4 Tobacco Insights From Circle K

LAVAL, Quebec — For the parent of Circle K convenience stores, the tobacco category turned in a stable performance in the chain’s second fiscal quarter, with cigarettes showing zero growth but vaping and “white nicotine” or nicotine pouches showing promise.

Generally, Alimentation Couche-Tard did well with in-store merchandise, officials said during a Nov. 27 earnings call. For the second quarter of fiscal 2020, merchandise and service gross profit on a same-store basis increased by approximately $28 million or 2.3% in the United States, said Claude Tessier, chief financial officer for the Laval, Quebec-based company. For the first half of 2020, merchandise and service revenues increased on a same-store basis by $218.5 million or 3.1%.

• Couche-Tard and its Circle K chain ranked No. 2 in CSP’s 2019 Top 202 list of convenience chains with 8,389 U.S. stores.

Regarding the tobacco category, Brian Hannasch, president and CEO of Couche-Tard, reported a number of insights ranging from his view on underage vaping to the company’s Lift digital upselling program that uses display screens at the register to encourage additional sales. Here are a few key insights …

Cigarettes for Couche-Tard’s second fiscal quarter showed essentially zero growth overall, Hannasch said. However, the chain is experiencing “stable growth” in market share.

With regard to tobacco regulations, lawmakers and health officials in the United States and Canada have been especially vigilant in recent months, “due to a number of cases of lung issues and concerns about underage vaping.” Hannasch said. “We continue to follow the situation closely and reiterate our position as a responsible retailer of age-restricted products, and we also stated that we’re in favor of fact-based measures to prevent minors from accessing vape products such as raising the legal age [of buying tobacco products] to 21.”

Vapor and nicotine pouches have been key contributors to Circle K’s overall growth in other tobacco products (OTP) in the United States and Canada over the past two years. With recent concerns about youth consumption and health effects of vaping, the chain removed all open systems from its stores in North America “until we better understand the health issues that have been reported with open systems,” Hannasch said.

Still, he said the company remains “optimistic with the right regulations around ingredients, flavors, online availability and youth access that these products can be a path for reduced nicotine consumption for our customers.”

Circle K has been installing its Lift digital upselling program in the Holiday Stationstores chain it acquired in 2017, Hannasch said. “We clearly see Lift driving basket and market share gains in key categories like tobacco when it’s executed well,” he said.

While cigarette sales have been flat, tools such as Lift will help improve category performance, he said. Overall, Hannasch said, advancements in technology, program offers and larger strategies combine to help improve Circle K’s performance. “We can see clear correlations between traffic penetration and basket growth and market share gains in the tobacco category where we do it well,” he said.