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A New Prairie Dawn

Saskatchewan has snatched Alberta’s crown as Canada’s growth leader. And yes, commodity prices have a lot to do with it. But something else is awakening in the traditionally collectivist-minded heartland: a new spirit of enterprise

May 1, 2008

by Amy Jo Ehman

Craig Lowenberg knows “hot” when he sees it, whether it is measured in Scoville Units or economic growth. His business selling fiery hot sauces has tripled since moving from Calgary to Saskatoon in 2006, just in time to hit the heat wave of Saskatchewan’s economic boom.
Lowenberg, a beefy, bald fellow with a goatee, could be the poster boy for Saskatchewan’s rising fortunes. His mug graces the label of his Uncle Big’s Serial Killer Hot Sauce which, at one million Scoville Units, is billed as the hottest hot sauce made in Canada. Made appropriately in what could be the country’s hottest economy.

In 2007, Saskatchewan broke records for retail sales, housing prices, building permits and oil revenues. Gross domestic product grew close to 5%, almost double the national rate. The provincial population rose by an estimated 16,500. Significantly, many of those newcomers moved to Saskatchewan from Alberta, reversing a long-standing trend in the opposite direction.
“There is a new spirit of optimism across the province,” says Steve McLellan, CEO of the Saskatchewan Chamber of Commerce. “People are looking at Saskatchewan in a new light. We’re a brighter, shinier star.”

Lowenberg and his wife, Lorien, relocated to Saskatoon because they wanted to grow their family and their business away from the frantic pace of Calgary. Alberta’s largest city had changed dramatically since he moved there in the early 1990s from his hometown of Grenfell, Sask. “When I moved to Calgary, it had a small-town feel and people were really friendly. Sixteen years later, well, most people don’t see one drive-by shooting in their lifetime and I’ve seen two,” he says. “My wife and I wanted to raise a family and we didn’t think Calgary was the right place.”

Nor was it the right place to grow their business. After developing a successful online store, and selling their hot sauce at various venues including the farmers’ market, they wanted to quit their day jobs and open a small retail outlet. They found the cost of renting space in Calgary prohibitive, but they were also paying a high price in terms of time and stress. In Saskatoon, they found a friendlier pace and an affordable retail space close to downtown to open Droolin’ Devil Fine Foods, where Lowenberg sells 500 hot condiments, snacks and paraphernalia including his own Uncle Big’s signature brand. With more time to focus on marketing, he now sells more of his products into the Alberta market than when he lived in Calgary, and is working on deals to place his line of hot sauces into grocery stores.

“It’s more laid-back here,” said Lowenberg, whose daughter Isabella was born eight months ago. “Your life slows down, your blood pressure drops and it gives you more of a chance to focus on what makes you happy.”

His timing was perfect; retail sales in Saskatchewan “are going through the roof,” according to Doug Elliott of the newsletter Sask Trends Monitor. Retail sales jumped 13% in 2007, compared to about 9% in Alberta and a national average of just under 6%. In the first three quarters of 2007, sales at home centres and hardware stores jumped 32%, home electronics and appliances rose 20% and furniture stores recorded a 24% surge at the cash register. New vehicle sales jumped 14% over the previous year.

Employment in Saskatchewan rose by 2.1% for an additional 10,000 jobs, still a far cry from Alberta’s employment growth of 4.7%. However, Elliott argues, there would have been more job growth had there been workers to fill the jobs. “Our employment growth is limited to how many people we can bring in,” he says. “We’ve got help-wanted signs in virtually every hotel, restaurant and retail establishment, and a shortage of people in construction trades. Almost anyone who wants a job can find one.”

Confidence in the manufacturing sector is also high. Across Saskatchewan, the value of industrial and commercial building permits jumped 47% in 2007 and manufacturing shipments increased despite the strong Canadian dollar, the shortage of labour and stiff competition from China. Total international exports jumped 25% over 2006.

In a poll conducted by the Saskatchewan Chamber of Commerce, 75% of respondents indicated they would invest money in their business in 2008. “You don’t invest in your business if it’s a short-term boom. You invest in your business when you think the economy is on a long positive curve upwards,” says the Chamber’s McLellan.

Perhaps the most touted statistics are those concerning the housing market. The value of residential building permits rose 74% in 2007, with housing starts up 62%. The strongest growth was in Saskatoon, where the price of existing houses jumped an average 50% with many selling for more than the asking price. Sound familiar, Alberta?

“The growth curve started so dramatically that many sectors weren’t ready for it. For example, we can’t build as many houses as the demand, so that’s driven up the price of new and used homes. Clearly the construction trades are working overtime to make sure we get that happening,” says McLellan.

t its heart the boom is about the rising price of oil, coupled with new exploration in the Bakken oil field in southeast Saskatchewan, which is touted as the largest light-oil discovery in Western Canada since the 1950s. The sale of oil and gas rights in Saskatchewan topped a record $250 million in 2007. In February, the first rights sale of 2008 raised a whopping $197 million.

Other commodities are garnering attention, too. A bushel of wheat hit $10 US and rising at the end of 2007. Gold, diamond and kaolite mining are all abuzz, and there’s talk of expanding the uranium industry beyond mines to include a nuclear power facility. The potash industry, of which Saskatchewan is the world’s largest supplier, is undergoing a $3.2-billion expansion in order to keep up with the growing demand, particularly in Asia, and exploration continues for new potash mines.

