The Quebecor Success Story

Ronald Goodall

Jacques Cartier arrived in 1534. Samuel de Champlain arrived in 1603 and established La Nouvelle France in 1608. From that beginning, our largest province grew and a people, les quebecois, created a culture and environment unique in Canada.

When we travel through the Quebec countryside we pass the roadside shrine; we see from afar the gleaming spires of the village churches high above the roof tops; we become absorbed in the history of Quebec City, truly the most picturesque city in Canada. The traveller will be warmed in winter by thick, hot pea soup; charmed in spring by eggs fried in maple syrup; tempted in summer by the dried cod of Gaspe; all of which reminds me of the old saying: "The English know how to eat; the French know what to eat."

That uniqueness of Quebec is demonstrated also by la fete de St. Jean Baptiste on June 24; by the confusion on meeting a person with an Irish name who can converse only in French, reflecting an Irish ancestry caused perhaps by a century-old shipwreck in the St. Lawrence; and, of course, by the excitable Latin temperament, which I know so well.

Quebec has produced Sir Wilfrid Laurier, Henri Bourassa, Gaetan Boucher, Rocket Richard and, recently, a spate of rock stars. In other respects, Quebec has many similarities to other provinces such as in the apparent wealth of lumber, minerals and water. The provinces seem to excel in producing press barons: New Brunswick gave us Max Aitken, Lord Beaverbrook; Ontario gave us Roy Thomson, Lord Thomson of Fleet; Quebec is today producing another press baron, our guest speaker - entrepreneurs all, who started from a small beginning, and became leading international businessmen.

Pierre Peladeau was born and raised in Montreal. He earned a degree in philosophy from the University of Montreal and a degree in law from McGill. Mr. Peladeau has been described as a "Quebecois contradiction." He has been honoured by the University of Quebec, the Societe St. Jean Baptiste de Montreal and he earned the Order of Canada in 1987. He supported the separatist side in the 1980 referendum and chaired Montreal's Canada Day committee last year.

Mr. Peladeau is very active in community endeavours such as Le Pavillon Ivry-sur-le-lac, a rehabilitation centre for alcoholics; Maisonnee d'Oka, a treatment centre for young drug offenders; Montreal's Orchestre Metropolitain, which endeavour presumably allows him to enjoy his love of Beethoven.

In 1950 Mr. Peladeau borrowed $1,500 to buy a local newspaper. Today he is the controlling shareholder of Quebecor Inc., a company whose sales approximated $700 million in 1987. The company publishes three daily newspapers: Le Journal de Quebec, Le Journal de Montreal and The Winnipeg Sun; 51 weekly newspapers, and six magazines. The company operates 18 printing plants in Montreal, Toronto, Vancouver, and in the northeastern United States.

Ladies and gentlemen, please welcome Pierre Peladeau, President and Chairman of the Board, Quebecor Inc., who will address us today on "The Quebecor Success Story."

Pierre Peladeau

Let me first tell you that in my days as a backbencher in the business world, as owner of a small Montreal weekly newspaper, I did not think that I would some day address the Toronto Empire Club. But in recent years, l have been wondering when the invitation would come.

Well, here we are and I use the word "we" intentionally, because I believe that for at least 20 minutes, a speaker and his audience are partners: one wishing to convey his message, hoping that the others, the listeners, will receive it. As Plato used to say to his disciples: "If you want to learn, listen. You never know what the other has to say." Thank you, Mr. Chairman, for inviting me. By the way, Mr. Chairman, a good point for you: I am told that your wife is from Sorel, Quebec.

I am not a university professor. I am not an economist and I would not want to be one. They contradict themselves so much that they don't seem to know where they are going. One talks about lower economic growth next year. Others go further and predict a recession in 1989. And they want us to believe them! How come they did not see Black October Monday coming. I'd rather read my horoscope with my morning coffee. I learn more!

We don't publish editorials in our dailies because I don't want to tell our readers what to do or think. We presume they can think by themselves. And besides, I always hated to be told what to do. So I certainly won't tell them what to do. And I will not tell you what to think. I am a plain businessman, an entrepreneur. I will talk of what I know, of what I lived. Like Beethoven who wrote about his anxieties, his frights, his love, his hatred.

