Smoker Friendly CEO Details Growth Plan

Main Street Capital bought minority stake in tobacco, c-store company to help with acquisitions
smoker friendly csp
Photograph courtesy of Smoker Friendly

BOULDER, Colo. — The tobacco category faced many challenges—from flavor bans to tax increases—over the past year. But that’s not stopping Smoker Friendly CEO Terry Gallagher Jr. from wanting to acquire more tobacco and convenience stores.

Investment firm Main Street Capital Corp. recently made a $51.7 million investment in the company, taking a minority stake. Gallagher talked to CSP about what this change means for the company and what’s driving Smoker Friendly’s growth strategy.

Gallagher remains bullish on the tobacco category, partly due to growth in moist and oral nicotine products. And as more retailers, like some drug stores, pull tobacco products off their shelves, he sees a gap for Smoker Friendly to fill.

“We don’t pretend to think convenience is going to go away from owning the cigarette and tobacco category,” Gallagher said. “We think convenience stores will always somewhat be the king in the category—but there’s plenty of room to play alongside traditional convenience within our space.”

Boulder, Colo.-based Smoker Friendly, which previously operated under The Cigarette Corp. but now is under holding company Boulder Panther Group LLC, has more than 160 stores that operate as tobacco stores, cigar lounges, liquor stores and gas stations under banners including Smoker Friendly, Tobacco Depot and Gasamat. The company also puts on the annual Smoker Friendly conference and tobacco festival.

Tobacco stores are the core of its business, Gallagher said, but the company will consider acquiring more fuel and c-store locations, too, if the right deal presents itself. The main opportunity, though, is to buy family-owned tobacco businesses whose owners want to exit the space, he said. Smoker Friendly built a platform to allow those businesses—whether a single store or a chain of 70—to exit and join the Smoker Friendly brand.

Over the next few years, Gallagher said he’d like to see the company ramp up to 300 to 500 stores.

“We have a business model and a plan to aggressively try to grow to that level, and bringing in Main Street [Capital] as a partner with a lot of dry powder gives us the ability to grow much faster than we could have as a family and using our own capital to get there,” Gallagher said.

Main Street Capital is providing Smoker Friendly a revolving line of credit to support its working capital needs and will make a delayed draw term loan available to the company to assist with its acquisition growth strategy, the Houston-based investor said.

In the last 14 months, Smoker Friendly has acquired 33-store chain Smoker’s Outlet, 22 Tobacco Road Outlet locations and three Smoker Friendly dealer stores.

The acquisition strategy has been in place for several years, Gallagher said.

His generation of family members, entering their 50s and 60s, started wondering a few years ago what was next, and they decided there still was a tremendous opportunity in tobacco. The next generation of Gallaghers is already geared up to take over the growing business, he said. (Gallagher’s father, Terry Sr., is still active with Gasamat.)

“It was really a decision as a family," to partner with Main Street Capital, Gallagher said. "We made it, and people are all on board and excited about going down this path."

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