My friends Moses and Martha wear me out. Like so many double-income Canadian couples, they've always got a home renovation project on the go. In the spring, they put in new hardwood floors and crown moldings. Then they redid the kitchen. That was after they remodelled the second-floor bathroom. This summer they repainted the living room—twice. Moses hated the “cornflower” colour Martha had chosen.

The most galling part of it all, to their friends, is that their house looked perfectly lovely before. But in an age where cocooning has given way to bunkering, where decorating shows fill prime time, keeping up with the Joneses is all-consuming.

This is obviously great news for the people who sell the stuff of home-renovation dreams. I almost never seem to talk to Moses when he's not just back from Home Depot or one of its big-box cohorts. In the past year, he's been frequenting the Rona outlet near his Toronto neighbourhood more and more. There's good reason for that. When he needed 34-inch French doors (yet another project of his), he found that the nearest Home Depot stocked only 30-inch ones; wider doors required a special order. He found his desired item in-stock at Rona. It made his day. “Rona's just as good as Home Depot and it's got a better selection of a lot of things,” Moses says. “And it's 100% Canadian, you know.”

Not very long ago, few Canadians outside Quebec knew much about the obtusely named retailer, not even what it sold. That is not the case now. Following a spree of acquisitions, Rona has spent more than $90 million on marketing in the past 18 months, most of it to herald its entry into the English-Canadian market. That's one big reason for the Boucherville-based company's increased profile: Sponsoring Debbie Travis's Facelift on HGTV and Rona Dream Home on Global has helped make the retailer a, well, household word. But if the advertising push initially helped draw people like Moses (a Debbie Travis fan) to the store, it's taken much more than that to keep them coming back.

Rona Inc. has emerged as a red-hot retailer, perhaps Canada's hottest. Since 2000, it has more than doubled its share of the $30-billion Canadian hardware and home renovation market—to about 14%, with 2003 retail sales of $3.9 billion—and it's nipping at the heels of Home Depot for the top spot. It aims to surpass its U.S.-owned rival soon, and grab 25% of the Canadian market by 2007. It's the kind of objective that requires a corporate extension ladder. “It's definitely going to be a challenge,” says Michael McLarney, editor of the Toronto-based industry newsletter Hardlines. “On the other hand, I've learned not to underestimate them, because they've managed to live up to all of their other promises so far.”

Rona's same-store sales were up 9.2% in the second quarter of this year. Total sales rose 53% and profits surged 99%. Those numbers owe something to operating in possibly the most robust segment in retailing. Home-renovation stores have been surfing on a wave of sky-high housing starts, which are set to surpass the 200,000 mark in Canada for the third consecutive year. Then there's sales of existing homes. These were up 8.1% in the first seven months of 2004 alone, to more than 269,000, and seem to be headed for another record year too.

Still, it's not all luck. Rona's unique business model—it's publicly traded; has an array of big-box, medium-sized and small neighbourhood stores; and a mixed corporate and dealer ownership—may give it an edge over the competition, Home Depot Canada and Home Hardware. The former, a division of Atlanta-based Home Depot Inc., operates only corporate-owned big-box stores, although it recently began experimenting with a slightly smaller format. Home Hardware, the industry's No. 3 player, with a market share of about 13%, is a dealer-owned co-operative that serves mostly small- and mid-sized markets. As for Canadian Tire, which also has about 13% of the market, its dealer-owned stores focus more on housewares and hardware than the building materials that drive sales at its competitors.

“ By operating stores in a variety of formats, Rona can enter any market with whatever size of store is appropriate,” says McLarney. That advantage has not been lost on investors. Since first issuing $150 million in stock at $13.50 in 2002, Rona has seen its share price more than double, despite another $150-million issue last year. The shares have recently slipped from their February high of $35, but still hover around $30, giving the company a market capitalization of more than $1.7 billion.