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“Many of the oil companies out of Alberta are looking at Saskatchewan as an attractive opportunity, and even more so since the change in the royalty structure in Alberta,” says Kevan Bender, an ex-Albertan Saskatchewanian with his fingers in new ventures in both energy and potash. In December, Bender’s employer, Athabasca Potash Inc., went public on the Toronto Stock Exchange raising $50 million, one of the most successful initial public offerings in Saskatchewan history.
“It was a huge undertaking and it just shows the untapped opportunities of Saskatchewan,” he says. “It feels like the new Alberta. Everybody is positive and spending money. It seems like in Saskatchewan the mentality has changed overnight.”

In 2002 the New Democratic government launched a three-year advertising campaign designed, in part, to lure Albertans with ties to Saskatchewan back to the province of their youth. Bender, who grew up on a farm near Porcupine Plain, Sask., answered the call. He had been working in the Alberta banking industry since graduating from the University of Saskatchewan in 1995 with a degree in agricultural economics. In 2004, he moved back to Saskatoon. However, his stay was short-lived. He packed up and returned to Alberta after one year. “I felt the economy was still in the old mentality,” he recalled. “I tested the waters. The mood wasn’t what I’d hoped.”

Now he’s back again and it’s a different story. “You really get a sense that times have changed,” he says. “I spent most of my time in Alberta because I always felt the entrepreneurial aspects of the people and that aggressiveness. I like to feel that optimism. This time coming back [to Saskatchewan] the optimism is there.”

During his brief stay in 2004 he met geologist Dawn Zhou, who recognized a growing demand for potash, a key component in fertilizer, in the burgeoning Chinese and Asian markets. Saskatchewan is the world’s largest supplier of potash and the Potash Corporation of Saskatchewan, a former Crown corporation that was privatized in 1989, is the dominant player. Zhou formed Athabasca Potash Inc. and secured the rights to the Burr Project, which lies adjacent to an existing Potash Corp. mine. Bender came on as vice-president of communication and investor relations, a role he filled from his home base in Canmore until moving to Saskatoon one year ago. His wife, Christina, and their two children, Peyton and Ty, followed in August.

He and Zhou are also small players in the oil industry, forming Ruby Energy Inc. with land rights in the Bakken field and surrounding area, which they lease to a major oil company.

“It’s hard to leave a place like Canmore but it was a tremendous opportunity that I could not ignore,” says Bender. Two recent developments have further fuelled the optimism: a royalty hike in Alberta and a change in government in Saskatchewan. In November, the centre-right Saskatchewan Party, led by 41-year-old small businessman Brad Wall, ousted the New Democrats after 16 years in power. Wall pledged two initiatives that resonated with the business community: a promise not to raise oil and gas royalty rates and a move to “modernize” the labour laws. “With the NDP government and long memories going back to past years, some potential investors stayed away,” says Bender. “With the new government, a conservative government, that investment is coming in big waves.”

Economic forecasters at BMO Financial Group are predicting Saskatchewan will lead the nation in economic growth in 2008 with GDP growth of 3%. RBC Financial is predicting 3.6%. “There’s a fair amount of variation from one forecaster to another, but they average around 3.3%,” says Jim Marshall, chief economist at the Saskatchewan Institute of Public Policy. Not only is that growth significant, he says, but the changing makeup of the economy paints a fuller picture. The perception that Saskatchewan is an agricultural province is no longer true, with sectors such as mining and petroleum, manufacturing and services significantly outpacing the farm economy. “Agriculture is important, but other sectors are much bigger,” says Marshall. “It’s not your father’s Saskatchewan anymore.”

Anecdotally, most of the new faces in the business sector seem to be Albertans with ties to Saskatchewan. However, that is expected to change. “The positive vibe is catching on to other friends who are hearing the news about the lifestyle advantages of Saskatchewan. So, it’s starting to catch fever with the rest of the crowd,” says Bender, who touts the slower pace, shorter commutes and extra family time as the biggest benefits of living in Saskatoon.

“There’s a lot of interest offshore as well, especially from Asia,” says Abe Toews, whose company Stone Creek Consulting helps farmers and business owners plan their exit strategies. He says 70% indicate a desire to sell out and retire within 10 years, creating opportunities across all sectors for younger entrepreneurs. “Even though the pricing of farmland and industrial property has gone up, it’s still a relatively inexpensive proposition compared to Alberta,” he says. “It’s an opportune time to sell and to buy.”

Back at Droolin’ Devil Fine Foods, one of the biggest sellers is a signature green hot sauce commemorating the Saskatchewan Roughriders, which rose to football supremacy in November by winning the Grey Cup for the first time since 1989 – the significance of which was not lost on the business community. “It was not at all a coincidence. It was the strategic outcome we’ve been planning for 18 years,” laughs the Chamber’s McLellan. Joking aside, he says the victory underscored Saskatchewan’s winning attitude. “It was great luck that we won the Grey Cup, but it couldn’t have happened at a better time for the business community.”

Surrounded by bottles and bottles of hot sauce, Lowenberg sums up his market in terms that might also apply to the prevailing mood in Saskatchewan: “The trend is that nothing is hot enough anymore. Which is good for business.”

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