health care

The French connection

How Jean Coutu Group’s beloved founder and folksy brand made it Canada's most reputable company.

At a Jean Coutu Pharmacy, you can stroll the aisles and, amid the diapers, face creams and soft-bristle toothbrushes, find a new pal or two. That, at least, is what Quebec’s leading drugstore chain has for years been telling consumers on TV, radio and in flyers: You can find everything here, “even a friend.”

The hokey slogan has long invited mockery, most famously in a series of skits on Rock et Belles Oreilles (think Kids in the Hall in French). But its corniness and warmth are characteristic of the company’s unpretentious image. The line originated in the fact that pharmacies could stay open longer than other Quebec merchants. “The store became a meeting place because other retailers were closed,” explains François Coutu, the CEO and the youngest son of the founder. “Especially on Sundays, working people could go out in a relaxed environment. You could interpret [the slogan] any way you want. There could be a love story there.”

Forty-two years after the first store opened, the love story between the Jean Coutu Group and its Quebec clientele is going strong. In fact, the affection and trust consumers feel for the 389-store chain of discount pharmacies have elevated it to the top spot in this year’s rankings by the Reputation Institute. The publicly traded company scored in the Top 10 in all categories, from the quality of the products to workplace, and was ranked particularly high in corporate citizenship and governance.

Jean Coutu has achieved this despite—or perhaps because of—sticking to an old-fashioned approach to retail. Compared to Pharmaprix, Shoppers Drug Mart’s brand in Quebec, where cosmetics clerks aggressively shepherd shoppers to perfume counters and cashiers urge them to join the store reward program, a visit to a Jean Coutu is a low-key affair, with the focus firmly on low prices. Nevertheless, the company has grown steadily, with annual sales now topping $2.5 billion, and consistent profits even during economic downturns. One-third of all prescriptions in the province are filled at Jean Coutu pharmacies.

At the core of the retailer’s public image and brand is its founder, a cultural icon for several generations of Quebecers. Now 84, he’s no longer running the business, having handed control to his five kids. But the patriarch remains as personally identified with his stores as Colonel Sanders is with buckets of chicken. “He’s the grandfather that everybody wishes they had,” says Bernard Motulsky, chair of social and public communication at the Université du Quebec à Montréal. “Unlike its big competitors, Jean Coutu [chain] has a celebrity.”

That celebrity is advanced in years, however. Will the next generation of Coutus manage to maintain this Quebec institution’s family-friendly image?

Jean Coutu has never had the flash of the province’s best-known entrepreneurial giants. Unlike the pontificating Péladeaus of publishing, Coutu never stared down a union; nor has he gone into space like the Cirque du Soleil’s Guy Laliberté or engineered transportation breakthroughs like the Bombardiers. Instead, the pharmacist is a folksy, benevolent figure who rarely appears in public without his trademark white lab coat, and his business empire lacks sex appeal: he achieved success by knocking a few cents off jars of Vaseline and nodding patiently at geriatrics as they enumerated their pains.

While few people outside Quebec would recognize the soft-spoken octogenarian, in his home province, he’s a genuine star. In one TV commercial from several years ago, Jean Coutu appears at a restaurant saying little while a waitress stands star-struck in his presence. Being his company’s main spokesman for decades in a province that watches more TV than any other has made him as well known as singer Gilles Vigneault.

The retailer’s marketing has always had a down-to-earth appeal, reaching out especially to the working-class and rural shoppers, speaking in their vernacular and with their accents. That branding pitch mirrors Coutu’s own persona as the quintessential gars de chez nous. “Their ads are close to the people,” says Benoît D’Aoust, CEO of Montreal advertising agency Eau3. “It’s not a refined message, but it’s true. Jean Coutu is a family-owned business that [endears itself] to other families.”

Despite the company’s rapid expansion, that personal connection with the owner keeps shoppers happy to punch in their PINs at the cash. “They built their success upon two main elements,” says Motulsky, “the fact that you can find everything there, and that you can find a friend, the personification of Jean Coutu. Going to a pharmacy is like going to the doctor. If the doctor is friendly, it’s a little less austere. It becomes a pleasant experience.”

D’Aoust points out that Coutu’s biography also creates a compelling story for the brand. “You’ve got a charismatic entrepreneur who created a brand, and there’s a narrative which he put his heart and soul behind,” he says. “Jean Coutu started with a single pharmacy, and he grew it with the people of Quebec. So they share a story, and the public feels entitled to that success story.”

In his recent autobiography Sans prescription ni ordonnance (translated roughly as Without Prescription), Coutu explains that his central business principle arose from an incident he witnessed at his pharmacy. A certain Mr. Tremblay, a father of four with a sick wife and two jobs, waited patiently to get his prescription filled. Suddenly, a doctor cut in and gave his order, adding, “Don’t forget my discount.” Tremblay stormed out, and Coutu realized that he had to offer better service and deals to the working stiffs. As a result, Jean Coutu franchise owners can lower prices as far as they want, but each item has a set maximum price.

Coutu’s emergence on the business scene coincided with the Québécois entrepreneurial awakening. Following the Second World War, French-speaking consumers increasingly chafed under anglophones’ commercial dominance. It’s become part of nationalist mythology that store clerks would order francophone clients to “speak white.” In his book Quebec Inc., Matthew Fraser identifies several common characteristics of the new Québécois business magnates, and Jean Coutu possessed a number of them. His bourgeois background made him part of the “old middle class.” He was “a manager,” but also “an entrepreneur,” having launched himself into business with $16,000 of his own savings.

