Why Mexicans Don't Drink Molson

by Andrea Mandel-Campbell

  Sixty-nine years after his family arrived in Canada as struggling Jewish immigrants, Bronfman was at the helm of the world’s largest distiller, a fact he unabashedly celebrated with the construction of the Seagram Building on Manhattan’s swanky Park Avenue in 1958. The thirty-eight-storey, bronze-tinted skyscraper designed by renowned architect Ludwig Mies van der Rohe would become not only a New York City landmark, but a testament to what could be achieved in a supposedly cold, harsh hinterland like Canada.

  The first inductee into Canada’s “global hall of fame,” Bronfman was followed by Thomas Bata, another hard-driving and exacting taskmaster. Born in the Czech town of Zlín, where his family had been cobblers for more than three hundred years, Bata’s father revolutionized shoemaking by replacing artisanal leatherworking with the conveyor belts and mass production he’d seen while working on the assembly line of a shoe factory in the United States. The Bata Shoe Co. was already the world’s largest footwear exporter when young Thomas, in a dramatic bid to save the company, immigrated to Canada two weeks before the Nazis marched into Czechoslovakia. He brought a hundred key Bata employees and their families— as well as more than a thousand machines — with him and relocated to a settlement north of Trenton, Ontario, which he named Batawa. After the war, Czechoslovakia’s incoming communists nationalized the Zlín operations, which had employed forty thousand workers, and Bata’s temporary home became permanent.

  Despite the company’s strapped finances and its exiled outpost, Bata and his coterie of devoted employees “were determined to rebuild the company bigger than it was before,” recalls his wife Sonja. “They were absolutely fanatic about it.” They immediately turned to the still-undeveloped African market and, in a story that has become part of company lore, dispatched two salesmen, one to traverse the continent’s east coast in search of potential shoe markets, the other to traverse the west. The salesman sent to investigate the east wrote back saying it would be virtually impossible to establish a market, as no one wore shoes, says Sonja. His colleague on the west coast reported that the “opportunities were unlimited” because “nobody wore shoes.”

  In order to be able to furnish consumers in developing countries with shoes they could afford, Bata employed a unique “multi-domestic” approach to international markets in which inputs were sourced locally, manufactured in the country and sold to a local Bata retail store. In nations with no infrastructure or history of manufacturing, it was a challenging task, and Bata even established tanneries and hide workshops. “In many places there were no spare parts, no equipment, no nothing,” says Sonja. “But they refused to give up. The word ‘impossible’ was not in the vocabulary.” At its zenith, Bata was the world’s largest footwear company, selling one million pairs of shoes a day in practically every country outside the former Soviet bloc. As one business colleague put it: “Bata considered the world a very small thing, and very accessible.” *

  Franz Strohsack was another victim of the war that roiled through Europe. By the age of twenty-two he was anxious to escape the economic depression that hovered over his hometown of Weiz, in the Austrian Alps, and see the world. Canada was the first country to offer him a visa, and in 1954 he arrived in Montreal with a single suitcase and, the story goes, forty dollars in his pocket. A trained tool-and-die maker, he worked at odd jobs, cleaning dishes and picking up golf balls at a driving range before taking out a thousand-dollar bank overdraft and opening his own small machine shop in Toronto in 1957.

  Frank Stronach, as he now called himself, slept on a cot by his lathe, and in 1960 won his first job making auto parts for General Motors in Oshawa. His big break came with the 1965 Auto Pact agreement between the United States and Canada. While most Canadians worked the assembly line for the Big Three automakers, Stronach and other European immigrants saw an opportunity to supply parts. Today Stronach’s Magna International, with us$23 billion in annual sales, eighty thousand employees and three hundred facilities worldwide, is one of the world’s largest auto parts manufacturers. The former dishwasher is unapologetic about his annual pay packet of some $50 million, maintaining that “Canada would be better off with more Frank Stronachs.”

