Volume 3, Issue 2 - Fall 2018

Rethinking competitive advantage

Superclusters and economic development. 

By David Froh. 

Prairie people have always seen the advantages of our wide-open spaces — they are a blank canvas of opportunity.

These endless possibilities have fostered a culture where we have become accustomed to creating great things. As you will read throughout this issue of Prairie Manufacturer Magazine, Saskatchewan’s tradition of innovation is more than a century old, and continues strong today. Family-owned enterprises like Dutch Industries, SeedMaster, DOT Technology Corporation, and Degelman Industries literally started in farmyard quonsets, and then expanded to serve global markets.

The path to prosperity in this province has always been built upon trade — and that, as they say, takes a village. You need to find quality suppliers, nurture distribution channels, and earn trust with customers. The common denominator is understanding the value proposition and partnering with those that complement the business.

Traditional economic development is often thought of as a zero-sum game with winners and losers, where regions fiercely compete for investment, sometimes to their detriment. Such an approach is not sustainable. It can lead to neglecting local companies and assets, and cause entire regions to miss out on dynamic opportunities to partner and prosper.

Governments can, however, support industry through competitive taxation and regulatory regimes, as well as through procurement and strong trade infrastructure. They can also provide targeted policy and well-timed incentives.

Enter the federal Innovation Superclusters Initiative — a $950 million pool of money that encourages businesses to work together toward a stronger, shared competitive advantage.

Economic Development Regina was proud to play a leadership role in the creation of one of these superclusters, Protein Industries Canada (PIC). PIC is a consortium of small- to large-sized enterprises, comprised of research and development, technology, economic development, finance, investment, and education partners — all focused on positioning Canada internationally as the leading source of high-quality plant protein and co-products.

PIC’s mission is to feed the world sustainably and supercharge the Canadian economy. By securing $150 million in federal dollars and hundreds of millions more in private sector commitments, achieving this goal is within reach.

The global population, which is expected to reach 9.7 billion people by 2050, will require more food than we’ve produced in the history of humankind. There are approximately three billion people in the middle class alone demanding better proteins and safer, more reliable food. With their consumption growing by four per cent year-over-year, how will we feed these people with limited resources? The answer is twofold: Different than we are today, and with a Prairie solution.

I love a good burger; but the truth is that the future of food, and perhaps our economy, is plant protein — foods and food ingredients from pulses, canola, hemp, and wheat. Millennials across North America and beyond are eating differently, demanding ‘flexitarian’ options, and contributing to a surging plant protein market that is expected to grow from $10 billion to $13 billion by 2020.

PIC has ambitious goals to move Canada to second place in global agricultural exports and fifth in agri-food exports. If successful, the cluster will change the footprint of food processing, manufacturing, and agriculture technology in Canada.

To get there, cluster partners must recognize and cultivate their own distinct competitive advantages, but align them toward one common mission.

Clustering enables businesses to enjoy economies of scale. They can access talent, information, suppliers, and capital often reserved for larger organizations. It has historically occurred when companies from the same sector gather in close proximity. This is particularly evident in industries like banking and information technology. Think San Francisco or Waterloo as case studies.

While this particular supercluster is much more expansive, reaching across all three Prairie provinces, the Greater Regina Area (GRA) is a critical stop along the plant protein highway.

One of the primary reasons is geography. We are surrounded by massive amounts of quality and sustainable inputs right at our back door. More than five million tonnes of pulses were exported from Saskatchewan last year, much of it from the Regina plains. Our 17,000 pulse growers produce 99 per cent of Canada’s chickpeas and 84 per cent of Canada’s lentils. Additionally, Saskatchewan farmers grow 9.2 million tonnes of canola, making them Canada’s largest canola producer.

We are also well-connected — supported by a vast network of trade infrastructure, making the GRA an ideal location to source, process, produce, and export from. Exporters can reach 60 million consumers within a day’s drive of the region, and more than 270 million consumers within two days. It is home to Canada’s only self-governing inland port authority, the Global Transportation Hub, as well as the Chuka Creek Business and Logistics Park — the new state-of-the-art container and intermodal terminal facility for CN Rail.

Manufacturing is an important part of PIC’s strategy, too. Sensors, devices, and equipment produce large amounts of data that can provide unprecedented decision-making capabilities. From farm to table, manufacturers of purpose-built devices (seeders, sprayers, combines, rail cars, and everything in between) can be the core of this smart agriculture ecosystem. Leaders like ISM Canada, headquartered in Regina, already work with private and public sector players on big data, cloud computing, analytics, and smart mobile applications for agri-business, and can enable manufacturers and farmers to jointly identify efficiencies, boost performance, and enhance profitability.

With $5 billion-plus in sales and nearly 10,000 employees in the agri-business and manufacturing sectors, the GRA is, again, ideally positioned. We already specialize in short-line manufacturing of agricultural equipment for precision dryland farming. The city has a world-class steel mill and local companies that provide steel processing services, including profile cutting and bending technology. The Innovative Manufacturing Center at Saskatchewan Polytechnic, meanwhile, is the most well-equipped machining and manufacturing facility in the province, offering full testing, prototyping, and certification capabilities.

With the rapidly changing demand for new technologies, it is still possible to enter the manufacturing or agri-value sector as a start-up — two of the few industries where that remains true. Part of the reason is the capital that is accessible here. Conexus Credit Union, for example, is a partner in PIC’s $150 million Venture Capital Fund, and a proud operator of the area’s newest business incubator. Other initiatives, like Path CoWork — a new collaborative co-work space, where entrepreneurs are supported by organizations like EDR and Women Entrepreneurs of Saskatchewan — allow entrepreneurs to connect with the resources they need to thrive.

We realize, though, we are not alone in our pursuits.

The GRA is an essential pillar of the PIC cluster, but could never reach our goals without leveraging the world-leading plant biotechnology research in Saskatoon, machine learning and artificial intelligence expertise in Winnipeg, and the production and processing expertise in the Edmonton region. These jurisdictions house assets Regina doesn’t yet have — and that’s okay. That’s why the cluster spans Western Canada.

Finally, our respective provincial governments have a role to play. In Saskatchewan, initiatives like the Technology Start-Up Incentive (a 45 per cent non-refundable tax credit for investments in eligible tech start-ups), the Value-Added Agriculture Incentive (a 15 per cent tax credit on capital expenditures for newly constructed or expanded value-added agriculture facilities), and the Commercial Innovation Incentive (which reduces the Corporate Income Tax rate to six per cent for up to 10 years on taxable income earned from the commercialization of a broad range of qualifying IP) all strengthen the competitive equation.

In the GRA, collaboration is at the heart of everything we do. And that needs to be the mantra of modern economic development agencies everywhere: Think big, build a world-class business base, and search for new partners — regardless of where they’re operating today.