3 Ways Couche-Tard Is Battling Slow Fuel Demand

Samantha Oller, Senior Editor/Fuels, CSP

Circle K

LAVAL, Quebec -- Even with a global footprint and recent aggressive acquisitions, Alimentation Couche-Tard Inc. is not immune to fluctuating gasoline price, margin dynamics or future demand.

Brian Hannasch, president and CEO of Couche-Tard, which operates more than 15,000 convenience stores across North America, Europe and Asia, weighed in on several of these factors—as well as opportunities for growth—during an earnings call for the fiscal fourth-quarter ending April 30, 2017. Here are three fuel-related highlights ...

Fuel volumes up, margins down

Circle K

Couche-Tard’s U.S. same-store fuel volumes increased 1.7% in its fiscal fourth quarter, which ended April 30, partly thanks to growing premium-gasoline sales. Its fuel gross margin slipped 1.31 cents per gallon (CPG) to 15.47 CPG, which the company attributed to volatility from an increase in crude prices during the spring. Fuel volumes were especially negatively affected in the Southeastern United States because of disruptions from fuel rebranding.

Hannasch said that Couche-Tard’s effort to rebrand all 15,000 sites around the globe to the Circle K fuel brand is gaining traction in the United States and Europe, helping support growth overall despite the tough winter and early spring weather.

More than 1,300 c-stores in North America and more than 1,200 sites in Europe are now branded Circle K.

An EV laboratory

Electric car charging

In Norway, Couche-Tard is installing electric-vehicle (EV) chargers, motivated by that government’s aggressive goal of selling only zero-emission vehicles by 2025. Today, more than one-third of new cars sold in Norway are either EVs or hybrids, with generous buying incentives supporting the growth.

Hannasch underlined the role of these incentives in the boost in demand for the EV charging stations.

“To be clear, we are only seeing penetration in Norway where the concept is heavily subsidized both in terms of taxes that make the vehicle more affordable than a comparable fossil-fuel vehicle,” he said, noting that EV drivers also have special lane privileges on roads, free parking and free charging among other perks.

“We are taking a proactive approach in using Norway as a laboratory to understand how do we continue to drive traffic to our sites,” Hannasch said.

Beyond charging at its Circle K sites, this testing could also include charging stations in parking lots or even residential charging “and other ways to engage that customer and keep them in our ecosystem.”

With more charging stations to come, Hannasch said Couche-Tard is close to joining a consortium of car manufacturers on a charging network partnership for most of its core European markets, which include Scandinavia, Ireland, Poland, the Baltics and Russia.

The future of fuel

Car fuel economy sticker

Electric vehicles are not currently affecting Couche-Tard’s fuel business overall, and Hannasch does not expect they will hurt demand in the next five to 10 years.

“We do believe there will be a flattening of fuel demand in the next five years, and that's consistent with what we hear from our fuel suppliers,” he said, adding it will be driven mostly by tougher Corporate Average Fuel Economy (CAFE) standards that are increasing the fuel efficiency of vehicles.

While liquid fuel “will be very relevant to us for a long period of time,” the retailer will continue to track EV market development. Beyond that, Hannasch expects growth in fuel will continue to be a matter of grabbing market share, rather than benefiting from an overall increase in fuel demand.

“[There are] a lot of low-volume sites in the industry both in Canada and in the U.S., and those sites are pressured over time from a lot of different fronts that demand will be redistributed,” he said. “The higher-quartile, high-quality assets and those players with a strong backcourt are going to be the ones that win in that environment.”

Laval, Quebec-based Couche-Tard's network includes 9,424 c-stores in North America, including 8,077 stores selling motor fuel. Brands include Circle K, Couche-Tard, Corner Store, The Pantry, Nice N Easy, Flash Foods and Holiday. Couche-Tard ranked No. 2 in CSP's 2017 Top 202 list of the largest c-store chains in the United States.