Coutu’s father, a doctor, hoped to see him follow in his footsteps, but young Jean got booted out of medical school. The experience was formative. “If you’re a son of a doctor and want to become a doctor and end up as a pharmacist, it’s a big disappointment,” says Laurent Lapierre of the HEC business school in Montreal, who lectures on the Jean Coutu phenomenon. “In his early days, he seemed like a failure.”

After working at a pharmacy, Coutu got into the business with a cousin. Their original megastore opened in 1969 on Mount Royal Avenue in the densely populated, working-class Plateau neighbourhood of central Montreal. His partner (whom Coutu later bought out) suggested that Coutu’s name go on the sign because it was shared by one of Quebec’s biggest heartthrobs. For years, Coutu explains in his book, customers would ask if the actor that owned the store came in often.

Coutu soon outstripped his namesake in public recognition. People looking to save a nickel on Aspirin were impressed by a pharmacy whose shelves were stacked so high with diapers, pomade and shoe insoles that the floor needed to be reinforced. Although Coutu dabbled with a chain of small stores, which he called Farmeterias, he focused on the discount Pharm-Escompte format after visiting early big-box pharmacies in Toronto and realizing those chains would eat him up if he didn’t go for volume.

The founder managed to retain his grandfatherly image even as he repeatedly locked horns with provincial and industry authorities over issues like the number of pharmacies he could own and what the chain was allowed to sell on Sundays. (The latter battle he fought in print and on TV, personally appealing to the public for support.) Not only did he mostly get his way, but he faced little public criticism, even during his ultimately ill-fated defence of his company’s right to sell cigarettes. His worst press in recent years was over his refusal to intervene in the sale of the Montreal Expos, of which he was a part owner. But those grumblings have been overshadowed by his high-profile philanthropy, including $10 million to the University of Montreal.

It was outside its home market that the company experienced its biggest setbacks. By the mid-’90s, having bought some American pharmacies, Jean Coutu’s operations in the northeastern states were as big as those in Quebec. In 2004, when J.C. Penney put its 2,800 Eckerds pharmacies on the block, Jean Coutu teamed up with CVS to buy 1,560 branches. The acquisition turned into a disaster as a lack of skilled staff and a dwindling photo-development business weakened the already struggling stores. Its share price depressed, the Jean Coutu Group sold the unit to the Rite Aid chain in 2006.

Coutu confesses that the American fiasco left the company gun-shy about acquisitions. His one strategic regret is the failure to snap up Ontario’s 135 Big V stores in 1996, which Shoppers later gobbled up. That missed opportunity that boosted a major rival’s power felt “like I scored into my own net,” Coutu writes in his autobiography.

Despite these missteps, the chain has maintained firm dominance on its home turf, even though increasingly industry consolidation has strengthened the competition. Pharmaprix, with about half the stores, has proven unable to leverage its parent’s national dominance into a market lead in Quebec; though Pharmaprix stores are larger than Jean Coutu’s, they have lower profit-per-square-foot ratios. Uniprix, the second-largest pharmacy chain, has been hobbled by internal strife. Meanwhile, Guy-Marie Papillion, a similarly charismatic pharmacist behind the Essaim, a rising Quebec City–based chain, simply retired and sold out.

The future of the business he built does weigh on the patriarch. The whole industry faces turmoil with the advent of laws in several provinces demanding lower prices on generic drugs. Generics constitute over half of Jean Coutu’s prescription sales, and its Pro Doc generic drug arm has been a high-growth business to date. While Quebec’s new generics law may weaken the company’s returns, some observers speculate that it could give Jean Coutu a chance to gobble up smaller pharmacies less capable of withstanding lower profits.

CEO François Coutu won’t comment on whether the company might buy others or if a rumoured $2-billion union with the Edmonton-based Katz chain is in the works. But he insists he’s planning to continue his dad’s legacy. “I’m a pharmacist myself, and even though I’m not Jean Coutu, I try to maintain a paternal attitude toward the employees and pharmacist-owners,” he says.

D’Aoust argues that the connection that Jean Coutu has developed with the people of Quebec has endured because it’s subconscious. “It’s been a habit for so long to be loyal, it’s like asking a sovereignist in Quebec who he voted for,” he says. What’s more, in this province, a trusted pitchman can transform a brand, as proven by actor Claude Meunier’s 25-year relationship with Pepsi, which long outsold Coke in Quebec. The Québécois also tend to jump on bandwagons en masse, whether they’re watching Tout le monde en parle on TV or voting NDP.

But the company knows that the Jean Coutu brand is largely a francophone phenomenon, and likely wouldn’t work beyond the provincial borders. The first forays outside the province, into French-speaking parts of New Brunswick, were successful, but in the Ontario market, the company operates under the name Maxi Drugs.

In its home market, however, the Jean Coutu brand today is almost entirely about the man. The discount message that the founder most wanted to convey in the early days has been replaced by a veneration of the man. Recent campaigns have made no mention of prices or convenience; they simply evoke the Jean Coutu name, with great awe. “He’s a bit narcissistic,” says HEC’s Lapierre. “But he’s an unparalleled communicator.” And the name has now become iconic enough to stand beyond the man. Says Lapierre, “It will just carry on, like Bombardier.