John Caulfield, Contributing Editor
vol. xi, #25, June 20, 2005

IN THIS ISSUE: • Castle dealers eager for new look • The Bay adds power tools • Shake-up at CanWel: Royce gone • Debbie Travis: too hot to handle? • Home Depot buys two smaller companies • Ace dealers: loyalty first • Home Depot managers can file class-action suit * * * * * *

“I praise loudly. I blame softly.” Catherine the Great (Empress of Russia, 1729-96)
MISSISSAUGA, Ont. – A comprehensive new program for store identification and merchandising being offered to Castle Building Centres members is gaining momentum. A prototype design is now fully operational at one store, Windsor Building Centre in Windsor, Ont., while a number of other Castle stores are in various stages of planning and development.That store, which was developed even as the program itself was still being fine-tuned, came in under budget and on time, says Mike Frame, business development manager at Castle. The program recognizes the need for a strong, unified brand to assist the group’s 250 member stores to promote and identify themselves amidst the incursion of other major retail brands. Companies like Home Depot and Rona are both making inroads into the small-town markets of English Canada that have long been the domain of independent groups such as Castle, and its chief competitor, Tim-BR-Marts Ltd. The Windsor store, which now features beige and burgundy limning the traditional gold colour of the Castle logo, has become a destination for Castle members to see the new look first-hand. “That’s generated interest in all regions across Canada for the program,” says Frame, with up to 10 stores expected to be ready for implementation by this fall. “We’re in a go-forward position.” And even though the program was still in the development stage, the owners of the Windsor store wanted to make the switch right away. A Home Depot store opened in town recently, and a major Home Hardware dealer had updated their store. Nevertheless, the 6,000-sq.ft. operation has become an effective ambassador for the new look of Castle. “What it does is give us the platform to demonstrate the full capacity of all the marketing components of the offering,” says Frame. The program was designed by Burlington Merchandising & Fixtures of Burlington, Ont., fronted by Rob Wilbrink, Phil Dwyer and Mike Serecin, all ex- of Rona and Lansing. Just last week, Castle’s board approved the final draft of a store development program manual that outlines in detail all aspects of the program, covering everything from store layout and interior signage to exterior fascia, signage, and ancillary branding, such as truck signage and even uniforms. “The purpose is to create a brand entity for Castle,” says Wilbrink. “This is the best looking program in the industry. When the Castle dealers see it, they say ‘wow’,” he adds. The new Castle program remains focused on Castle’s core categories of lumber and building materials, while offering complementary hardlines merchandising that helps expand the front end of the store and caters more directly to the consumer. However, since Castle has a philosophy of offering its members greater independence and latitude than other groups, it will neither mandate the new design, nor offer a cookie-cutter solution to all, explains Frame.
TORONTO – In an effort to beef up its hardlines assortments in its flagship chain, Hudson’s Bay Co. has rolled out a small selection of power tools in the Bay. The launch, which picks up momentum just in time for Father’s Day, was designed to offer Hbc customers the convenience of one-stop shopping, says Mariana Di Rezze, a spokesperson for Hbc. The tools, already available at Zellers stores across Canada, were tried out in the Bay as part of a pilot project, with Hbc bringing in a few items from the wider assortment of tools available at Zellers discount department stores. In most parts of Canada, customers will find the Black & Decker tools – 3/8-inch 18-volt Drill Kit, golf organizer storage unit, and Power Smith Rotary tool. They are merchandised alongside a wider assortment of poker accessories that are also being positioned as Father’s Day gift ideas. In addition, the tools are featured on “gift-giving gondolas” through out the store and follow the treasure hunt strategy approach where customers can find them in random spots within the store. Due to consumer demand, says Di Rezze, Bay stores in Alberta currently offer a slightly larger assortment of power tools than the rest of Canada – including a Black & Decker electric measuring tape, stud finder and laser level, and a 14.4-volt four-piece combo kit. If the pilot project is successful, Hbc will continue to offer a selection of tools at the Bay and will perhaps widen the assortment that’s currently available, says Di Rezze.