  Harrison and Wallace McCain weren’t immigrants or ethnics, but as third-generation Irish-Canadian farmers from rural New Brunswick, they were definitely outsiders. When, in 1957, they decided to use their family inheritance to build a frozen french-fry plant in their hometown of Florenceville, no one believed they could compete against the big agri-food manufacturers across the border in Maine. But instead of using a government grant and a 17.5 per cent tariff on American processed potatoes to barricade themselves behind the Canadian border, the McCains went global.

  Within a decade they were selling the frozen spuds to the United Kingdom, Australia and the United States. As the fast-food craze gained momentum, they hooked their fortunes to food chain giants like McDonald’s, becoming the world’s largest french-fry manufacturer. With fifty-five factories on six continents and $5.7 billion in sales, McCain Foods accounts for a third of the world market. Harrison, in an effort to manage his ever-expanding empire, once said he spent 140 nights a year sleeping on the corporate jet. Speaking at his funeral in 2004, former New Brunswick premier Frank McKenna told a packed church: “Harrison McCain was a globalist before the word was even invented.”

  While Bronfman, Bata, Stronach and the McCains are known for their domineering, larger-than-life personalities, Issy Sharp is said to be the most unassuming of tycoons. His father Max was born in Oswiecim (Auschwitz), Poland, before moving to Palestine in 1920 as a pioneer settler on Israel’s first kibbutz. In 1925, Max immigrated to Canada, working as a plasterer before he eventually began building his own homes. To get by, the family would move into each newly built home, decorate it and sell it. As a child, Sharp recalls living in fifteen different houses.

  Perhaps it was that nomadic lifestyle that first gave Sharp the taste for hotel life. In 1961, he opened his first motor hotel in Toronto’s seedy east end. A decade later his ambitions had moved decidedly upmarket, and he built the Inn on the Park overlooking the leafy grounds of London’s famed Hyde Park. As of 2006, Sharp’s cautious, thought-out expansion had grown to include seventy properties and landmark hotels in thirty-one countries. But instead of being an owner and developer, Sharp focused on hotel management, turning his Four Seasons hotels into a global brand. In 1994, the Jewish businessman struck an unlikely partnership with Saudi Prince Alwaleed bin Talal al Saud, whose Kingdom Holdings is one of the largest hotel developers in the world. His next conquest: the Middle East.

  Where Sharp was a careful gradualist, Paul Reichmann was a monumental gambler. The last of the founding members of Canada’s small international pantheon, the former rabbinical student built the largest real-estate development company the world had yet seen, only to see it collapse in the biggest corporate failure of its time. But while his family fortune, at one time estimated at us$10 billion, may no longer rank among the world’s richest, Reichmann’s signature buildings live on as a tribute to his tenacity and perseverance.

  Born in Vienna in 1930, Paul and his family fled Nazi-occupied Austria in 1938, briefly residing in Paris before renting a flatbed truck and making their way to Tangier, Morocco, in the wake of encroaching German forces. Paul’s father flourished as a currency trader, but the family was forced to move again as the rise of Islamic nationalism and the creation of Israel in 1948 prompted the mass exodus and expulsion of Jews throughout the Arab world.

  After immigrating to Montreal and Toronto in the mid-1950s, the Reichmann brothers set up a business importing Spanish tiles before moving into real estate. By 1973, Paul had won a hotly contested bidding war for a property in the heart of Toronto’s financial district and was planning to build the highest office tower in the Commonwealth. With the watershed First Canadian Place barely completed, Paul moved on to Manhattan, where, in the biggest property gamble in New York history, he turned a sandbar on the city’s abandoned lower west side
into the glittering World Financial Center.

  The sprawling complex of soaring palm-treed atriums would be dwarfed, however, by his ambitious bid to develop Canary Wharf, a us$6 billion, twenty-four-building mini-city in the wastelands of London’s east end. The high-stakes gambit would be his Waterloo. An economic downturn unlashed the moorings of his highly leveraged Olympia & York, and in 1992 creditors took over the company. But as the business world was still breathlessly composing his epitaph, Reichmann was already mounting a comeback, cobbling together a group of investors to buy back and develop Canary Wharf.

