CST Brands and Couche-Tard: Nothing Personal

'What could have been' for CST becomes Couche-Tard's No. 1 coup

Illustration by Gary Musgrave

In the summer of 2014, Kim Lubel was trailblazing across central Pennsylvania and upstate New York. She was homing in on the acquisition of a highly respected, family-run convenience chain in the Syracuse area and an agreement with a Lehigh Valley fuel distributor for the rights and tax advantages of its master limited partnership.

Lubel, the indefatigable and charismatic head of Valero Energy’s retail spinoff, CST Brands, was riding high. She talked passionately about a dynamic retail network built on smart acquisitions and new ground-ups.

Speaking on the heels of CST’s purchase of Nice N Easy Grocery Shoppes in August 2014, she said, “We don’t see this deal as a one and done. This is about building a footprint for us to grow across the United States.”

Almost two years to the day of its Nice N Easy deal, CST Brands, operator of about 2,000 stores in the United States and Canada, announced its own acquisition. The purchaser was a company permeating not just North America but parts of Europe, too: Alimentation Couche-Tard, proprietor of the Circle K brand.

CST’s story is not like that of The Pantry, Swifty Serve, Clark Enterprise, Convenience USA or Dairy Mart—rapid-fire M&A chains ruined by intolerable debt, gross mismanagement or operational incompetence.

CST was a good chain with good people and a compelling story. So what happened from the summer of optimism just two years ago to this past summer of its sale?

Many industry observers were surprised at how fast CST went from one end of the spectrum to the other. “CST was expanding and doing well,” said one Texas consultant who requested anonymity. “That’s what most of us thought.”

If the underlying question is why, then the tide beneath it is regret.

Consider again the promise. San Antonio-based CST Brands and its Corner Store concept made aggressive strides over the past two and a half years in foodservice: a baked-goods strategy with signature items, such as its whoopie pies and breakfast kolaches, and an even more expansive menu in play for larger-format test stores in Texas that included stromboli, pizzas and subs. These were well-crafted, field-tested offers.

On the M&A front, no one can forget the one-two, MLP-inspired coups of food-first Nice N Easy in upstate New York—where the acquisition was as much about intellectual property as it was about scale—and similarly with tech-forward Flash Foods in Georgia.

Then factor in Kim Lubel, formerly Kim Bowers, stepping onto the stage in 2013 as the first female president and CEO of a major convenience-retail chain. She broke through the company’s rigid, big-oil heritage, calling for greater accessibility, casual attire—even welcoming facial hair, which was previously barred. She garnered favor at all levels, with her legal acumen impressing 8investors and her fluid Spanish making her the darling of front-line employees. More important, she articulated a food-centric, big-format vision that has become the hallmark of today’s c-store innovators.

Yet even though she grabbed the reins of this multiformat behemoth with grace and authority, it took a mere 10 months for the promise to evaporate.

Continued: Beginning Of The End