One of the biggest challenges of the U.S. convenience market is also what makes it the most attractive: its size.
At just north of 150,000 c-stores, this large market is “very fragmented” and “underinvested,” making it attractive for global operators looking to expand their footprints, says Benjamin Brownlow, research analyst for Raymond James, St. Petersburg, Fla.
We’ve seen it with OXXO and PEMEX, two Mexican companies that have been eyeing Texas for expansion. And now two more global retailers are making plays in the United States.
If successful, they will “elevate the competitive landscape in a bid for market share, either with enhanced offerings/services or pricing,” Brownlow says.
Entering the United States slowly—but surely—is Dublin-based Applegreen, which operates more than 200 fueling stations and c-stores in Ireland and the United Kingdom. The United States was the next natural progression for the company.
“There is a lot of Irish heritage on the East Coast,” says Joe Barrett, chief operating officer for Applegreen. “Plus, it is relatively easy to do business as we don’t have to overcome the language barrier, as opposed to leaving Ireland [and] heading eastward to Europe and having to learn German, French or Spanish.”
Applegreen has 10 c-stores with gasoline in Long Island, N.Y., and Massachusetts. It also recently signed agreements with CrossAmerica Partners LP and 7-Eleven Inc. that Barrett hopes “will lead to further expansion” in the United States.
Applegreen is leasing nine sites in Massachusetts from Allentown, Pa.-based CrossAmerica and signed a franchise agreement with Irving, Texas-based 7-Eleven, according to the Belfast Telegraph.
“The one thing we have learned from our U.K. experience is expand slowly and take your time,” says Barrett.
Brownlow couldn’t agree more. The biggest hurdles global companies entering the United States face are differentiating from the competition and building brand equity, he says: “You can advertise and promote, but the bottom line is you have to get customers into the store, and that sort of consumer awareness just takes time to play out.”
And sometimes the consumer never comes. United Kingdom-based Tesco ventured into the United States with its Fresh & Easy concept in 2007. At 10,000 to 15,000 square feet, the c-stores were too big, they didn’t sell gasoline and the company’s cold chain delivery system of prepackaged meals were perceived by Americans as lacking freshness. Tesco fi led for bankruptcy in 2013 and sold its stores to Yucapia Cos. All Fresh & Easy stores closed in 2015.
“Fresh & Easy sounded like any other convenience store,” New York-based retail consultant Gerald Lewis has previously said. “[Tesco] would have had to acquire a major U.S. supermarket chain and use that chain and its brand name to develop a Tesco Express sort of format in the United States.”
Globally, Applegreen has built its brand around its “low fuel prices always” and “better value always” commitments. It also offers premium food and hot beverages, including its own aCafe and Bakewell cafe brands. It has yet to implement a food program here.
“It’s all a learning curve at the moment,” Barrett says. “From permits to customer product preferences, it’s all very similar to Ireland but still a bit different.”
As Applegreen continues to learn about a new country and trading environment, its focus will remain in the East. “The East Coast … is very pro-business and -retail, which is encouraging to us,” Barrett says.
Making a bigger play for U.S. market share is Santiago, Chile-based COPEC, a Chilean energy conglomerate with fuel stations and c-stores in five other countries, including Colombia, Ecuador, Mexico, Panama and Peru.
For $535 million, COPEC is purchasing Brentwood, Tenn.-based Delek U.S. Holdings’ Mapco retail system, which includes 350 corporate stores operating primarily in Tennessee, Alabama and Georgia, with additional presence in Arkansas, Virginia, Kentucky and Mississippi. (The acquisition is expected to close by the end of this month.)
The Mapco deal is the “second significant step to transform COPEC into a broader company in the fuel retail and convenience-store market,” says Lorenzo Gamuri, CEO of COPEC.
The first step was obtaining a majority ownership stake in Colombian c-store operator Organizacion Terpel, which accounts for approximately 45% of that country’s fuel market share. It has 1,949 Terpel-branded gas stations in Colombia and 233 stores in Panama, Ecuador, Peru and Mexico under store brands Altoque and Deuna.
While it’s too early to tell if Applegreen and COPEC will find success as foreign-based operators in the United States, Alimentation Couche-Tard has proven that it can be done.
The company opened its first convenience store in 1980 in Laval, Quebec. Its 2001 acquisition of Johnson Oil Co., along with 225 Bigfoot stores, was its first breakthrough in the United States. Fast-forward 15 years (and many more acquisitions later), and Couche-Tard now operates about 7,800 c-stores primarily under the Circle K and Kangaroo Express brands in 41 states.
“They’ve been very good as acquirers; they’ve been very inquisitive and aggressive in their growth strategy, and they’ve been fairly good at being toward the top end in terms of product offering,” says Brownlow.
Just this August, Couche-Tard announced its intention to purchase San Antonio-based CST Brands Inc. for about $4.43 million. The deal, which would be the largest acquisition in Couche-Tard’s 36-year history, is expected to close in early 2017. It would put Couche-Tard ahead of 7-Eleven Inc. as the company with the most c-stores in the United States and Canada with approximately 9,900 sites, vs. about 8,600 for 7-Eleven.
But 7-Eleven isn’t going to sit back and watch that happen. In an eff ort to reach a new goal of 10,000 stores in North America, 7-Eleven plans to add 1,100 locations through its fiscal 2019, according to a Wall Street Journal report.
Who’s the real potential winner in all this border hopping? The shopper. Brownlow believes this elevated competitive landscape “should help evolve how consumers perceive the standard neighborhood convenience store.”
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.