Couche Tard Makes a BIG US Play (Again)

If I were to ask many of you who is the second largest Canadian retailer by revenue, most would likely say Sobeys, some might say Metro. Both would be incorrect.

Couche Tard is the right answer. In fact Couche Tard is not only a Quebec banner but the owner of Mac’s in Ontario and the West and Circle K in Atlantic Canada (after purchasing Irving’s c-store chain).

However, it is the US business where they really shine. In 2003, Couche Tard picked up the Circle K chain in the US which turned them into the second largest c-store operator in the world after 7-11.

They continued their US build up by acquiring the c-store operations from major oil & gas companies, such as Exxon Mobil’s “On The Run”, while they were exiting the c-store business to focus on core oil & gas operations.

Couche Tard also has great international reach with over 3,600 Circle K franchise operations in Japan, Hong Kong, China, Indonesia, Vietnam, Guam, Macao and Mexico.

Not only is Couche Tard Canada’s second biggest retailer, it is by far it most international (although that is not a very difficult feat).

Couche Tard’s latest play is a $1.9 billion hostile bid for Casey’s – a midwest chain of 1,500 stores. After lengthy negotiations with the board of Casey’s went nowhere – Couche Tard took the deal to shareholders last week in order to get a deal done.

And with the Canadian dollar at par, Couche Tard is taking a play right out of the book of the millions of snowbirds and cross-border shoppers. Buy cheap US goods.

What could this mean for CPG suppliers? Well, if you play in core convenience categories such as tobacco, candy, beverages and snack food, one could imagine Couche Tard will want to leverage its new found buying power if the deal gets done. International buying agreements are a good possibility.

What about the Canadian c-store industry? Well, needless to day, Couche Tard will have its hands full digesting 1,500 stores. This could be the time to make some inroads through operational improvements and image enhancements, but also to consider consolidating in order to better compete with Couche Tard on its home turf.

Alliances / buying groups such as ITWAL only have as much power as the ability of their members to execute together as one unit. Suppliers have been frustrated with this lack of executional coordination for years.

The Canadian industry is also under attack from an ever expanding Shoppers Drug Mart (arguably Canada’s second largest c-store chain) and emerging retailers such as Dollarama with their $0.69 candy bars.

Definitely interesting times in the c-store industry. Not a time to be standing still.

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