MACS the Knife
Mid-Atlantic retailer is carving out a new vision for Circle K.
MACS wants to make a mark. Leave a distinct impression on customers. Think tattoo. Well, if not that extreme, at least the company wants that “wow” factor.
Its sharpest tool: the Circle K brand.
With a skilled team brought in to inject greater value into this investor-assembled platform of 70 company-ops and about 230 dealer sites, MACS must transform itself into something more to people than gas and smokes.
“We ask ourselves, ‘What do we want to be famous for?’ ” says Derek Gaskins, senior vice president of marketing and merchandising for Mid-Atlantic Convenience Stores (MACS), Richmond, Va. “Where do we ultimately want to get credit?”
So far, those marks of distinction include “brand developer” status with the nation’s second largest c-store brand; a working partnership with Circle K’s parent—the 6,100-store Alimentation Couche-Tard—including a high degree of autonomy for MACS; and an initial, pared down go-to-market strategy involving fountain, coffee and roller grills.
The MACS model is a new phase in c-store consolidation, made up of refined players and ramped up circumstances: the private-equity firm Catterton Partners, Greenwich, Conn.; a veteran set of c-store executives with backgrounds ranging from Pittsburgh’s Giant Eagle GetGo chain to the mother of all M&A champs, Cary, N.C.-based The Pantry; and now the decision to join ’em vs. beat ’em in the highly contested but Circle K-free zone of the Mid-Atlantic.
With those forces in play, the MACS story goes beyond what customers see. It is not just another equity investor playing in the convenience landscape, nor is it promising to pioneer a new retailing design. For an industry keen on market trends and insight, MACS’ journey brings the spotlight back to one of the industry’s biggest consolidators, Circle K; finds commonalities in what drives both major oil companies and investment houses; and ultimately circles back to the competing forces of corporate consolidation vs. entrepreneurial spirit.
The drivers and choices are more Wall Street than Main Street, more corporate than mom-and-pop. But what has to happen—the magician’s trick at the store level—remains the same: get to the heart of the consumer.
That’s the bulls-eye, according to Dan Pastor, the company’s new CEO. And that’s where this new team believes it can add value.
As Pastor rhetorically asks, “When you put 300 locations together that aren’t uniform, how do you position that both at retail and wholesale to be impactful to consumers?”
MACS had a fast start. Just two years ago, the Catterton Partners-assembled platform emerged amid an all-out retrenchment of major oil companies from retail. For the newly formed MACS, as with similar investor-backed amalgamations in the Midwest, Southeast and to a degree on the West Coast, the industry expected yet another new c-store brand.
But surprisingly, MACS zagged instead of zigging, tying its future to the Laval, Quebec-based Couche-Tard and its nationally known Circle K name. The entities whittled out a “brand developer” partnership, combining Couche-Tard’s buying and infrastructure strength with a high degree of autonomy for MACS.
With the deal done, the physical changeover commenced in September. The first dozen company-ops finished conversion by the end of the month, and four more sets were scheduled for rebranding by Thanksgiving.
The reasons behind MACS’ branding decision become more evident as the details surface. But from a broad perspective, Pastor saw two choices: create a brand from the ground up, or partner with an established name. The backdrop of this decision was the reality of playing in one of the country’s toughest convenience playgrounds, amid the likes of Wawa, Sheetz and a few other top-notch mid-size companies.
“We had no brand equity on day one, from an equipment perspective, a marketing perspective, with brand recognition,” says Pastor. “It was going to take a lot of time to make that brand known.
“But as an alternative to that, we asked ourselves: Were there other brands we could partner with? And if so, who and what resources, capital, leveraging was out there? What better equipment, better buying, better advertising, better offering?”
The questions led MACS to Circle K in what appears to be a fixed agreement to rebrand current sites and fill in with new locations. “We looked at the advantages they had and looked internally,” Pastor says. “Then there was the big idea to join forces and capture the market together— that’s what we’ve done.”
Why a Win-Win
One of most blatant, compelling reasons for this partnership was an obvious omission. Simply put, for all its acquisitions and growth, Circle K remained largely absent in the Mid-Atlantic region of Virginia, Delaware, D.C. and Maryland. “I was shocked,” Gaskins says of the brand’s near-invisibility in the area.
Couche-Tard began its run in the United States in the early 2000s with the dramatic purchases of midsized chains followed by an aggressive, previously unheard-of acquisition of a chain double its size: ConocoPhillips’ Circle K. Taking its decentralized model into new territory, the company established autonomous business units divided by region, with the closest one to MACS the Great Lakes region in the Midwest.
Though Circle K did not respond to CSP’s request for comment, Dennis Tewell, vice president of franchising for Circle K, said in a statement the company was “excited and proud” to be working with MACS, calling the partnership its “first footprint” for the brand in the Mid- Atlantic.
With the exception of a few stores in Maryland, Circle K had no presence in metro areas such as Washington, D.C., Richmond and Baltimore. From its alliance with MACS, Circle K suddenly cuts a sizable swath through what Gaskins describes as a combination of rural, suburban and urban areas.
“We are based here in one of the largest growth corridors in the nation,” Gaskins says. “When you look at population density, people moving in, income levels, job factors … it’s a very powerful region.”
From an outsider’s perspective, reducing competition was a major win for both MACS and Circle K, says David Bishop, managing partner of Balvor LLC, a Barrington, Ill.-based c-store consulting firm. “Given the lack of overlap, it allows Circle K to expand in the Mid-Atlantic … [while giving MACS] control over the level of competition in the area,” he says.
The compelling choice of Circle K over its more obvious rival, Dallas-based 7-Eleven, may have been about existing market presence, with 7-Eleven already holding share in the same markets. But the implication then is that 7-Eleven could have offered brand equity and consumer awareness, while Circle K did not.
So why Circle K? Bishop says Circle K and 7-Eleven can provide support, programs, services, scale and buying power. Both could supply MACS with established, turnkey programs with preset graphics, equipment and vendor agreements, allowing for details such as the fountain presence of two competing cola manufacturers, and an appealing price point.
If infrastructures were comparable and competitive issues were tipping the scales in favor of Circle K, then flexibility appears to have been a deciding factor. And MACS executives are adamant about their independence from Circle K. (Pastor emphasizes that MACS was not purchased by Couche-Tard but is an independent company.)
“We’re trying to leverage the best of both worlds,” Pastor says. “We believe we have a sense of what consumers want. What are great programs for Circle K may need our flair of merchandising because our demographics [are different].”
Brad Williams, senior vice president of operations for MACS, agrees on the need for a degree of autonomy. “We want to be able to do the right things,” he says. “It goes to what’s best for developing the brand in this particular market. One of the benefits is that we can look across [Circle K’s] portfolio and figure out what’s working in Florida, Southern California and the Midwest, and make something our own, something that can resonate in this region.”
Even at the stores, MACS’ plan is to give managers a level of independence, with plan-o-grams and selection decided on a store-by-store basis. “We’re not going to take the cookie-cutter approach and just hope it works,” Williams says.