First of all, I will talk to you about a great success story, Quebecor. If we appear proud of our success, I sincerely believe that all of you, as Canadians, should rejoice in this accomplishment. More and more, Quebecor has become a Canada-wide company doing business throughout Canada, with plants in Quebec, Ontario, Manitoba, and British Columbia, and very soon, in Alberta. We also publish a few weeklies in New Brunswick, so I could say that we are very nearly operating coast to coast.

Although I am bold enough to assume that some of you know something about Quebecor, I still think it appropriate and timely to describe our company for your information - and for my own pleasure, as I simply love to talk about Quebecor. In 1972, we first went public on the American Stock Exchange. At the due diligence meeting organized by our brokers, E.F. Hutton, I was asked what "Quebecor" meant. Gold from Quebec. As a matter of fact, $32 million. Today, that affirmation would not be true. In 1987, only $350 million out of $682 million came from Quebec. More than $330 million came from the rest of Canada and the U.S.

It all started when I finished my law degree at McGill University in 1950 with a $1,500 loan from my mother to buy a small weekly newspaper. She insisted that in every event of my life, I should aim to be a winner. That is why I enjoy so much the story of the American general who, in an up-and-up restaurant, ordered a fried lobster. The waiter brought him a lobster with a broken claw. The general inquired, how come the claw was broken. You know, said the waiter, lobsters fight one against the other when they are in a common pool. It so happened that this lobster got a licking and had one of his claws broken. The general looked at the waiter, and said, "bring me the winner." So, I tried to follow my mother's advice - her command, I should rather say - because she was really "a little general."

From that modest investment of $1,500, we have grown to a company with more than $1 billion in assets, and revenues that will exceed well over $1 billion this year. Quebecor is divided in four main sectors. First, publishing: We own and operate four daily newspapers, including Le Journal de Montreal, Le Journal de Quebec, The Winnipeg Sun and the Sherbrooke Record. To which we will add within days, The Montreal Daily News.

Le Journal de Montreal is the number-one French-language daily in North America, with a daily circulation well over 300,000. Published since 1964, it ranks just behind The Toronto Star. After only 23 years of publication, that's not a bad record.

The Winnipeg Sun should reach profitability this year. After only eight years, it is also something to be proud of. Ask the people of the Financial Post, they will tell you.

Just a few words about our new venture, our morning daily, The Montreal Daily News. The decision to launch a new daily in Montreal was not taken lightly, but only after several market studies and abundant research. It is not meant to compete with The Gazette and certainly not to pick a fight with The Gazette. Even though if they look for it, they'll get it. We firmly believe that there is a place for the two of us, with each one catering to the taste of its readers. The Daily News - in tabloid format - will put the accent on business and on sports, with a deep interest in Montreal news and in the various minority groups which do not feel well looked after. One could say that we are creating in Montreal the same situation you have here with the Financial Post and The Globe and Mail.

Let me just tell you a little story that happened last week. My 25-year-old son, who is a steady reader of Report on Business, reacted like a Globe reader when the Post came out. He found the Post incomplete and not as accurate as the Globe. I told him that I had a different view and that, maybe, it was because of the tabloid format that he had that reaction. A few days later, he came back and told me exactly that.

Changing one's philosophy from broad sheet to tabloid is like changing one's eating habit. It takes a little time (like divorcing one woman and living with another). But in my own mind, tabloid is the format of the future. Offering, in one corner, a choice between a broad sheet paper established for years, sure of themselves and a tiny conservative, and in the other corner, a jazzy tabloid with short stories from makeup and plenty of colour.

We have appointed as publisher of the Daily News, the former owner and editor of the Sherbrooke Record, George MacLaren. At a press conference, a question was asked as to why we had chosen the publisher of a small newspaper with 6,000 circulation to head our Daily News instead of inviting the publisher of a Canadian newspaper with a 50-60,000 circulation. My answer was simple and direct: George MacLaren has his feet on the ground, and if he has made money with a small newspaper, he will do well with a larger one.

Besides our dailies, Quebecor also owns a network of regional weeklies, and the number increases rapidly. As of last night, we stood at 51. I was told this morning that this figure has not changed and still stands for today.

