery starts with Island potatoes, apples and rye.

According to Prince Edward Island’s 2010 Fall Economic Update, “Manufacturing shipments from PEI have declined 7.8 per cent on a year-to-date basis through September” with international exports down 10 per cent. Frozen potato and aerospace products are down sharply to account for most of this loss while fish and pharmaceuticals are up even more dramatically, the latter rising nearly 30 per cent. Over the past 10 years, food shipments have continued to dominate PEI’s economy, accounting for about 60 per cent of total exports. The commonalities among Cows, Honibe and Prince Edward Distillery offer important insights into what it takes to start a small, high end manufacturing business.

One of the keys to success is of course a good idea backed with solid research. Honibe founder John Rowe says his idea came to him on a hiking trip in British Columbia when he opened his pack to find a broken jar and his favourite tea sweetener smeared all over his gear. In his search for an alternative, he discovered that honey couldn’t be found in pure, solid form. Being a native Islander and an engineer, John took his idea back home to the PEI Food Technology Centre, part of an Island scientific community in Charlottetown that includes the University of Prince Edward Island, the National Research Council, the Canadian Food Inspection Agency lab and Agriculture and Agrifood Canada. Ten years of research led to a patented dehydration process, the founding of Island Abbey Foods Inc. with his wife Susan and the Honibe honey drop, a solid, non-sticky tablet of pure honey. Island Abbey Foods is the first company in the world to develop the technology to solidify honey, an accomplishment that won them the 2011 Premier’s Award for Innovation, the SIAL d’Or award for the world’s best new food product in 2010 and a $600,000 cash plus $400,000 investment from CBC’s reality investment show, “Dragon’s Den”. Julie Shore of Prince Edward Distilleries found her inspiration in Cape Breton on a tour of Glenora Distillery, the only single malt whiskey distillery in North America. “That rekindled her interest in her distilling history,” explains partner Arla Johnson. Julie adds, “We have ancestral blessings.” Four generations back, her family distilled corn whiskey in North Carolina in the years before prohibition. “I’ve always been fascinated by distilling. Really cool stories of the distillery. The old whiskey jugs. If they’d only kept it going, we could have been the Kennedy’s of North Carolina.”

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Could the cure for cancer be lying in the mud on the ocean floor off Atlantic Canada?

Dave Overy and Brad Haltli laugh when I ask what they’re looking for in the waters off Atlantic Canada. Their answer does nothing to conjure the romanticism of the sea. These two research scientists, working out of the Nautilus Biosciences lab at the National Research Council (NRC) in Charlottetown, are after the most defenceless, unappealing of all marine organisms – bacteria and fungi. Dave and Brad find them on immobile marine creatures like sponges, corals, tunicates and sea anemone. They even welcome a good look at driftwood and mud.

“Typically,” explains Haltli, “these organisms develop a chemical means to protect themselves, and we can exploit that for human purposes.” He’s the bacterial natural products group leader while fellow senior scientist Dave Overy heads up research into fungi. Both work in the lab of Dr. Russell Kerr, founder and co-owner of the company, where – in partnership with the University of PEI – they conduct research and oversee graduate students. “There’s a lot of structural similarity between compounds produced by bacteria and fungi and those isolated from corals, sponges and other invertebrates. This intense similarity has led the natural products community to believe it may be symbiotic bacteria or fungi that are actually producing these (compounds).”

Founded in 2007, Nautilus is a new player in the field of bioscience. As yet the company hasn’t produced a cure for cancer or even baldness. In fact, it has no products whatsoever and therefore no revenues, but it nevertheless belongs to PEI’s successful and growing bioscience sector, one with the potential to be a major player in the world of natural products.

A cluster of companies, financial institutions, government agencies and academic partners came together six years ago to form the PEI BioAlliance and represent the interests of a sector with $80 million in annual sales. Within this sector, Nautilus belongs to a sub-sector that uses natural products from PEI and around Atlantic Canada as the raw material for the manufacturing of high tech products.