TORONTO – A reception featuring décor maven Debbie Travis was held at Canadian Tire’s mid-town store at Yonge and Davenport last week. The event gave some radio contest winners the opportunity to meet Travis in person. But it was also a great opportunity see Travis “uncut,” as she demonstrated a more unrestrained wit and humour than she typically reveals on TV – and offered some insights into the evolution of the Debbie Travis paint line.Travis explained the process she used to develop the eponymously named Canadian Tire line and establish colours for each mood. “What we did was lock ourselves in a room with 20 bottles of wine, and then sent [Canadian Tire] all the colours in the morning.”In her attempt to find youthful, hip colours, she said, “Some of the colours were, of course, too hot for Canadian Tire. The ones with names like “Slutty Susan” came back,” she told the small crowd, appreciative of her humour. In fact, the retailer nixed at least half a dozen names because they were deemed inappropriate. Travis also noted the power of styles and trends in driving home renovations. People will consider changing the colour on a wall within as short a time as six months, she said. Furniture is no longer purchased with a lifetime of use in mind. “Why buy a sofa for 30 years?” she quipped. “The marriage is only going to last for two years!”
NATIONAL REPORT — Two of the industry’s largest dealers — Home Depot and Building Materials Holding Corp. — last week strengthened their respective subsidiaries’ programs through acquisitions. San Francisco-based BMHC acquired, through its BMC Construction division, a 51% stake in BPP Cos., an Arizona-based provider of concrete foundation services for local homebuilders. Terms of the deal weren’t revealed, but BMHC said that BPP generated more than US$100 million in revenue last year. In April, BMHC acquired another Arizona-area installer, Riggs Supply, which specializes in plumbing.Atlanta-based Home Depot said it would acquire two companies — Hawaii-based Wire Products, a dealer specializing in concrete fortification products; and Illinois-based Utility Supply of America, a catalogue distributor of water and wastewater parts. The acquisition of Wire Products, which Home Depot will manage under its White Cap Industries division, is expected to close in August. The purchase gives the company a presence in Hawaii with three locations. The dealer expects to close its purchase of Utility Supply by July. Utility Supply sells under the name USA Bluebook to municipalities, non-municipal government facilities, and industrial and private water and wastewater facilities and labs.
OAK BROOK, Ill. – Ace Hardware’s plans to add 1,100 stores to its network by 2008 will depend largely on how willing some 3,800 independent retailers will be to give up some of their independence. Those 3,800 retailers currently operate more than 4,800 stores.Ray Griffith, who became Ace’s CEO the first of April, says turning Ace into a powerhouse national chain that looks the same everywhere is key to competing with the big boxes. He says Walgreen, America’s largest drug chain, is growing rapidly by internal expansion, not by acquisition, and thinks Ace can do the same. Walgreen, however, is a corporate chain with top-down managerial power, not a co-operative comprised of 3,800 individual owners with their own ideas of how to succeed in their local markets.Griffith spearheaded Ace’s earlier effort to “standardize” and improve Ace’s public face. In 2000 he gathered dealer groups at its annual meeting/trade show for brainstorming sessions, asking what it would take to get dealers to sign onto a plan to modernize and unify Ace stores.The resulting plan, labeled Vision 21, met with remarkable success. With it, Ace converted 2,500 of its 4,800 stores to upgrades, which Ace helped by providing the merchandise credits as well as working out bank agreements to provide attractive terms for new store loans and remodels. It also presented achievement awards to compliant stores. However, 1,600 stores so far have resisted the modernization/ standardization efforts. And Ace also discovered that nearly 550 of its units did not even want to identify themselves as Ace stores by using the name in any way. Those dealers who choose not to use the Ace name can no longer enjoy all the financial benefits received by Ace-identified stores. Griffith says all new stores are to be at least 12,000 sq. ft. in size, considerably larger than the average Ace store of 9,000 sq. ft. today. In fact, there are many older Ace member-dealers operating stores of 5,000 sq. ft. or less, particularly in urban areas and very small towns. Griffith says dealers who signed up for Vision 21 are enjoying greater sales gains than the average Ace dealer – 4% in 2004 compared with a 1.5% increase for those not participating.
