Couche-Tard Rolls Out Proprietary Cigarette Brand

Meets one-year market-share target in only five weeks

LAVAL, Quebec -- Over the past few months, executives at Circle K parent company Alimentation Couche-Tard have made no mistake that they are unhappy with cigarette pricing changes recommended by Altria Group. The “deflationary effect of the price strategy” has taken a sizable bite out of the company’s same-store merchandise sales in the United States.

So last month, rather than continue to complain, the chain took action, rolling out a proprietary cigarette brand to all its regional divisions in the United States, CEO Alain Bouchard announced yesterday.

“We’re very, very pleased to announce that we launched our own cigarette brand in the U.S. as of about five weeks ago,” he said on an earnings call with analysts. “We launched the Crown brand in all our divisions, and we’re very, very excited with it. The market share we have taken so far after such a short period [of time] exceeded our year target after five weeks.”

For the third quarter, Couche-Tard announced same-store merchandise sales growth of 3.4% in the United States. It added, however, that when excluding “tobacco products influenced by the deflationary effect of the price strategy of a cigarette manufacturer,” the increase is 6.7%.

For a complete look at Couche-Tard’s earnings, see “Related Content” below.

Couche-Tard hinted at the proprietary cigarette in November, as previously reported in CSP Daily News. At that time, Bouchard said, “In the United States, a cigarette manufacturer modified its supply terms and price structure at the beginning of the first quarter of fiscal 2012 in order to encourage retailers to decrease or maintain low unit prices on certain of its products, which has put a deflationary pressure on the corporation’s cigarettes sales.”

Added CFO Raymond Pare, “We don't like to see these kind of programs that basically affect our capacity to price our product in our store. … You will see soon one of the steps that we will take to work around this program, and we are very excited by this.”

Bouchard did not offer any details of pricing or who is supplying the proprietary cigarette brand.

Alimentation Couche-Tard Inc. is the largest independent convenience store operator in North America (whether integrated with a petroleum corporation or not) in terms of number of company-operated stores. As of Jan. 29, 2012, Couche-Tard had a network of 5,817 convenience stores, 4,225 of which include motor-fuel dispensing. At the same date, the corporation had agreements for the supply of motor fuel to 338 sites operated by independent operators. Couche-Tard’s network consists of 13 business units, including nine in the United States covering 42 states and the District of Columbia, and four in Canada covering all 10 provinces.