LAVAL, Quebec -- Consumers trading up to premium gasoline in big numbers was one of many happy surprises for Couche-Tard officials in addition to better-than-anticipated earnings as it integrated its acquisition of The Pantry, executives reported in the convenience-store chain’s quarterly earnings call Tuesday.
- The Pantry: When the parent of the Circle K brand bought The Pantry, Cary, N.C., nine months ago, Brian Hannasch, president and CEO of Alimentation Couche-Tard, Laval, Quebec, said he was more confident about the $85 million in expected synergies than what the chain could produce in revenue, calling the mood on the c-store side “not bullish.”
Since that time, implementing fuel programs, a competitive cigarette-pricing strategy and its brand promise around key categories, including its “Polar Pop” fountain, coffee and roller-grill programs, revenue is on the upside and the outlook inside the store is greater than originally envisioned.
Hannasch also said the company is finalizing new fuel-supply agreements for The Pantry stores, which should be in place as early as next month. With the overall integration of The Pantry going smoothly, Hannasch went on to comment on future acquisitions, saying, “We in no way see [The Pantry integration] as a barrier to further acquisition in North America.”
Couche-Tard announced a move to a global rebrand last September of a “refreshed” Circle K logo, with some stores in Illinois having just received the new look. That rebrand will eventually eliminate The Pantry’s Kangaroo Express logo. Saying “it’s too early to tell” how consumers are responding, Hannasch said Couche-Tard has conducted enough studies to know that it will be successful.
Click here for a complete summary of Couch-Tard's third-quarter earnings.
In addition to its ongoing integration of The Pantry, executives elaborated on several trends they’ve seen within the North American market:
- Fuel. Hannasch said he would have never predicted the “resurgence of premium fuel. Its performance surprised us, and we’re in a great position to take advantage of it. It’s robust across all geographies.” When asked about a seemingly new approach to fuel pricing, Hannasch called the process a combination of data and technology “to maximize total profit in relatively small trade areas. We try to think when pricing fuel to act as a surgeon vs. a construction worker with a sledge hammer.”
- Foodservice. The chain’s fresh-food program has now expanded to 1,100 locations with another 320 added by fiscal-year end. Hannasch said the company still has a lot of learning to do in terms of menu, waste and developing a food-handling culture. It is also continuing to fine tune logistics and cut delivery costs. Its latest foodservice concept is up and operating in Houston and will soon open in Phoenix and Charlotte, N.C., he said.
- Tobacco. With regard to its tobacco strategy, Hannasch said Couche-Tard is “committed to defending the [tobacco] customer” to take advantage of the profitable basket rings they provide. “We also see a combination of competitive pressures, and … margins could face further compression,” he said. “But I tell our people: We don’t deposit percentages; we deposit pennies and dollars.”
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