Our second sector is the printing division. Spread throughout Canada and the U.S., we operate 22 plants. The revenues from this sector were well over $300 million during our 1987 fiscal year, and the number of employees exceeded 3,000. In the U.S., we operate eight plants, located in Boston and vicinity, New Jersey, Connecticut, Vermont, and Michigan, showing revenues of well over $100 million.

Our third sector is distribution. A vast network carrying more than 450 titles to the consumers in the largest number of points of sale in Quebec, Northern Ontario and New Brunswick. Delivery is made to over 245,000 homes while sales to retailers reach some 16,200 points of sale.

We now come to our new sector, forest products. Two years ago, I was invited to one of Donohue's fishing camps. I loved my experience. I loved it so much that I bought the company. In July 1987, Quebecor in association with the British Printing and Communication Corporation, acquired 55.25 per cent of Donohue Inc. for $320 million. A number of factors combined to make the purchase of Donohue an attractive buy. Top quality management, operations conducted by highly experienced competent personnel, technologically advanced equipment. And a list of highly prestigious clients and partners including The New York Times and the Gannett Group. Finally, Donohue meant association with Robert Maxwell and his corporation, potentially both a customer and an associate in future projects in Europe and the United States. Robert Maxwell will also be our partner in our new paper, the Daily News.

In physical count, Quebecor has 8,734 employees, that is 7,665 in Canada and 1,069 in the U.S. For the first quarter ended December 31, Quebecor experienced the highest increase in profits ever recorded for a quarter. Net income, as compared to the same quarter of last year, increased by 68 per cent and our net earnings per share rose from 30 cents to 48 cents. We seem to be on the right track.

Turning to the Quebec climate, we can state that our corporation is not the sole example of success. Scores of businesses have mushroomed in the last years. As a matter of fact, Quebec has been living a tremendous revolution in the world of finance, economy, and business in the last 15 years.

A few years ago, the word profit was looked upon by the so-called elite as a synonym for uneducated and mercantile people and French-Canadian youth was oriented mainly toward the priesthood or the so-called liberal professions of law, medicine, dentistry, pharmacy, etc. There were few engineers and very few in our graduate business schools. Today, our engineering schools are bursting at the seams: Lavalin and SNC are world-known enterprises headed by the graduates of our engineering schools.

As Matthew Fraser of the Globe says in his excellent book, Quebec Inc., the Quebec business schools and management faculties are producing almost half of Canada's business school graduates. And he adds that business grads in Quebec have an enormous advantage over their counterparts in English Canada and the U.S. They are bilingual and thus can function as easily in Paris as in London, Toronto, or Africa.

But an observer of the Quebec scene will realize that, whereas years ago, the heroes were the great FrenchCanadian hockey players, or some of our colourful politicians, even in sports, things have changed in Quebec. Fifteen or 20 years ago, the star players of Les Canadiens of the NHL were Richard, Beliveau, Lafleur. The owners, on the other hand, were the Molsons who were assisted by general managers, all English speaking, such as Toe Blake, Dick Irvin, Sam Pollock and Scotty Bowman. Today, the key players in hockey are named Robinson, Naslund, Corson, Gainey, Momesso, Smith, Chelios, Svoboda, etc., but the managers are Savard, Perron, Laperriere. Only three or four hockey players are French speaking. Such an operation 20 years ago would have created a riot. Things have changed completely. Now only a few players are French speaking while all of the management is French. Ten years ago, the visit of the Toronto Maple Leafs would fill the Forum and the adjacent taverns after the game. Today, the Quebec Nordiques have replaced that rivalry. But there's no problem for the taverns. It's business as usual.

In the field of radio in Montreal, CFCF, Canada's oldest English radio station, has been sold recently to a group of young French-speaking broadcasters.

Today, recognition is given throughout the province to the people who succeed in business: Desmarais of Power Corp., the Lemaire brothers of Cascades Inc., Laurent Beaudoin of Bombardier, Claude Castonguay of The Laurentian Group - and I could name a whole series without even naming me. Most of these men have reached the top and created a new elite or, still better, they have reached "excellence," now a key word in Quebec. One could think that they all read the bestseller In Search of Excellence. They live it.