Member companies using natural products include Nature’s Crop, a pharmaceutical and nutritional company specializing in non-genetically modified plant oils that just opened a new extraction facility in Kensington. Island Abbey Foods is researching how Island honey can be used as a drug delivery substance (they already make their own throat lozenges). Hendrick Seeds is growing soybeans with traits of particular interest to Japanese and European markets. The Ontario-based company is building its own research facility and will be contracting 40,000 acres for soybean production on the Island. Ceapro, a manufacturer of active ingredients for personal care and cosmetic products, is new to PEI. Speaking from his office in Edmonton, Ceapro’s chief financial officer Branko Jankovic says his company is collaborating with the National Research Council and the Food Technology Centre on an oil extraction project. They’re also collaborating with Agriculture and Agri-Food Canada’s PEI field research site at Harrington Farm to test a special variety of spearmint to see how it will grow in PEI. “Great first year results,” reports Jankovic.

Dr. Regis Duffy is considered the founder of PEI’s bioscience sector. Born in Kinkora (between Summerside and Charlottetown), Duffy returned to the Island after studies in the U.S. to become the first dean of science at the University of PEI. In 1970, he created Diagnostic Chemicals Limited, a company that would prove to be the Island’s sector pioneer. It has since split into two companies. BioVectra is wholly owned and operated in PEI while multinational biotech corporation Genzyme purchased the other arm of the company, which it continues to operate on the Island. Dr. Duffy is still with BioVectra as chairman.

Forty years after Duffy started the Island’s first bioscience company, Rory Francis, executive director of the PEI BioAlliance, says there has been significant progress. “The ability to attract and retain high quality people in business and in government. The fact that we’re 30 companies now, the growth in revenue, the number of companies moving products to market.… And the commitment to research and development. The quality of the infrastructure with the NRC, the quality of the partnerships – research and academic, business and the provincial government. These are all signs of success.”

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THE BUSINESS RESPONSE TO HURRICANE IGOR

On Tuesday, September 21, Hurricane Igor assaulted Newfoundland with 140 km per hour winds and torrential rain. It destroyed buildings and vehicles, washed out roads and bridges and stranded thousands without power on the Burin and Bonavista peninsulas. The next day Kevin Jacobs, manager of the Clarenville Co-op, had an idea. “I left for my dinner hour at twelve,” he recalls. “There was a radio report on. CBC had hired a boat to go to Hickman’s Harbour to do a story. I turned around in my truck and went back to the marina. I asked them if they would allow me to put milk, bread and eggs on their boat. The guy said he couldn’t do it because they were in a hurry.”

Undaunted, Jacobs looked for another way to act on his idea of shipping supplies to the communities cut off by the 230 mm of rain Igor had dropped in six hours. “There was another guy in a boat. I asked him if I could hire him. He said yes. We had to go back to the store to get merchandise. I asked my assistant manager to call our vendors to raise money to get supplies. In a matter of a half hour, we raised $3,000.00.” In the meantime, the CBC employee Kevin had met on the dock tracked him down. “He called his boss, and his boss said to him, ‘Food first, story second.’ That was two boats we loaded to Hickman’s Harbour.”

So began a week-long impromptu relief effort led by Jacobs and his staff at the Co-op. Jacobs himself made public pleas via the media, contacted major Co-op vendors and challenged local businesses to match his own generosity. One of the first calls he made was to Melissa Churchill, the lone employee over at Clarenville’s Budget Rent a Car outlet; he needed a cube van to haul all the supplies. Melissa landed Kevin an initial two-day rental donation that turned into a ten-day give worth about a thousand dollars.

“Why wouldn’t I?” says Churchill of her decision to contact head office in Nova Scotia for permission to help out. “The devastation was unbelievable. You needed transportation to get the food to people. No access to communities, roads washed out for days, weeks. I saw people boated into the community for medical reasons. Helicopters bringing people into the hospital. It (the van) was to help people out, is what it was.”

When Kevin contacted the Coke bottling plant in St. John’s for a donation of 1,500 bottles of water, Neil Sullivan, area sales manager for Coca Cola Refreshments, had a similar response. “It was a great opportunity to help our customer and the consumer as well,” says Sullivan who oversees a staff of 23. “It’s good to be able to give back to the community when people are in an unfortunate situation. I was in Halifax back in 2001 in Hurricane Juan. No power for a week. I’ve been there, done it.”

At the request of the Red Cross, Bert Bown at Co-op Atlantic’s Gander Distribution Centre donated 665 cases of bottled water for a total of 31,920 litres. Co-op Atlantic assigned staff to follow tractor-trailers loaded with relief supplies up the Bonavista Peninsula until roads became impassable. At these critical locations, staff and volunteers carried supplies by hand to smaller trucks waiting on the other side. Kevin Jacobs went along on some of these trips to make sure the supplies got through. At one location, he says, “I saw these four ladies and some of my staff lugging eggs across the ditch.”