The most appealing aspect of Rona's right-sizing of stores, analysts say, is that it enables the company to invest just the right amount of capital in a given situation to earn a good return. Signing up an independent hardware dealer in a small town requires less of an investment on Rona's part than opening a corporate-owned store there. And keeping most of its English-Canadian big boxes in corporate hands means all of the profits from those high-volume outlets flow directly into company coffers.

Still, the arrangement may not be as foolproof as it looks. Dealer-owners are a notoriously testy bunch at the best of times. When they start seeing corporate-owned big boxes opening up only a few kilometres from their stores, they can become downright cantankerous. Rona faced a revolt from some of its Quebec dealers when it began opening big boxes there in the early 1990s. Now it's counting on signing up hundreds of the 4,000 independent hardware dealers across English Canada, where the company currently has only a handful of dealer-owners under its banner. That will make the big-small juggling act all the more tricky.
Robert Dutton, Rona's 49-year-old CEO, relishes the challenge. “I don't try to lull the independents [into complacency]. I prefer to tell them the truth: It's never going to be like it was back when. We have to adapt our stores as a consequence.”

No one remembers better than Dutton the way things were. Dutton was born into the business. His family ran a small, independent hardware store in suburban Sainte-Dorotheé (now part of the city of Laval), just north of Montreal. The store became a Rona dealer in 1971. “When I go into one of our [independent Rona] stores, it makes me think of my childhood,” he says. “The most important phrase in my life is: ‘Can I help you?' Those were the first words I learned.”

Of course, he also learned the French version of that universal retailing question: Puis-je vous aider? Dutton's anglophone father married a Québécoise; Robert, his twin brother and their sister were raised speaking French. After graduating from Montreal's École des Hautes tudes Commerciales in 1977, where he specialized in marketing and finance, the 22-year-old Dutton was set to take over the family business. Not content to mix paint for the rest of his life, he dreamed of building a much bigger store and had even picked out a site. He paid a visit to Rona's CEO, André Dion, expecting to walk away with a dealer agreement for a larger store. Instead, he left with a job offer. “I was so impressed by Robert's drive,” recalls Dion, who went on to found microbrewer Unibroue. Dion remembers the young Dutton as shy. “But he already knew the retailing market so well and his willingness to learn impressed me too.”

Dutton accepted Dion's offer—reluctantly, he says. He planned to stay for only two years, keeping his project to expand the family business in mind. At first, he continued to work at the Laval store on weekends. Before long, though, there would be no time for that.

Rona started out in 1939 as a loose coalition of Quebec hardware merchants who united their purchasing power to get better prices on goods. In the early 1960s, the group became a dealer-owned co-op. It changed its name to Ro-Na, a moniker derived from the first names of the group's president, Rolland Dansereau, and his deputy, Napoléon Piotte. (The hyphen was dropped in 1998, when the corporate name became RONA Inc.)

When he joined headquarters, Dutton was assigned the task of making Rona a brand name. “Until then, we had been just a buying group. But we realized that we needed to be a marketing group too,” he says. He set about imposing more coherent standards on the group's members. For the first time, dealers were obligated to hang a Rona sign on their stores and to distribute an annual flyer with consistent chain-wide prices. By the time Dutton was appointed executive vice-president and chief operating officer in 1990 (when he was only 35), he had achieved his goal of making Rona Quebec's best-known hardware brand. His next goal was to require even more finesse: He had to manage the company's transition into a revolutionary new era in retailing.

Dion left Rona shortly after Dutton's appointment in 1990, leaving Dutton as the company's de facto CEO until his official nomination to that post in 1992. It was an ominous time in retailing. North America was just barely out of the worst recession since the Depression, a slump that had put Rona in the red. Meanwhile, the new retailing concept that had taken the United States by storm—the Brobdingnagian warehouse store—was starting to pop up in urban Canada. Molson, then still a diversified conglomerate, was an early pioneer of big box in the Toronto market, with its Aikenhead's hardware chain. In 1994, Molson sold the chain to Home Depot, giving the U.S. retailer—which invented the big-box concept in 1979—its Canadian beachhead. That same year, Molson teamed up with Quebec's Val-Royal hardware distributor to create a new Quebec chain of big-box outlets, Réno-Dépôt. For Dutton, the writing, in carpenter's pencil or not, was on the wall.