Recently, a well-known Canadian politician, and he was not from Newfoundland, commented on the new face lift of Montreal since Bill 101 and its signs in French. He could not understand why in his hotel room the switch was marked in only one language and indicated On and Off. His FrenchCanadian friend explained very simply: "You know, we French-Canadians don't need the marks in French, because we know when the light is on or off."

Every year in Quebec, new awards and prizes are created for business achievement or for leadership. It is now fashionable to present awards to the successful men and women of the year and most of the time, it is business success which is celebrated. The new idols in Quebec are the entrepreneurs, a new class growing in quality and in numbers.

Speaking of awards, you may have heard or read about Raymond Malenfant. He is the owner of the Manoir Richelieu at Murray Bay. He was recently named the Hotel Man of the Year by his fellow hotel keepers. A very significant award indeed for a man who showed immense courage in his troubled and long-lasting stand in a union issue. He was honoured because even though his premises were bombed and he himself was the victim of threats of all nature, he held through and won his battle. Unions had a tremendous importance in Quebec. The fact of honouring Malenfant shows how unions today have lost their strength and power.

The preoccupations of Quebecers are now very much oriented toward economics - and I am not talking of the type that constantly predicts the future. To wit, our Premier Robert Bourassa is an economist, and his credentials with Empire Club members should be quite acceptable. He has an MA. in economics from Oxford and a master's degree in international and corporate tax law from Harvard. His vis-a-vis in the House and leader of the Opposition will soon be Jacques Parizeau, who has a Ph.D. in economics from the London School of Economics. Quebec used to be governed by lawyers, newspapermen and teachers. It is now governed by economists. On both sides. As they say in Paris: "Qui dit mieux. . . " It seems now that it's Ontario that is administered by lawyers. Am I right? Pray the Lord, your day will come.

Such is the interest for business in Quebec that The Globe and Mail has taken the habit of contacting French-Canadian businessmen much more frequently than ever before. And what is more, their reporters now express themselves in French.

I would also like to refer to three significant factors that played a role in the Quebec entrepreneurial resurgence. First, the Caisse de Depot et Placement du Quebec has been an extraordinary success, and has become a formidable instrument. With its portfolio of over $30 billion it has fulfilled its two main objectives: maximize the yield on its investments and contribute to the economic development of Quebec.

Secondly, in 1979, the creation of the Quebec Stock Savings Plan was, in the words of Matthew Fraser, the most brilliant "coup" of Parizeau's political career. The plan presented many advantages: reduction of the tax load of middle and high income taxpayers; a new source of risk capital for Quebec companies; and it multiplied the number of francophones in the stock market. As Fraser admits, the QSSP has been one of the principal motors of the current business boom in Quebec.

Third and last, the Mouvement Desjardins, in the words of Fraser, is a kind of socioeconomic religion to millions of French-Canadians. With assets over $30 billion, the Mouvement Desjardins with a very bright president, Claude Beland, is present in almost every facet of business - banking, insurance, trust companies, loan companies - and holds a percentage in many Quebec corporations.

Well, I can restate that Quebec "ain't what it used to be!" And to quote Walter Wriston, the former chairman of Citibank: "Even the future is not what it used to be."

I should like to say a few words on free trade. I can well understand the uneasiness in Ontario - it also exists in Quebec, but we are a country of exports. International trade must be of fundamental importance to Canada as a whole. As Premier Bourassa stated some time ago: "We will insist on the implementation of adjustment programs, transitional periods and clauses protecting jobs and internal production against too strong an increase in imports, to facilitate the adaptation of businesses, workers and regions."

We believe, and I for one strongly endorse these views, that a free trade agreement with the U.S. opens for Canada a market of more than 200 million people, and it substantially decreases the possible risks of compensating trade tariffs being imposed by the U.S. against our exports. Let us not forget that there are presently more than 300 bills in the U.S. Congress with an unsavoury flavour of protectionism.

A few years ago the question was, "What does Quebec want?" Today the question is, "What's happening in Quebec?" I hope I answered that question for you.

The appreciation of the audience was expressed by Paul Rouleau, a Director of The Club.