|SODISCO-HOWDEN BUYS ACE CANADA
|Montréal, QC - Sodisco-Howden Group has acquired Ace Hardware Canada, putting to rest months of speculation about the fate of the U.S. wholesaler in Canada.
The deal, worth $15 million plus an eventual net benefit of $6 million in net tax operating losses, closed last Tuesday, concluding discussions that began in earnest about three months ago. Ace had been losing money ever since it lost its initial - and largest - customer, Beaver Lumber, when that chain was purchased by Home Hardware Stores in the Summer of 2000. Ace's shipments to former Beaver dealers wound down until March 31, 2001. By signing new Ace dealers and through a series of supply agreements with buying groups, Ace tried to grow in Canada, but volumes didn't pick up fast enough to ensure its long-term viability.
Ace's business in Canada is now worth about $40 million, reflecting shipments to 127 bannered or co-bannered Ace dealers, as well as another 300-plus independent building centre dealers who relied on Ace to beef up their hardware assortments. The added volume will be driven out of Sodisco-Howden's London, ON distribution centre, giving Sodisco-Howden about $482 million in sales.
Ace is strong with companies such as Homecare Building Centres in Ontario and Winnipeg-based Sexton Group. They, along with other customers, including United Farmers of Alberta, will have the option of continuing the Ace programs under Sodisco-Howden's license.
According to Jos Wintermans, president and CEO of Sodisco-Howden Group, one company had to buy the other, as the hardware distribution market in Canada, he says, wouldn't support two players. But the deal leaves Ace's presence in Canada intact, as Sodisco-Howden will support Ace's banner and programs under a licensing arrangement that reflects Ace's activities in 56 other countries around the world. Sodisco-Howden Group, in turn, will have access to all of Ace's programs and brand support. Dealers served by Ace will continue to get that service, but from Sodisco-Howden.
"It's a win-win," says Wintermans. "It's a viable relationship that keeps the Ace name in Canada and gives hardlines retailers an alternative."
As recently as last month, when Paul Ingevaldson, vice-president corporate strategy and international business for of Ace Hardware in Oak Brook, IL, spoke at the Hardlines Marketing Conference in Toronto, Ace had affirmed its commitment to supporting the independent dealer North America-wide. That support, said Ingevaldson at the time, is a counter-offensive against the incursion of the big boxes.
Ingevaldson sees the deal as a strategic alliance between the two groups that will fulfill Ace's mandate to support the independent. "We'll be able to bring Ace programs into Canada through Sodisco-Howden," he says. "We're looking at it as a long-term relationship. We can also assist in some buying power opportunities, and in that way deliver better pricing to the Canadian independent."
The deal is expected to close by the end of the year, at which time Ace will close its Markham, ON head offices. Its Brantford, ON distribution centre is expected to close by the second quarter of 2003. A warehouse in Calgary was shuttered earlier this year.
|ALLIANCE BENCHMARKS IMPROVEMENTS IN SUPPLIERS' SALES
Fort Wayne, IN - Suppliers are getting benefits from their supply agreements with Alliance International LLC, and the group has done a study to prove it. Suppliers with consolidated supply agreements who are actively selling all three members of the group, namely Rona Inc., Home Hardware Stores Ltd. and Do it Best Corp., have realized an average sales increase of 27% over the past three years.
"The study shows the strong commitment of the Alliance partners to grow their businesses with suppliers who think globally, then act locally," says Greg Thomas, executive director of the Alliance. "This not only means that these suppliers are increasing their sales, but are also developing stronger business partnerships with each Alliance member."
More and more, the Alliance is seeking out suppliers who are internationally focused. The development of strong partnerships, Thomas says, can benefit suppliers through group purchases, reduced logistics costs and better sales promotions.
"The Alliance represents the best opportunity for any supplier to grow their market share in North America," says Ray Gabel, vice-president of hardlines purchasing and marketing for Home Hardware. "We welcome these international partnerships to help our dealers grow their sales and profits."