So successful were Kevin and his Clarenville Co-op staff at organizing their own relief effort and getting the word out, their office became the clearinghouse for the Hurricane Igor response. Kevin says ex-pat Newfoundlanders working for oil companies in western Canada donated cash they had gathered around their offices. “Everybody was calling in, trying to donate money. This was emotional for my staff,” Jacobs explains. “We’re grocery people. People would call them on the phone crying.” The Salvation Army called Kevin to ask if he could get supplies to communities they couldn’t reach. “While I was on the phone with the Salvation Army,” says Jacobs, “a guy walked in my office from Bonaventure. This is the area I wanted to get to. They were organizing a boat from the community to come to Clarenville for goods. I was looking for a boat, but it was already coming towards me. In an hour and a half, we had that boat loaded.”

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As an industry, forestry is at a crossroads. Stereotypes aside, today’s loggers are not a bunch of rough-looking guys with chainsaws and machines ruthlessly harvesting every tree they see. Forestry has entered an age of great transformation that simultaneously looks forward to a new age of scientific innovation while harkening back to a time of deep understanding of the forest.

From stump to shelf, high tech has hit the woods. Steve Talbot, executive director of the Forest Products Association of Nova Scotia, points to the use of computers on harvesting machines that track harvest levels and the efficiency of the operators. GPS units show the operators exactly where to cut. Back at the lumber mill, scanners tell saw operators the precise number and size of lumber pieces to cut from each log, thus reducing waste. Any waste that results is used for fuel, sold to pulp and paper mills and even turned into wood pellets at new processing facilities like the one built by the Shaw Group in Lantz, Nova Scotia. “Sawmill technology has come so far to reduce waste,” says Talbot, “some mills can take a previously unusable, crooked log and make straight boards using a flexible saw blade system. Optimization is the key word on the lips of many folks in the forest industry.”

Others are working on the next generation of products and new approaches to manufacturing. On February 1, the Forest Products Association of Canada released a study called Transforming Canada’s Forest Products Industry. Admitting the industry faces “difficulties,” the study calls for private and public investment in research and development, particularly into bio-fuels and bio-products, as well as the retooling of existing plants. According to an FPAC summary, “there is great potential for the forest products industry to integrate the traditional industry with emerging bio-technology to profit over the long term through the integrated production of traditional products with bio-energy and bio-products.”

One particular bio-product, something called NanoCrystalline Cellulose, seems most promising. Through their research and development institute, FPInnovations, the forest industry is encouraging companies to join the new Canadian Forest NanoProducts Network, a group of industrial, academic and governmental partners to develop applications of NanoCrystalline Cellulose. NCC is the fundamental building block of cellulose fibres extracted from trees. With almost eight times the tensile strength of stainless steel, as well as unique optical, electrical and magnetic properties, the application possibilities seem endless: reinforced polymers, textiles, paints, coatings, optical devices, pharmaceuticals, bone replacement, tooth repair, building products and aerospace applications. 

Talbot’s word, “optimization” may indeed describe recent developments in the industry, but it also comes close to encapsulating what ails it. The forest industry in Atlantic Canada in particular has bumped up against the same problem faced by the fishing industry and other resource subsectors – depletion of resources and ecological deterioration. Businesses and jobs are disappearing.

Take Nova Scotia as an example. Even though wood harvesting has nearly doubled in that time, the number of forestry jobs has been cut in half. According to Industry Canada, this is a national trend. Since 2005, both jobs and GDP have declined across the industry, including in wood product manufacturing and pulp and paper. Simultaneously, the state of Nova Scotia’s forests continues to decline. Over 90 per cent of the harvest is by even-age methods, mostly clear-cutting. Only 29 per cent of tested harvesting sites were in compliance with the Nova Scotia Department of Natural Resources Habitat and Watercourses Protection Regulations in 2005. And the regulations are not considered stringent, requiring that only four trees per acre remain standing and 20 metres of forest remain intact along rivers. While replanting is a common practice, natural forests are being replaced with softwood plantations that are more farm than forest. In 2005 alone, 12,585 hectares of natural forest was converted to softwood plantations.