  At the same time, with his empire freshly in ruins, he embarked on another daring venture, becoming one of the first international developers to move into the highly risky and still untapped Mexican market. His timing couldn’t have been worse. A devastating currency crisis in 1994 paralyzed Mexico, putting Reichmann’s ambitious development schemes on hold. A year later, investment partner George Soros, the billionaire currency speculator, pulled out of the venture. Reichmann refused to give up. As he once explained, “The only question that enters our minds is: Will success happen immediately or later?”

  For Canadians there is another question: will others pick up where Reichmann and Bronfman left off? Some are trying. But invariably, if you pull back the Canadian veneer, you find many — in fact, a disproportionately large number — of the country’s globally minded entrepreneurs continue to come from the same historical stock of Americans, immigrants and “ethnics” responsible for so many of Canada’s achievements, both inside the country and out. As Carleton University’s Professor McDowall sums up: “The good thing about Canada is it didn’t stop people from being entrepreneurs. It just didn’t encourage it. We have some shining examples of people who come equipped with another genetic code, ready to embrace the rest of the world.”

  * The United States abrogated reciprocity for two principal reasons: to protest British involvement in the American civil war by pressuring Canadians to drop their allegiance to the British, and as a reprisal for Canada’s Cayley–Galt Tariff of 1858, which imposed a 20 per cent tariff on imported manufactured goods.

  † The Ontario Manufacturers’ Association became the Canadian Manufacturers’ Association in 1877.

  * In 2005, Brascan changed its name to Brookfield Asset Management.

  * For a fascinating account of this episode see Shirley Render, Double Cross: The Inside Story of James A. Richardson and Canadian Airways (Vancouver: Douglas & McIntyre, 1999).

  * By 1987 the spot price for oil tanked to $10 a barrel.

  * As Matt Bray, a retired professor from Laurentian University and inco historian, notes, Ritchie first spied a Sudbury rock sample in a Montreal railway office. He had it tested but did nothing about it until seeing a second sample in Ottawa.

  † Schwab was assumed to be acting on the behalf of U.S. Steel and its controlling shareholder, American financier J.P. Morgan, although this was never proven.

  * Alcoa’s founder was Arthur Vining Davis, after whom Arvida, Quebec, was named.

  † In its eighty-year history, Alcan has had two Canadian-born ceos: Jacques Bougie and David Culver.

  * The piece was actually an “assisted purchase” in which Hirshhorn and a group of his Toronto business partners raised funds for the gallery to acquire the painting.

  * After the fall of Czechoslovakia’s communist regime in 1989, the Batas relaunched operations in the Czech Republic and closed the company’s Ontario headquarters. Run by Bata’s son, the company is now based in Switzerland. Still a powerful force today, Bata boasts 4,600 shops worldwide.

  4 THE MILK MAFIA AND OTHER STORIES

  “We’re used to having such an incredibly wealthy resource, we could burden it with just about anything and it would be prosperous. But it won’t prosper anymore.”

  RUSSELL HORNER, CEO, CATALYST PAPER CORP.

  MICHAEL HALL EMITS that sturdy, slightly salt-of-the earth quality that most city folk assume to be naturally occurring in farmers. Don’t be mistaken — there’s no overalls or telltale dirt under his well-kept fingernails. Dressed in a casually sophisticated suit and open-necked dress shirt, Hall is thoroughly modern and urbane, just as comfortable in the bustle of Toronto as he is on his farm outside Ottawa, where he runs a successful dairy operation. Since buying out his dad’s small, sixteen-cow herd, he has steadily built up the business and, in a joint venture with another farmer, now milks 130 cattle.

  He’s effusive about Canada’s top-notch dairy industry: unparalleled quality, the highest standards, excellent marketing and research. “The Canadian dairy industry is one of the most efficient in the world,” says Hall. “Our cows are sought after and we are as competitive as any country out there.” Yet the cosmopolitan farmer and his competitive cows prefer to stick close to home. “We have chosen to stay out of the international market,” he affirms.