At least 15 product category reviews are conducted each year, but the group is also looking for synergies in its purchases of supplies and services. Several non-resale categories, such as shopping bags and other store supplies, are currently under review.
The Alliance represents nearly 6,000 retailers through its three members, with combined wholesale volume of about $9 billion.
|HARDWARE CONSOLIDATION CONCERNS RETAILERS
|National Report - The takeover of Ace Hardware's operations in Canada by Sodisco-Howden Group brings the number of independent, national hardware wholesalers in Canada down to … well, just one. With no direct competitors remaining for Sodisco-Howden, the takeover of last week is getting mixed reviews.
"It's a feather in the cap of Sodisco-Howden, because it brings a fair piece of business their way," says Ron Marchetti, central business development manager for Castle Building Centres Group. "However, I think it's unfortunate that Ace has left the market, because it gave everyone a choice." Sodisco-Howden is the primary supplier for Castle, but the group also has a wholesale supply agreement with TruServ Canada and buying synergies through the Mutual Hardware buying group. About 10% of Castle members are currently dealing with Ace.
Marchetti's colleague, David Morton, Castle's lumber buyer, is more emphatic, however. "It's a dark day for Canadian hardware retailers," he says. "It leaves one less competitor in the market and that spells doom and gloom for independent retailers."
Dealers carrying Ace products look forward to continued support of Ace products and programs under the licensing arrangement made with Sodisco-Howden. "I don't think it's going to make any difference," says Steve Webster, a Tim-BR Mart dealer in Elmvale, ON. "As far as we're concerned, we'll continue to have a hardware supplier." Webster likes the Ace programs, but already relies on Sodisco-Howden for about 60% of his hardware needs.
Other dealers, who have the full Ace program, will probably have more of a headache trying to switch over to Sodisco-Howden's SKU numbers and bar codes. Randy Martin, director of merchandising for Vancouver-based Tim-BR-Marts Ltd., anticipates some challenges for dealers who rely more heavily on Ace, especially those who have only recently switched to Ace. But he expects Sodisco-Howden's western distribution centre in Surrey, BC to increase turnaround times for customers in the West. About 20% of Tim-BR-Mart's dealers deal currently with Ace.
|BMR MAKES BID FOR MONTRÉAL RONA DEALER
|St-Basile-le-Grand, QC - Matco Ravary, a chain of six building centres in the Montréal area, has received an offer from an affiliate of Le Groupe BMR to acquire Matco Ravary for about $26 million. Matco Ravary is a publicly traded company, owned in part by Rona Inc. Over the years, Matco Ravary has developed a contractor focus. The company has struggled to increase profits, however, as it competes against the insurgence of big boxes in its market.
The deal calls for BMR to pay cash for the company, giving the privately owned wholesale buying group a foothold in Québec's major urban market. It will also be the first outright acquisition by the group, which sells to 125 independent building centre dealers in Québec and in francophone communities of Ontario and New Brunswick. Matco Ravary has also agreed to pay BMR break-up fees of between $100,000 and $500,000. BMR will assume liabilities estimated at $13.6 million.
Gilles Nolet, president and COO of Matco Ravary, and Carmel Chaput, chairman and CEO, principal shareholders in the company, have agreed to invest about $4 million back into the deal in the form of shares. They will also stay on with the company under the new ownership.
The deal is conditional pending due diligence and approval by Matco Ravary's board of directors.
|COMPANIES IN THE NEWS
|Rona will open a Rona Home & Garden store on Wednesday in Mississauga, ON. The 140,000-sq.ft. outlet will be the company's 40th big box in Canada.
Household, cleaning and convenience hardware items will be added to the truck next month when Home Depot Canada starts using GroceryGateway for home deliveries. The service will start next month, according to a report in Friday's Toronto Star, which quotes the publisher of Hardlines (enough cheap self-promotion! - Editor).
Goodfellow Inc. reported a net profit for the year of $7.4 million on sales of $505 million, compared with $4.6 million last year. Net profit for the fourth quarter was $1.8 million on sales of $150 million, compared with $1.8 million on sales of $127 million a year earlier.
