John Caulfield, Contributing Editor
vol. xi, #16, April 18, 2005

IN THIS ISSUE: • Winroc acquires Leon’s • Canadian Tire wants customers for life • CanWel converts to income trust, looks for banner support • Rona adds independents • America’s Top 10 vie for market share • Ace eyes aggressive expansion

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“I’ve been married to one Marxist and one Fascist, and neither one would take out the garbage.” Lee Grant (actress and director)
CALGARY – Superior Plus Income Fund, through its Winroc division, has entered an agreement to purchase Leon’s Insulation Inc. The deal is worth $48.5 million and follows Winroc’s previous acquisition of Interior Building Supplies, which has locations in Windsor, London and Cambridge, ON. Winroc, a building materials wholesaler with annual sales of about $350 million, was purchased by Superior in June 2004. Under the new ownership, Winroc has stepped up its efforts to grow its presence as a leading specialty building materials distributor in North America. The purchase of Leon’s increases significantly Winroc’s presence in the lucrative Ontario marketplace. Leon’s, considered one of the country’s largest drywall and insulation dealers, had sales of $95 million in 2004 from just two locations, Burlington and Stouffville, ON. The dealer was formerly a member of the GSD buying group, The Signature Group. “Leon’s distribution operations are well positioned to service a strong market in the Greater Toronto Area and for future growth north and east of GTA,” says Paul Vanderberg, president of Winroc. Operation of Leon’s will continue under existing management staff.
VANCOUVER – CanWel executives continue to explore options for the bannered dealers it inherited through the acquisition of Sodisco-Howden Group at the end of last year. But until a final solution is found, Sodisco-Howden will continue to throw its full support behind its retail customers who sport the Ace and Pro banners.The final solution may come from another group that will take over management of those retail banners in one fell swoop. According to Tom Donaldson, “Certain people have expressed interest in helping us grow the banners. We’re exploring certain options right now,” he adds. But don’t expect a quick fix. “We’re going to go pretty slowly on this.” Until then, the bannered dealers can expect all the services and support they’ve received in the past, he says. “Our focus right now is keeping those banners healthy and that services received from Sodisco-Howden stay healthy every day.” Could a strategy for Sodisco-Howden’s bannered dealers include one of CanWel’s own customers? “We wouldn’t rule out any particular strategy at this time,” says Donaldson. Possible candidates for that help could well include some of CanWel’s existing LBM customers, which include Rona inc. and Home Hardware Stores Ltd. In fact, the very competitiveness of Sodisco-Howden versus organizations such as these has been considered a big hurdle to the success of the Sodisco-Howden acquisition. Off-loading the entire banner side of Sodisco-Howden’s business could well enable CanWel to overcome that hurdle. Hardlines called TruServ Canada, itself a dealer-owned hardware distributor, to explore this further. “We’re not in conversation with CanWel at all. We anticipate at some point in the future there will be further acquisitions,” says Bill Morrison, president and CEO of TruServ Canada. “If there’s any appropriate way to support their banners, we’d love to sit down with them. TruServ’s mission is to support independents in the marketplace.” Even though the Sodisco-Howden offices in Montreal have been downsized (much of that was executive positions, MIS people and members of the marketing team), operations remains firmly in place. “Serge [Tremblay], Sodisco-Howden’s new vp merchandising and marketing, wants to bring a lot of focus to programs such as flyers, catalogues, electronic information, and new product selection and introduction.” Even news that CanWel is seeking to transform itself into an income trust will not affect the various business units – including the Sodisco-Howden customers themselves. “What they’ll see is a better quality product delivered on time. That’s what it’s all about for Serge’s group.” The income trust initiative is a way for the company to generate a higher return to its shareholders. Simply put, the trust can’t be taxed federally. The entire profits are returned to the shareholders, who in turn pay the tax themselves. The company was also considered under-represented on the market, so a second share offering was floated last week. The money raised from that offering will be used to pay down debt and for possible future acquisitions.
BOUCHERVILLE, Que. – Rona inc. has made five more key recruitments of independent dealers, including a couple in Western Canada, where it is aggressively seeking dealer growth. The new dealers are expected to add about $65 million to Rona’s topline retail sales.The dealers are: BSRB Matériaux Inc. of Gatineau, QC; First Nations LP of Sioux Lookout, ON; Lakeside Building Centre in Sylvan Lake, AB; J & G Supply, Brandon, MB; and Shuswap Building Supplies & Rentals Ltd., Scotch Creek, BC. The latest announcement comes out just as Rona finalizes its acquisition of Totem, a 16-outlet chain that dominates the retail home improvement business in Alberta. That chain was sold off by its owner, Jim Thorogood, for a cool $100 million, adding fiscal 2004 topline sales to Rona’s war chest of about $260 million. The results from operation of Totem will be consolidated into Rona’s financial results as of the beginning of the company’s second quarter. Since the beginning of 2005, Rona has added 14 affiliated stores – seven in Western Canada, four in Ontario, and three in Quebec – totalling additional retail sales of $101 million.