Dutton gathered his Rona dealers in Laval, a common launching pad for big-box retailing in Quebec, to tell them that the company had no choice but to enter the game. The dealers were given a choice: Continue operating as small independents, or close their stores and become co-owners of a new Rona big box. Several took Dutton up on his offer, and together they became franchisees in the new Laval store, which opened in 1994. Dutton has followed a similar process with all of the 23 big boxes that fly the Rona banner in Quebec. The reliance on franchisees in a big-box setting is unique to the company.

By the late 1990s, Rona and Rno-Dpt had cornered the big-box market in Quebec, thanks in part to a non-competition agreement between Molson and Home Depot that kept the American giant out of the province. With its approximately 350 independent dealers in Quebec added to the pie, Rona had become the province's dominant hardware chain, with about a third of the overall market. Dutton figured (wrongly, it turned out) that the chances of further expansion in Quebec were small, so he turned his sights toward English Canada.

Plan A was to recruit independent dealers in Ontario. It wasn't easy. Rona was an unknown brand. And there was the language barrier. “There were problems. Like communicating with people down there [at the Boucherville head office] when we had ordering problems,” says Stephen Jay, owner of Wilson Plumbing & Hardware in Point Edward, Ont., and one of the first Ontario dealers to sign up with Rona in 1996. “And the laws are different in Ontario and Quebec [where the legal system is based on the Napoleonic Code], so we had to go through three or four rewrites of our dealer-owner agreement before we got it right.”

Jay persevered and is happy he did. But the language and legal obstacles, along with Rona's modest brand profile, meant the recruitment drive was largely a bust. Dutton had to switch to Plan B: growth by acquisition. It meant a dramatic shift in strategy, forcing the company to abandon its co-operative roots and go public to raise the cash needed to buy big. It would also mean pioneering a hybrid company structure—then unproven in the hardware business—of mixing corporate-owned stores with franchises and dealer-owned outlets.

Dutton wasn't convinced that managing the transition was how he should spend the next years of his life. In mid-1997, exactly 20 years after joining Rona, Dutton, then 42, announced he was taking a leave of absence. The company insisted he was coming back, but most observers were skeptical. Dutton, a devout Catholic, spent a good part of his sabbatical studying and meditating at le Grand Sminaire de Montral. The institution, run by the Sulpician order, is devoted to educating future priests. Dutton, a warm yet intense man with deep brown eyes, explains his decision to take time out this way: “I turned 40 in 1995 and I felt I had realized my goals. Rona was doing well. I felt that maybe I had done what I could do there. I wanted to take some time to reflect on the meaning of my life, to see how I could better serve others.” In the end, he concluded Rona was the right place for him to do that. “Creating jobs is maybe the best way for me to help people, not only out of poverty, but to regain their dignity.” Dutton returned to Rona the following February more determined than ever to implement his Plan B. Its necessity had become all the more apparent: Only months earlier, Molson and Val-Royal had sold Rno-Dpt to French retailer Castorama, which aimed to expand into Ontario (which it did under the Building Box banner). Also looming was the expiry of the non-competition clause that kept Home Depot out of Quebec.

In 2000, after many months of effort, Dutton finally found his English-Canadian beachhead in Cashway Building Centres, a 66-outlet Ontario chain that had annual sales of about $300 million. He bought the chain from Winnipeg-based Russel Metals Inc. for $50 million. Then, in 2001, Dutton spent $220 million to buy a chain of 51 stores—Revy and Revelstoke in Western Canada and Lansing in Ontario—from West Fraser Timber Co. Ltd.