Home Depot Canada opened its first store in Abbotsford, BC last Thursday. This is the 85th Home Depot in Canada.
Drummond Metal Products has announced its certification as a Smartwood company. Smartwood is part of the Rainforest Alliance, and the certification ensures that wood used in Drummond products are from well-managed forests, independently certified in accordance with the rules of the Forest Stewardship Council.
BPB has announced the launch of a new branding strategy to tie together its identity through its various companies. The BPB family of companies in North America - BPB Celotex, BPB Marco, BPB Westroc and BPB Gypsum (formerly James Hardie Gypsum) will now be known as BPB. The name change will also affect some products, including its gypsum board, which will now be branded "ProRoc." Its compounds and textures will be part of the "ProFin" line. New packaging will be phased in on a gradual basis.
All the assets and certain liabilities of Snapper Inc. have been sold to Wisconsin-based Simplicity Manufacturing, by Snapper's parent, Metromedia International Group. Simplicity makes residential and commercial lawn and garden equipment.
The Sherwin-Williams Co. reported an increase in consolidated net sales of 4.4% in the third quarter, to US$1.43 billion, and an increase of 2.4% for the first nine months to US$4.03 billion. Biggest gains came from domestic architectural paint sales, a growing DIY market and aggressive promotion.
|PEOPLE ON THE MOVE
|CLARIFICATION: James Jones, formerly general merchandising manager for the Building Box and Réno-Dépôt for lumber, building materials, millwork, hardware, seasonal and nursery departments, has been promoted to vice-president operations for the Building Box banner … Marvin Ettinger remains vp operations for the Réno Dépôt banner … Joseph Piro, currently general merchandising manager for the Building Box and Réno-Dépôt banners for the electrical, lighting, kitchen, plumbing, paint, décor and flooring departments, has been put in charge of all departments since Jones's promotion. He reports to Luc Nantel, Réno-Dépôt's vice-president of operations. (514-270-8111)
|Investment in non-residential building construction reached a record high in the third quarter, as the private and public sectors both increased spending, says Stats Canada. Overall, businesses and governments spent nearly $6.7 billion in the third quarter, up 3.5%.
Manufacturer's shipments in August were up 0.6% to $43.9 billion, says Statistics Canada. However, the increase was largely due to higher fuel prices. The wood products industry increased as well, continuing to recover from recent lows.
|Consumer spending in retail stores edged up 0.2% to $25.7 billion in August, after a 0.2% decline in July, reports Stats Canada. In constant dollars, retail sales remained unchanged in August, following a 0.6% decrease in July. Wholesale sales rose 1.1% to $35.1 billion in August, buoyed by strong auto sales and an increased demand for industrial machinery, says Stats Canada. Wholesalers sold $35.1 billion worth of goods and services in August. Since November 2001, the growth of monthly sales has averaged 0.7%.
Canada's composite index continued to rise, albeit gradually, in September, according to Stats Canada, with a 0.2% gain. Housing was up 0.5% and further gains in manufacturing outweighed further losses in the stock market. Starts of single-family dwellings continued to rise, nearly equalling the 12-year high set in May. Purchases of household goods have expanded steadily since early in 2000. Excluding the stock market, the composite index rose 0.5%.
|The Canadian Hardware and Building Materials Show will introduce a New Auto Pavilion at next year's show. Called "Auto Focus," it will showcase new concepts and products for retailers selling in the automotive aftermarket. The show runs February 2-4, 2003 at the National Trade Centre in Toronto, and kicks off with the first-ever Industry Awards Breakfast at the Sheraton on Sunday.Don't miss Practical World 2003, the Cologne International Hardware Fair/DIY'Tec. The 2003 show is March 9-12. For show information, contact Barbara Hills at 416-598-3343 or email firstname.lastname@example.org. To book your flight and hotel, call Carol-Ann Itel at Trade Show Travel, 1-877-873-7469 or email email@example.com .