If one trend in this industry is toward the reduction of the raw material to its most basic component and the optimization of the systems to harvest and utilize it, the other toward the efficient and sustainable use of the forest as a whole. Citing what they see as exploitative and unsustainable forestry practices, groups like the Fundy Canadian Model Forestry Network and the Falls Brook Centre in New Brunswick and the MacPhail Woods Project in PEI have established the next generation of model Acadian forests. The Falls Brook Centre calls itself “the Canadian focal point” for the International Analog Forestry Network. Based on a combination of traditional forestry approaches and processes found within nature, the goal of analog forestry is to design forestry methods that mimic or are analogous to natural processes.

As I look on, Graham Nickerson suffers a wicked sword blow to the neck from a pint-sized warrior. With a mighty roar, the pitiless swordsman strikes again. This time, Graham manages to raise an arm against his attacker. Alas, it is hacked off at the shoulder and, sitting right there at the kitchen table, in front of a laptop full of photos from the Mediterranean, he dies a melodramatic death. The warrior is Graham’s four-year-old son, Bailey. The sword is a cardboard tube that once held Christmas wrapping paper. Satisfied, Bailey sheaths his sword… for now.

….

Graham Nickerson is the founder and president of Highland Geo Solutions, a company that uses high tech survey equipment and custom-designed software to map the world’s oceans. When he’s not working in the field, this is where he can be found – at his home office in Taymouth, New Brunswick (not far from Fredericton). He says that working from home allows his company to be highly flexible while maintaining low overhead. From Taymouth, Nickerson finds work, manages projects and plans upcoming trips. More importantly, he does this while spending time with his family. As the geoscientist plays dead, Sandra (his wife and business partner) feeds Rhys, Bailey’s baby brother, at the far end of the table. As the Business Operations manager, Sandra keeps the accounts in order.

In 2008, Highland Geo Solutions employed 20 geologists, engineers, surveyors and software experts. “We incorporated in 2006, but the roots of the company stem from work I did as a private contractor starting in 2000,” explains Nickerson. Since incorporation, he and his crew have worked on-site at 21 projects in 13 countries around the world. They have been involved in mapping debris after Hurricane Katrina, the marine excavation of 2,400-year-old Greek shipwrecks off the Albanian coast, river channel mapping in the United States, oil and gas exploration off the Angolan coast, and undersea mapping for cable routes in the shadow of Japanese volcanoes.

“There really isn’t a secret recipe to (how we built) our client base,” says Nickerson. “A number of the clients I dealt with at my old job followed me to my new company.” Working through a hard won network of university departments, old classmates, former employers, independent contractors and even competitors he’s met at trade shows and in the field, he has managed to succeed not through cut throat competition, but by imagining how projects can be mutually beneficial.

Their success is also due to a bottom-line oriented flexible operations strategy. “We leaned heavily on contractors to keep overhead in line with business activity. When a contract came in, it was easy to make a phone call and get the right person on a plane headed to the project. The days of working with a company for life with numerous benefits are over. Sandra and I work to live. We have all the infrastructure to make us globally accessible. Namely, high speed internet, good road networks and a local airport. We also get to live the lifestyle we want in the country with lots of interesting travel. Most of our contractors have similar interests. They want to have a life and not be beholden to a corporation. The ocean mapping industry really fits well with that. You tend to work intensely for a month or two and then have periods of down time to do whatever you want.”

At four years of age, Highland Geo Solutions is like the Nickersons’ middle child. “We spend a large portion of the work day managing the managers,” Graham explains. “We use web based payroll when necessary, online calendars and Blackberrys for calls and emails.” At times, it’s about as challenging to manage as its siblings. This past year, Graham found himself awake at night, wondering if his company could survive the economic downturn. Within weeks of that low, he was working ‘til midnight, sorting out his visa for the latest project in Indonesia, buying airline tickets and wistfully remembering the down time. “It’s like having a small baby and wondering if you’ll ever sleep again. Then they grow up and don’t need you as much and you miss it.” ….

Like any proud parent, Nickerson is happy to share pictures of his sometimes problem child. One of them, taken at the site of his favourite project in the Mediterranean, shows him sitting at a bank of computers aboard the Hercules, a small survey vessel belonging to RPM Nautical Foundation of Key West, Florida. Dedicated to the preservation of marine archaeological heritage, the RPM Foundation’s mandate is to provide technical expertise to governments that otherwise do not have the resources.