ATLANTA – Home Depot reports that the value of gift cards that never got redeemed over the years totaled US$43 million. The unused value of the cards, called “breakage,” was tallied from 1998, when Home Depot introduced the cards, until 2001, and the income was recognized on the company’s latest quarterly filing to the U.S. Securities and Exchange Commission. Home Depot will continue to report the gains on an ongoing basis in future filings. Unlike some other retailers, it does not impose an expiration date on the value of its cards.MEMPHIS – One of the key areas of growth for hardlines distributor Orgill is with its pro dealer customers. These dealers are being well serviced both by the regional supply capacity of Orgill’s network – and by the broad hardware ranges that many pro dealers are expanding into, as well as Orgill’s full LBM offering. Orgill’s pro dealer sales are expanding with the independent dealers served by Orgill’s national network of distribution centers. Pro Source, a program developed about two years ago specifically for those pro dealers, has been a factor in the growth, especially among larger chains such as Marvin’s and even 84 Lumber. RIVERSIDE, Calif. — A Superior Court judge here has ruled that assistant managers at Home Depot can sue the retail giant as a class of plaintiffs for unpaid overtime. Managers in California are typically exempt from overtime rules. But the lawsuit contends that assistant managers regularly perform the same duties as their hourly coworkers. Those tasks include stocking shelves, operating cash registers and picking up merchandise at other stores. As many as 2,000 assistant managers, who worked for Home Depot in California from July 1997 to the present could be included in the class action, whose total damages could reach more than $100 million. MINNEAPOLIS – The Valspar Corp. has completed its acquisition of stain and finish company Samuel Cabot Inc., for an undisclosed amount. The deal, which was originally announced on May 10, adds approximately $60 million in sales to Valspar’s operations. TEMISCAMING, Que. – Tembec has recently begun offering FSC-certified Softwood Kraft and Temcell High Yield pulps to the market. FSC certification is a third-party endorsement for environmentally and socially responsible forestry practices and the only system that tracks market pulp from the forest to the final product, according to a release by Tembec. Three operations being audited by FSC produce approximately 770,000 metric tonnes of pulps annually, and use FSC wood fiber from a combined area totaling 10 million acres. LAKE FOREST, Ill. – Salton Inc. may face Chapter 11 as early as this fall, based on its inability to make a US$6.7 million interest payment due last week on US$125 million in debt. Salton, well known for brands such as the George Foreman grill and other home appliances, has until September to come up with a plan for restructuring its bonds, which are due in December. DALLAS – Kimberly-Clark Corp. will begin formal testing of “Generation 2” Radio Frequency Identification hardware this summer. The Generation 2 hardware provides a universal solution to RFID technology on a global basis, replacing numerous and incompatible systems with one system used worldwide. The tests, scheduled to begin July 6th at Kimberly-Clark's dedicated RFID research lab in Neenah, Wis., will allow the company to determine which hardware is the most compatible with its conveyor, packing, logistics and shipping systems.
VANCOUVER – CanWel Building Materials Income Fund has made the following changes to the executive team of its wholly owned subsidiary, CanWel Building Materials Ltd.: Andrew Allen has been named national director of sales and product management for CanWel's Distribution Division. Formerly director, supply management at CanWel, this 10-year veteran of the company will be responsible for managing national account relationships, in addition to product management leadership … As a result of this reorganization, Rick Royce, vice-president, sales has left the company … Martin Hope has been named CFO. Hope is a chartered accountant who brings 20 years of experience to the job, with companies including Slocan Forest Products, Versatile Mobile Systems, and Duke Seabridge … Also at CanWel, Gordon Buttolph has been appointed director, information technology. He will be responsible for the overall management and direction of all systems activities for CanWel. Most recently, he was project manager for SAP implementation with International Paper Ltd., and before that he worked at Weldwood. Irly Distributors has elected its board of directors for the coming year (all located in British Columbia): Brian Hancock, Parkland Building Supplies in Sicamous, has been named president; Gus MacLellan of Mara Lumber, Kelowna, is vice-president; Jeff Davie, of Kaslo Building Supplies in Kaslo, is now secretary … Appointed as directors are: Carole Hamanishi of Wilway Lumber Sales in Abbotsford; Shaf Shivji of Dunbar Lumber Supply in Vancouver; and Trevor Stephenson of Woodstop Building Supplies in North Vancouver. Peter Clarke has joined Acton, Ont.-based TVM Building Products as vice-president sales – Canada. Formerly, Clarke served as director of sales with American Tool Co. (519.853.5330, ext. 242 or
Wholesale trade grew by 0.9% to $39.4 billion in April, marking the third consecutive monthly increase, reports Stats Canada. In constant dollars, wholesale sales were up 1.1% for the month.

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