Couche-Tard: We Want to Own Beverages

Retailer sees drinks as key to building store traffic

LAVAL, Quebec -- As Alimentation Couche-Tard continues to struggle with store traffic, the retailer is looking at beverages as a primary category it can use to turn things around.

"When you step back and look at merchandise retail sales in February in the U.S., [they] were negative," President and CEO Brian Hannasch said on a earnings conference call March 13. "Despite lower unemployment and consumer confidence, it's a bit of a puzzle that we and a lot of our key supplier partners are working to understand. ... The softness is in beverages and in parts of our tobacco category."

To that end, the aggressive acquirer has made changes in its recently purchased convenience stores to get them on board with proven strategies.

"We talked about [recently acquired CST Brands' stores] being weaker than the legacy network inside the box," Hannasch said. "[We're] resetting the sites to bring more impulse products up to the front, narrowing some selection in areas to get better depth of key brands."

The changes also extended to dispensed beverages, where the company is "adding key programs like [fountain program] Polar Pop and [frozen-beverage offer] Froster to those sites that we’re set up to have a much-improved summer over the trends CST was seeing prior," he said.

Battling Other Channels

Hannasch spoke in more general terms about the beverage category during Couche-Tard's investor day in January, citing the encroaching threat from dollar stores and other channels of retail for stealing sales.

"We have seen dollar stores get into beer [and] ... some tobacco and certainly beverages,," he said, noting that the entries into the category are making a difference in traffic patterns. "We actually are conducting a study right now that looks at our sites in proximity to dollar [stores] and the impact. What are the sales trend differences where we're close to dollar [stores] or where we're not?"

Regardless of the outcome of the study, Hannasch said he wants Couche-Tard's Circle K stores to win the beverage category.

"We're very committed to selling beverages, winning in that space, selling our core products. We think we can do better," he said during the investor day. "Our largest margin category after fuel is ... cold beverages: energy drinks, water, colas. We think we can do better there. We think we can tailor the sets, tailor the promotions and continue to take share there."

Hannasch acknowledged the c-store industry is challenged as other channels of retail add front-end beverage merchandisers, making grab-and-go available just about anywhere. He's not ready, however, to give up on owning the category.

"We still think we can lead the pack with unparalleled variety," he said. "When we look at the new SKU proliferation in beverages as people look for healthier drinks, flavored teas, enhanced waters, we're the channel that's got the capacity to deliver on that: consumer want, consumer needs. So we feel good about that, and not overly concerned about dollar stores playing in a big way in that space."

With more than 8,000 convenience stores, Laval, Quebec-based Alimentation Couche-Tard ranked No. 2 on CSP's2017 Top 202 list of the largest c-store chains in the United States.


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