  In fact, Hall and his fellow dairy farmers are doing everything they can to ensure they never have to compete in global markets. That may seem oddly incongruous, given the industry’s evident success, but from Hall’s perspective it makes perfect sense. Why? Because like so many industries in which Canada could be flourishing on the international stage, farmers are discouraged by dysfunctional government policies that not only dissuade them from even thinking globally, but actively prevent them from being able to operate and compete in foreign markets.

  A direct descendant of the National Policy, Canada’s supply-managed dairy industry is one of the many hostages of the Byzantine regulations and self-defeating market structures that continue to infiltrate and order almost every corner of the Canadian economy, from banking and telecommunications to fishing and forestry. Like Pavlov with his dogs, these policies train Canadians to eschew global aspirations in favour of domestic reward and are the reason why, despite the country’s natural strengths and leadership in a number of areas, going as far back as the 1800s, so many economic sectors remain stunted and internationally irrelevant.

  Canada is the world’s second-largest wheat exporter, yet it does not have a single multinational grain handler, grain trader or processor akin to Cargill of the United States, Europe’s Louis Dreyfus or Argentina’s Bunge. A Dutch– Norwegian conglomerate controls much of Canada’s once-formidable fishing prowess, while its unparalleled forestry resources are hopelessly outgunned by the global firepower of tiny Finland. At the turn of the last century, Canadian banks, thanks to their steely Scottish overlords, were North American powerhouses. No longer. In every case, a direct line can be drawn to a government policy that stymied potential and, like a plant that will contort itself to seek out the sun’s rays, directed industry’s gaze inward.

  It may be too late for many of them. That’s why the story of the Canadian dairy industry is so poignant. It has the potential to be a world leader — if it were ever given a curd of a chance.

  CHRIS BIRCH BUILT tires at a factory in Barrie, Ontario, but his real dream was to own his own dairy farm. Unfortunately, milking cows wasn’t as easy as it was when he was a boy and his family raised hogs and grew sweet corn back on the farm in Phelpston. To run a dairy operation, Birch would first have to buy quota, which is the right to produce and sell milk under the supply-management system. With quota priced at upwards of twenty thousand dollars per cow, he didn’t have the several million dollars in investment he’d need to make a living as a full-time dairy farmer.

  So Birch kept his job and borrowed money to buy a little bit of quota and a handful of cows, expanding the herd whenever he got a chance. But then the tire factory closed in 1992, and Birch couldn’t make ends meet. By 2000, unable to hang on any longer, he sold his quota to pay off the debt he’d incurred to buy it. Birch still had the cows, though, and he started looking for other ways to sell his milk. He got a permit to export to the United States and soon had a thriving business. Birch formed a co-operative with twenty-nine other local producers, and together they sold more than one million litres of a milk a month across the border. “There
are tremendous opportunities in the U.S.,” he says. “It’s a huge, huge market.”

  But while Birch thought he’d finally found an answer to his problems, he was soon confronted with new, even more difficult challenges. He was quickly overwhelmed with court challenges, cease-and-desist orders and random diktats from government officials. By 2005, the beleaguered farmer had spent nearly $1 million in legal fees trying to defend his right to export to the United States. Who was he defending himself against? Well, not the Americans. It’s farmers like Michael Hall.

  The Dairy Farmers of Ontario, and the complex web of provincial marketing boards and federal councils created to service and support them, have gone to extraordinary lengths to shut down what many would consider an export success story. That’s because in the world of supply management, farmers are not rewarded for conquering new markets. Their payoff comes from guarding their government-ceded monopoly over the domestic dairy market. Anything that might chip away at that assumed right to supply Canadian consumers— including exports — therefore has to go.

  The farmers need the monopoly and the high prices it ensures, because without it the entire supply-managed system would collapse. Under the system, prohibitive tariffs of 200 to 300 per cent effectively bar imported dairy products. At the same time, farmers, through provincial marketing boards, are allowed to fix domestic milk prices, which, according to the Organization for Economic Co-operation and Development (oecd), are more than double world prices. It’s an elaborate balancing act, scrupulously managed and vehemently defended, all to one end: protecting the quota.