Stealing an idea from Air North

Imitation is the sincerest form of flattery. It's also a highly successful business strategy. Last week I wrote about how successful Air North has been.

Imitation is the sincerest form of flattery. It’s also a highly successful business strategy.

Last week I wrote about how successful Air North has been. This week, let’s talk about ideas you can steal from them to build your own business empire.

The first lesson of Air North is to look for a product that Yukoners spend millions on every year with an Outside supplier. Back in 2001, before Air North started jet service to Vancouver, the Whitehorse airport saw about 150,000 passengers per year. At, say, $300 or more per head, that works out to a market worth around $50 million a year.

This is serious money. Too many new business ideas focus on very small markets where, even if you create a winning product, there just isn’t the scale to build a sustainable business. And while passenger numbers fluctuate somewhat with the economy, it’s not like flying to Vancouver is going to go out of style.

The second lesson is that you have to figure out how to make a good product. Being local isn’t enough. If Air North was more expensive, less reliable, had worse food or surlier service than the mainline airlines, it would already have joined CP Air in Yukoners’ memory banks.

The third lesson is to pick a business that doesn’t rely on the government doing something helpful. Air North has to comply with complex federal transportation regulations, which isn’t easy. It also benefits from things like the Yukon small business investment tax credit. But it didn’t have to go through extensive public consultations to get the buy-in of everybody and their dog before starting to fly to Vancouver. Nor did Air North require a specific government decision, such as a promise of free landings at the airport or a guaranteed share of Yukon government’s travel budget.

Such government support can be very lucrative if you can get it, but you may also wait a long time for government to act.

So what other business opportunities meet these tests? Interestingly, some that do have already been targeted by other Yukon businesses.

Take beer for example. Statistics Canada reported in 2013 that Yukon beer sales worked out to $646.80 for every Yukoner over the age of 15 (yes, that’s how they report the statistic). That’s a revenue opportunity worth well over $15 million a year. Kudos to Yukon Brewing for establishing an Air North-like presence in the Yukon beer market.

And, like Air North, their product is better than the generic industrial lagers that dominated the Yukon market before they entered.

Local distillery Yukon Shine is trying to do the same thing for hard liquor. Yukoners spend around half as much on spirits as beer, but that’s still millions of dollars a year. Yukon Shine produces excellent gin and vodka, and since those products are easy to ship it is also hoping to target the export market.

Potatoes are another example. Yukoners eat truckloads of them. Yukon Grain Farms now has a major business supplying that appetite. Importantly, it’s a business that’s big enough that it can support some significant investments in the agricultural equipment and storage facilities required to produce and store quality potatoes.

So what’s left for you?

Energy is a big opportunity. Yukoners spend well over $100 million per year on oil and gas, pretty much all of which comes from Outside. This opportunity violates rule number three, however. Producing energy here requires approval from multiple agencies at multiple levels of government. Non-conventional gas production looks like it is as good as banned in the Yukon, and there’s a moratorium on exploration in the Whitehorse trough. Northern Cross is still working on its properties north of Dawson, which have the potential to produce energy for the local Yukon market. We shall have to see how successful they are in getting that product to market.

Renewable energy sources could replace Outside oil for many purposes. It doesn’t have the stigma of fracking, but it still requires extensive environmental approvals plus a deal with electricity distributors to get to Yukon homes. And undercutting fossil fuels on price is not easy. The market opportunity is big, however, if someone can figure out how to get around these problems.

Cellular and internet service is another area where Yukoners spend big bucks. However, there remains only one fibre-optic cable going Outside, and companies entering the cellular market in the provinces have had a rough go of it.

Yukon Brewing’s success in beer prompts a thought about marijuana. We don’t have good statistics since non-medicinal marijuana remains illegal, but the Yukon weed market might not be too much smaller than our beer market. Medicinal marijuana is legal, however, and CBC reports that medical-marijuana firm Tilray is looking to hire up to 275 people for its expanding facility in Nanaimo, B.C. Maybe the midnight sun would be a competitive advantage, or you could cut a sweetheart deal with Yukon Energy for their surplus shoulder-season electricity to power your lamps.

Banking is another sector where Yukoners spend big dollars, but which doesn’t have a local player. Some Yukoners have been looking at resuscitating the idea of a local credit union. This has various complications around territorial credit union regulation and deposit insurance (see rule number three, once again). But “too big to fail” is probably quite small in the Yukon market, and you could always hope for a bailout if you messed up.

Maybe you have an even better idea. If so, you should move fast before another Yukoner drinks your milkshake. Think about that next time you eat potatoes, drink beer or fly to Vancouver.

Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. You can follow him on Channel 9’s Yukonomist show or Twitter @hallidaykeith

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