For $322 million, Parkland Corporation is buying M&M Food Market to improve one aspect of its business that the company itself admits is not currently very good.

“This helps address a gap in our portfolio where we currently don’t have a very good frozen [food] offer or a fresh-from-frozen offer,” said Bob Espey, CEO of the Calgary-based gas station and convenience store operator, in an interview Wednesday.

Buying M&M, he said, “allows us to build that.”

Founded in 1980 with a single location in Kitchener, Ont., M&M has since expanded across the country with roughly 300 standalone company- and franchise-owned stores and about 2,000 so-called “express” locations consisting of dedicated freezers inside other retailers. Parkland’s On The Run chain already hosts 100 M&M Express locations and Espey said that total should rise to all 400 of the company’s stores nationwide within the “next couple of years.”

Circle K, which is owned by Montreal-based Alimentation Couche-Tard Inc. — a key Parkland rival — also hosts several M&M Express locations, as does pharmacy chain Rexall. Espey said Parkland will maintain those relationships, though he added “one of the advantages” of buying M&M was so his company “can start to develop some of our own proprietary offers that would only be available at our sites.”

Unique offerings, according to retail industry analyst Bruce Winder, is what has allowed M&M to “survive pretty well for decades with these mammoth grocery chains breathing down their neck.”

“They’ve carved out a nice, profitable little niche within the frozen food area and they seem to have become a nice little Canadian gem of a business,” Winder said.

With roughly two million active members of its loyalty program, M&M has built a dedicated following that Winder said is simply a matter of comparably higher quality. Parkland is planning on combining the M&M program with its own “Journie Rewards” service to create one of Canada’s largest loyalty programs boasting roughly 4.5 million active members.

“Think about it, you can get frozen food anywhere, but a lot of it is crap. It is low-quality frozen food,” Winder said. “[M&M] is sort of a higher-quality frozen food option that actually tastes good and offers interesting menu items and dishes.”

Since being previously acquired by Toronto-based private equity firm Searchlight Capital Partners in 2014, M&M has placed a renewed focus on producing what it promotes as restaurant-quality items. The company's website now lists a total of 456 different frozen food options.

Andy O'Brien, who took over as CEO of M&M after the sale to Searchlight in mid-2014, said in an interview the sale process got started in the spring of 2021 with "a huge amount of interest from various private equity, [consumer packaged goods], and restaurant companies around North America."

More than 75 companies ended up signing non-disclosure agreements in order to take a closer look at the company's books, he said. 

Around the same time, Ian White, Parkland's senior vice-president of marketing and innovation, connected with O'Brien through a mutual friend in hopes of "finding a way to more closely partner with M&M," White said in an interview.

"It was just by coincidence that sometime in June [2021] a mutual friend said we should get together [with Parkland]," O'Brien said, "and after listening to Ian [White] speak about where he wanted to take Parkland's food business in the future... I knew this was the deal I wanted."

Several other bids were submitted, he said, "and while I can't say whether or not [Parkland] was the highest or lowest, though they weren't the lowest, they were the best fit for us."

“A unique selling proposition for them is good tasting frozen food as opposed to mediocre-tasting frozen food so that is where they win,” said Winder. “I really think it comes down to the quality of the food and the taste of the food. That is where they have developed a nice name and brand, and when people see the M&M name they’re going to be willing to pay more for that.”

Of consumers' willingness to pay more for M&M products, Parkland said in its announcement of the deal that purchases containing M&M products (made at one of the 100 On The Run locations that currently sell them) were generally 30 per cent larger than the company’s average basket size.

The bigger opportunity for Parkland, Winder said, comes from one of the main consequences of the broader shift toward electric vehicles. Drivers of gasoline-powered vehicles typically spend only a few minutes at a refuelling station, but so-called “dwell time” for EV drivers is expected to be upward of 20-to-30 minutes.

Espey alluded to that future reality when he described a scenario where M&M “items come into one of our stores frozen and then warmed up to serve to customers [that] allows us to continue to evolve our sites into a more relevant destination for consumers.”

“That is really where I see the bigger opportunity for them, in bringing products into stores frozen, then heating them up fresh,” Winder said. “The dwell time is going to be a lot longer with EVs and I think if they manage that correctly it could be a win for both companies.”