Couche-Tard Looks for More Acquisitions

Discussion
Jul 18, 2006
George Anderson

By George Anderson


The Canadian convenience store operator Alimentation Couche-Tard is looking to continue to grow in 2007 and the company’s CEO says it expects much of that growth to come from acquisitions.


Alain Bouchard, said in a conference call with investors and analysts last week, “I think we’re going to have a strong year on the acquisition side and, what I’ve seen visiting these targets in the last few months, these are great assets.”


Couche-Tard, the owner of the Circle K chain and the third largest operator of convenience stores in North America, currently operates 4,983 stores.


Mr. Bouchard said that, in addition to acquisitions, the company would “focus on innovation and the launch of new products and services and investing capital in our existing stores,” during its 2007 fiscal year. 


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7 Comments on "Couche-Tard Looks for More Acquisitions"


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John Hearn
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John Hearn
14 years 7 months ago

The C-store channel is an increasingly competitive battleground – there is plenty of scope for development of the stores and to retain and attract new shoppers. It’s where the smarter CPG companies in select categories realize they can still influence their market share most effectively.

With Tesco poised, I interpret the statement by Alain Bouchard as Couche-Tard taking a ‘hunt, or be hunted’ stance.

Tesco’s ‘form’ is to enter a new market/sector then swiftly seek a mid-major sized acquisition rather than ‘slow burn.’ Example: The acquisition of T&S (January ’03) in the UK. Looking at the list of major C-store operators, Couch-Tard are a ‘perfect pitch.’ And with the ‘Express’ format and sheer scale of Tesco, they have the cash to not only buy, but rehab the stores at the same time — making them more appealing to that still elusive demographic — the female shopper. Walgreens and CVS, with their angle on convenience, are proving that this can be a lucrative niche with the right format and location.

George Anderson
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George Anderson
14 years 7 months ago

Consolidation taking place in the convenience store business is simply the acting out of the age old ritual of big fish eating the small. The industry as a whole faces a number of challenges, economic and competitive, but sharp operators such as Wawa are redefining the typical convenience store in the minds of consumers. Tesco’s entry into the U.S. should further raise the bar for the industry and that, ultimately, is what will keep convenience stores strong for the foreseeable future.

Kai Clarke
Guest
14 years 7 months ago

I agree with many of the comments which folks have already expressed. Consolidation is inevitable and reflects the efficiency of the industry model. The big will get larger in the C-store channel. The key to everything is whether they can thrive in different spaces, or will we have large chains battling it out for market share in each location. Pricing, product, locations and models will continue to evolve, however, we will eventually see just a few players which will control the landscape. This is the same thing which has happened in the big box, mass and grocery industry. The C-store channel is a reflection of the same business trends at work.

Ryan Mathews
Guest
14 years 7 months ago

I don’t think you can intelligently speak about the potential future success of channels in and of themselves. What we really need to focus on is the potential success (or lack of it) of individual operators. If Kmart is your model, we should be holding a funeral for mass merchandisers today. If Wal-Mart is your model, it’s quite a different story.

Camille P. Schuster, PhD.
Guest
14 years 7 months ago

The convenience store industry in the US is about to become extremely competitive. While increasing in popularity, there are major changes taking place. Seven-Eleven is working to implement its extremely successful system in Japan in the US. Tesco, with its extremely efficient distribution system, has opened 4 experimental convenience stores in the US and plans to have 200 by 2007. Family Mart, owned by a Japanese, retailer has opened and is expanding in the US. Family Mart’s target market is people between the ages of 18 and 44 with a household income of $80,000+. This market is heating up and will be one to watch over the next few years.

Mark Lilien
Guest
14 years 7 months ago

At its current rate of profitability, Couche-Tard makes about $25,000 per location annually. That’s the tough part about convenience stores: the profit dollars per location can be modest. There are way too many convenience stores in the US and Canada, so any location growth would be bad for everyone in the business. Consolidation can help reduce competition, which is helpful. The key: pay as little as possible for any acquisitions because it’s hard to gain much via economies of scale. The best industry investment: push for more restrictive zoning to prevent further location growth. Worth exploring: buying the real estate and then franchising as many locations as possible.

Daryle Hier
Guest
Daryle Hier
14 years 7 months ago

Couche-Tard’s eventual goal is to be an equal competitor of 7-Eleven with a better model. This goal can only be accomplished through consolidation, which the industry needs anyway. Circle K’s concept includes fuel so gas station/food mart’s would be logical growth areas for acquisitions. With Tesco’s redefining “Fresh & Easy” concept aimed first at the cutthroat SoCal area, whether the traditional “C Store” is left standing, remains to be seen. I haven’t seen any big differentiation lately on Circle K’s part so again, it remains to be seen if loyalties can be established on anyone’s front in the battle for the C-store arena.

I have some doubts as to whether Tesco would acquire Circle K since they’re taking them on in one of their strongholds (SoCal). We’ll soon have an interesting encounter in this extremely aggressive industry.

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