SPECIAL REPORT – The strength of America’s housing market propelled the sales growth for all of the leading home improvement dealers in 2004. For those dealers whose clientele are mostly contractors and builders, last year was especially robust, despite the fact that interest rates continued to creep up. Several pro dealers, especially Strober and Lanoga, benefited from aggressive acquisitions that deepened their market penetration. On the retail side, the big three — Home Depot, Lowe’s and Menard’s — continued to battle it out for their customers’ home renovation and remodeling dollars, often at close quarters in a growing number of markets. Menard’s went bigger by opening more of its 225,000-sq.ft. store formats; Lowe’s added to its distribution network with huge warehouses; and Home Depot continued to probe the commercial side of the market with its acquisition of White Cap Industries.
COMPANY 2004 Revenue ($USbil.) % change vs. 2003 # Stores/Branches
1. Home Depot 73.09 12.8 1,890
2. Lowe's 36.46 18.2 1,087
3. Menard's* 6.974 15.0 205
4. Stock Building Supply 3.60 31.8 236
5. 84 Lumber 3.46 34.1 479
6. Lanoga Corp. 2.75 41.3 340
7. ABC Supply 2.10 13.5 275
8.Building Material Holding Corp. 2.09** 47.7 75
9. Builders FirstSource 2.06 23.7 63
10. Sears* 1.66 5.0 245
11.Bradco Supply 1.34 36.0 132
12. Strober Organization 1.25 31.6 91
*Menard’s and Sears numbers are estimates. Sears’ figures represent Sears Hardware and Orchard Supply Hardware operations, but not hardware sales from the company’s full-line department stores, which total an estimated US$8.5 billion. **Includes US$753 million in revenue from BMC Construction, which provides turnkey installation to builders. About 90 Sears Hardware and 6 Orchard Supply Hardware stores are also stocking appliances.  
MONCTON, NB – ABSDA introduced a major change at the 51st annual Atlantic Building Materials Show by re-aligning the show days and hours. A 2 ½ day show, it ran Thursday, Friday and Saturday, March 17-19. Shifting the dates, however, posed a challenge to the show’s organizers, the Atlantic Building Supply Dealers Association, which faced an anticipated drop in dealer attendance, primarily from Sunday.Numbers at this year’s show were indeed down, from 1,592 in 2004 to 1,256. But even though registration by store was reduced, says Don Sherwood, ABSDA president, more large retailers were in attendance. “The upside was that we had big buyers and they had optimum time for the exhibitors.” With less traffic to contend with, vendors had more time to connect with their major customers, Sherwood says. Dealers from Newfoundland are an important part of the show’s attendance – and represent some major buying influences, such as Chester Dawe and Notre Dame Agencies. In fact, 35-40% of the bookings placed at the show came from Newfoundland, says Sherwood. “We really rely on the Newfies to bring us through,” he admits.
OAK BROOK, IL – Under new leadership for the first time in more than a decade, the world’s largest hardware wholesaler, Ace Hardware, is setting out an aggressive new growth strategy for the next three years. Ray Griffith, who became Ace’s CEO the first of April, wants to add 1,100 new, modern stores to its nationwide network by 2008. The goal, he says, is to offer consumers leaner, brighter, more customer-friendly stores in both new and old locations. He firmly believes there is a role for hardware stores to play as a “convenience” option to big-boxes like Home Depot, Lowe’s, Menards and Wal-Mart.Griffith’s background includes a stint as CEO of Coast to Coast, a hardware wholesaling franchise operation which, for many years, successfully recruited investors to open small stores with a unified chain look, primarily in smaller towns, but Ace is different since it seeks out and signs up successful independent retailers as member-owners. These stores achieved their success in a variety of store sizes and formats and with widely varying marketing and merchandising approaches. They built their businesses by the force of their personalities, independence and unique merchandising philosophies. Many, of course, kept changing and modernizing as needed over the years, but most continued to build their business by emphasizing their own individuality, with a heavy emphasis on personal service. For the past few years, Ace has been encouraging its dealers to open new stores by offering up to US$215,000 in merchandise credits to fill a new store and present its vision of the proper merchandise mix, store layout, computer systems, pricing and employee training. This was the heart of its Vision 21 modernization program inaugurated several years ago.
The National Hardware Show in Las Vegas, May 16-18, will once again offer a comprehensive conference program. Join Hardlines for a world-class retail panel, “Global Retailers: Best Practices from Around the World,” on May 18 at 3 p.m.Panelists include John Herbert, general manager of the European association of DIY retailers; and Robert Collins, Director of International Sales and Retail Development, Ace Hardware Corp. We also have a commitment, from the leading home improvement retailer in England, Focus, to participate, with more to be announced.This innovative event will be followed by an international reception from 4:30-5:30 p.m. For more info, click here .  