To help Rona pay for the chain, which had sales of $800 million, the Caisse de dépôt et placement du Québec and la Société générale de financement—both indirect arms of the Quebec government—each invested $41.7 million in the company. (The Quebec government has since announced plans to sell the SGF's 3.6 million Rona shares, likely over the next two years.) Meanwhile, French retailer ITM Enterprises SA added another $10 million to the previous $30 million it had put into Rona. (It has since sold its 18% stake.) An initial public offering raised $150 million in 2002. Overnight, Rona dealers became shareholders of a publicly traded entity.

Dutton got an unexpected opportunity to consolidate his lock on the Quebec market in 2003, when Kingfisher PLC, the British chain that had taken over Castorama, put Réno-Dépôt and its Ontario pendant, The Building Box, up for sale. Réno-Dépôt's unionized outlets scared away another possible buyer, Home Depot, which by then had already opened its own stores in Quebec anyway. Many industry watchers thought Lowe's Co. Inc., which has successfully taken on Home Depot south of the border, might be attracted to Réno-Dépôt in order to launch a Canadian expansion. But that's what they thought when Cashway and Revy went on the market too. As in those instances, Dutton ended up as the buyer, paying $350 million for 20 corporate-owned stores under the Réno-Dépôt and Building Box banners and their $800 million in sales. While Dutton has retained the Réno-Dépôt banner in Quebec, all of the company's other stores in Canada—be they corporate- or dealer-owned—now fly the Rona flag. The grand total: 530 stores.

One of the characteristics, if not banes, of public companies is their ceaseless need to grow. For Rona, now even more dominant in Quebec, it's clear there's not much room for that at home. And while the Cashway and Revy acquisitions were a nice start, Rona still has lots of catching up to do in English Canada. “We have 43% of the Quebec market, 8% of Ontario and 11% of Western Canada,” Dutton explains. “We have to build our business in Ontario and the West.”

Dutton figures he has come up with the formula to do that and reach his goal of a 25% national market share by 2007. The first plank in the strategy involves retooling the big-box concept to make the stores less daunting and dingy—in short, more “woman-friendly,” as Dutton puts it. At the same, he intends, to provide something that many customers complain they still can't find among the 40,000 or 50,000 items the average big box stocks—good service. The model for the new format is the Rona Le Rnovateur outlet that opened last November near the company's Boucherville head office, in the suburban sprawl south of Montreal. The outlet, which is the culmination of a series of changes that Rona began implementing at its stores starting in 1998, is smaller than a typical big box, which can range from about 85,000 square feet to nearly double that. The new mini-big box has 41,000 square feet of indoor retail space and, attached to it, a 20,000-square-foot fully enclosed drive-through where building materials are sold and loaded. That keeps the unsightly stuff out of view.

The store's main retail area is bright and clean, with high white ceilings and walls, and polished floors. Service-oriented “boutiques”—specializing in paint, home-dcor accessories, windows, moldings, flooring and lighting—form the outer ring of the store. “Home Depot is oriented more toward men; I focus more on women,” says Dutton. (Rona counts on tradesmen and contractors for only 10% of its sales, compared with about 30% for Home Depot. The latter, however, has also been courting women of late, with warmer-looking stores, female-only how-to workshops and, like Rona, power tools designed explicitly for the fairer sex.) “Rona's come at it much like Lowe's in the U.S.,” says Hardlines editor McLarney. “They've taken the traditional big box, which was really a warehouse, and taken it to the next step. They've made them brighter and cleaner, with a greater sense of style. Home Depot has had to catch up.”

Rona estimates there is room for as many as 100 more of its mini-big boxes across the country, operating mostly under the Rona Home Centre banner in English Canada. While the smaller outlets obviously can't stock as many items as a traditional warehouse outlet, Dutton points out that Rona's finely tuned distribution system—with centres in Boucherville, Toronto, Calgary and Surrey, B.C.—can guarantee next-day delivery to almost any large urban store in the country.

