Behind Local Tastes

Shareowner, Jul/Aug 2006

Wholesaler Canada Bread Co. and retailer Alimentation Couche-Tard might sound like unfamiliar food-industry giants. Yet most of us boost their sales each week, and the two have more in common than a financial comparison suggests.

The former's brands include Dempster's, Tenderflake, and dozens of others. Brands are often specific to a region or grocery chain, so you cannot buy most, but at least one is likely familiar.

The latter has fewer brands, but its convenience stores are quite regional. The Quebec-based company dominates its home province with its Couche-Tard chain, and the rest of Canada with Mac's, which includes stores formerly branded Becker's. Its U.S. chain, Circle K, is second only to 7-11.

Both innovate and embrace large-scale production and management, but also cater to regional preferences. Circle K roasts coffee to cater to different tastes in Florida and California. Canada Bread retains brands which local customers trust even as its new products marry the nutrition of whole grains with the look of bleached flour.

In addition to traditional management virtues, both see that products with higher volumes and margins need not be advertised the most. Both cater to modern lifestyles and high-calorie cravings while promoting - and linking their brands with - wholesome goods.

For convenience stores, this is promoting a nostalgic milk-vendor image while also selling sweet drinks, snacks, gas, and smokes. Similarly, sweet and buttery processed baked goods often appeal most to palates, even as consumers see themselves mostly buying more wholesome loaves.

Smart brand marketing is no substitute for a steadily rising profitability trend, of course. But if firms are fundamentally solid - as we'll now check with our traditional Stock to Study analysis - such savvy bodes well.