VANCOUVER – CanWel Building Materials filed a preliminary prospectus with securities regulatory authorities on Monday to convert to an income fund, with an initial public offering to reduce some of CanWel’s debt in connection with the conversion. It also intends to put more CanWel shares on the street, so in addition to the trust fund’s IPO, a secondary offering of trust units will be floated. Funds raised from that offering will go to another CanWel company, Futura Corp. MONTREAL – Habitat for Humanity Montreal announced today the opening of the first Habitat ReStore in the province, in the LaSalle area of Montreal. Habitat ReStores are construction material liquidation stores that sell used materials and discontinued products. The materials are supplied by distributors, retailers, manufacturers, construction companies, and individuals. The profits from the sale of these goods go toward the construction of affordable homes for low-income families. There are 39 ReStores across Canada. CLEVELAND – Sales by Sherwin Williams for the quarter grew by 17% to US$219 million. Based on strong results, the company has raised its full-year earnings view and expects fiscal 2005 earnings at US$3.10 to US$3.20 a share, up from its prior outlook of US$3 to US$3.10 a share. In February, Sherwin-Williams announced it expected sales to grow in the low-double-digit percentage range. MOORESVILLE, N.C. – Lowe’s Cos., the second largest home improvement retailer in the world, has signed with the Charlotte Bobcats, at the same time terminating its relationship with the Carolina Panthers, a deal formerly worth US$1.5 million annually for the Panthers. The Bobcats had originally been in negotiations with Lowe’s rival, Home Depot. The new partnership will be worth from US$1.5-US$2 million a year. BEIJING – Anti-pyramid selling laws have been relaxed in China, allowing Avon to set up its direct sales operations there. Avon’s entry into the market is considered a test by the Chinese government to determine a suitable direct selling model suitable for the nation’s growing ranks of consumers. ATLANTA – The value of Black & Decker shares went up 9% last week on news that the power tool maker has raised its earnings forecasts for the first quarter and full year. Strong sales of power tools, especially in North America, are driving the optimism. The company was given a further leg up by savings from its acquisition last year of the power tool division of Pentair Inc., and the purchase, in 2003, of Baldwin Hardware and Weiser Lock.
People on the Move...
Rob Gerlsbeck, ace editor of Hardware Merchandising magazine for the past 10 years, departed the book last Friday. He has moved over to an associate editor’s position at Marketing magazine. Under Gerlsbeck’s guidance, the magazine established itself as a leading news and information organ for the Canadian home improvement retailer. He’ll be missed! Abbas Khan has been promoted at OSRAM Sylvania as vice-president sales and marketing, retail. He was formerly running Sylvania’s lighting group for Canada. (905-673-6171)At Ace Hardware Corp., Dave Myer has been appointed senior vice-president international and paint. He was formerly vp retail support and logistics … Bill Bauman has been promoted from his role as vice-president of retail support to fill the gap left by Myer. Bauman will now be in charge of direct operations for the entire Ace retail support centre system … Dan Prochaska has been named to the newly created position of vice-president supply chain. He formerly managed operations at Ace’s eight retail support centres in the Eastern United States.
New housing prices edged up in February by 0.3% on a monthly basis, compared with a month earlier, while the 12-month rate of increase slowed slightly to 5.1%, the lowest rate since March 2004, says Stats Canada. A vigorous new housing market, coupled with higher prices for building materials and labour, helped to push prices up nationally. Land value increases were a factor in 7 of the 21 metropolitan areas surveyed. Canada’s economy in 2004, as measured by gross domestic product, rose by 2.8%, versus the world average of 5.1%. It also trailed behind the U.S., where the economy grew by 4.4%. According to a review of the economy published in Canadian Economic Observer, energy exports and investment were key drivers of the economy. However, GDP remained below the IMF’s global average of 5.1%, which was powered by continued strength in the United States and China. The U.S. saw its GDP increase by 4.4%.
Retail sales in March 2005 were US$339.3 billion, up 0.3% from February and up 5.8% from one year ago. Excluding automobiles, retail sales were US$263.5 billion, up 0.1% from February and up 6.6% from March 2004.

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This well established and growing Canadian mid sized building products manufacturing company is their niche market leader, and is adding to their management team. Based at their corporate office, you’ll manage and motivate a small national sales force and business development, while being the point person for major accounts including Rona and Home Depot. Significant growth opportunities exist in Eastern Canada and the United States, and you’ll benefit financially based on your success, with a generous open-ended bonus program. You have successfully managed a regional or national sales group, or are ready to make the transition from key account sales to the next level. Working knowledge of the building materials industry is essential, along with a proven record of business development successes and a willingness to travel as necessary. Post-secondary education preferred. A competitive salary, bonus, car allowance, company benefit package, and relocation assistance are offered. Enjoy the lifestyle that the west coast has to offer! To explore this opportunity in complete confidence, please contact Wolf Gugler. Wolf Gugler & Associates Limited. Phone; (888) 848-3006. Email: Web site: (4.18.25/5.02/05) **********************************************************************************   SALES REPRESENTATIVE Dynamic power tool accessory company looking to expand their national manufacturer rep network and develop new Retail accounts including, Sodisco-Howden , Rona, Home Depot, Home Hardware and ILDC among others. Perfect opportunity for independent manufacturer agent with proven contacts within these organizations. Please forward resume to or fax to 905 513 7924 Attn. Sales Manager. ( **********************************************************************************

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