Still, getting to that target of 25% of the market will not be simple. Each point of market share will be harder to gain than the last. Almost half of the hardware and home-renovation market in Canada is still in the hands of small chains and independents; it will take converting scores, or even hundreds, of these outfits to the Rona banner to bring Dutton meaningfully closer to his goal. Rona must first identify the dealers it wants, which translates into mountains of market research. Then comes the painstaking work of courting individual dealers.

Dutton is solely interested in the go-getters. “The first question I ask [a potential recruit] is always the same: How do you see your store in five years? If he says, ‘Like it is now. The store of my father,' I say, ‘Thank you very much and good luck.' But if he says, ‘I want more building materials and a garden centre and a home-decoration boutique,' well, that's the guy I want.”

So far, it's been a tough slog. “They're not even close to their dealer-signing targets,” says Robert Gerlsbeck, editor of industry magazine Hardware Merchandising. Of course, many independents—and the buying groups they belong to—are doing well, thanks to the reno boom; they may see no need to fix what isn't broken. That is bound to change, industry watchers say. “The independents don't realize just how miserable things might get,” remarks one Bay Street analyst. “Home Depot isn't going to stop opening new stores. [Some independents and buying groups] might be well-run. But they still can't compete with Rona and Home Depot on price, they can't compete on private-label products, and they can't compete by offering multiple [store] formats. Once this euphoria of building is over, that will become even more clear.”

In the meantime, there is also the possibility—perhaps slim—that Rona could make the occasional add-on acquisition. Gerlsbeck points to New Brunswick-based Kent Building Supplies as a likely target. The chain, owned by the Irving family, has 30 stores in Atlantic Canada and about $350 million in sales. Rona, meanwhile, is barely present in the region. “But,” as Gerlsbeck adds, “do the Irvings want to sell?” That is anybody's guess. Ditto for another putative target: Calgary-based Totem Building Supplies, a privately held chain with 14 Alberta stores and $233 million in sales.

Speaking of that building euphoria, what happens to Rona when it does end, as it surely will? Dutton, for one, isn't worried. Only 10% of the company's sales are driven by housing starts, he says. And the reno trend is here to stay: The aging baby boomers that fuel it have both time and money on their hands. The housing stock is aging too: About 65% of Canadian homes are more than 20 years old.

“ The only place you feel secure is at home,” Dutton insists. “People want to be comfortable. Besides, there are more and more home-based workers. That takes an office. And it's not true all the empty-nesters want to move into condos. Most of them want to keep the house. They may get rid of the pool table, but they'll put in a home theatre instead.”

Still, will those increasingly rickety boomers want to spend their time installing the thing themselves? Industry watchers predict the do-it-yourself trend, while currently hot, is bound to cool. That's why Home Depot has been aggressively pushing its installation services, which have become an increasingly important source of revenue. So far, Rona has no plans to enter the do-it-for-me market. But it may soon have no choice but to follow suit.

Dutton, no doubt, will do so if necessary. “It always comes back to a dream,” he says. “In my first speech as executive vice-president in 1990, I said we were going to become the biggest player in Quebec. Then I said we'd become the biggest in Canada. We're close. We will be by 2007. After that? I have other personal objectives, bigger than that, but I keep that to myself.”

Dutton has watched with admiration, and a touch of envy, as Quebec Inc. counterparts Alimentation Couche-Tard Inc. and Jean Coutu Group Inc. have moved with bravado into the U.S. market. He sees no reason why Rona might not do the same one day. After all, he notes, the company's distribution centres already supply stores in Northern Quebec and Ontario. Go the same distance south and you hit a market countless times more densely populated than most of the Canadian landscape. “I don't see any limits to this company,” he concludes.

Back in Toronto, Moses and Martha are debating whether to redo the back patio now, before the snow comes, or wait until spring. One way or another, that horrible siding on the back wall of the house has to go. And an awning would be nice. Their chatter may drive their friends to distraction. But it's a symphony to Dutton's ears.