Couche-Tard has announced a new partnership with American restaurateur and TV personality Guy Fieri that will see a small menu of the chef’s Flavortown food creations offered in Circle K stores.Sam Greene/The Enquirer/Reuters
Alimentation Couche-Tard Inc. ATD-T is counting on bargain meal deals and a new partnership with celebrity chef Guy Fieri to help fuel sales in the United States as the Canadian convenience-store titan eyes takeovers of struggling rivals after ending its pursuit of Japan’s Seven & i Holdings Co.
Couche-Tard, based in Laval, Que., says its food-bundle offerings, including a sausage, egg and cheese croissant paired with a hash brown and choice of energy drink, coffee or soda for US$4, are attracting customers to its Circle K stores amid challenging business conditions in many U.S. states.
And it says its size and balance-sheet strength should offer opportunities to acquire competing retailers in the months ahead.
After seven consecutive quarters of declines, the company swung back to growth in U.S. same-store merchandise sales with its latest financial report, eking out a 0.4-per-cent gain. Net earnings for the period ending July 20 came in at US$782.5-million or 82 US cents per share on revenue of US$17.3-billion. Profit beat analyst expectations on an adjusted basis.
“We feel like we’re widening the gap” against many rivals in different markets, Couche-Tard chief executive Alex Miller told analysts on a conference call Wednesday, adding that the pressure on smaller convenience and service-station operators in particular is intensifying. “There is a place for us to continue to consolidate.”
Mr. Miller, who’s coming up on his one-year anniversary as CEO Saturday, is plotting Couche-Tard’s next big growth spurt after the company failed in its effort to take over Seven & i, owner of the 7-Eleven chain.
The Canadian executive and his team slammed their Japanese counterparts for their lack of “sincere or constructive engagement” when Couche-Tard withdrew its bid in July, but some commentators in Japan countered that it was simply impatient and that cultural differences between the two companies doomed a deal.
The pipeline of acquisition opportunities is “quite rich” at the moment amid the industry turbulence, Couche-Tard chief financial officer Filipe Da Silva said on Wednesday’s earnings call. The company’s priority is to do deals in North America but it could also expand in Europe with the right target, he said, building on the purchase of 2,000 service stations from French oil giant TotalEnergies in 2024.
The United States generally remains ripe for takeovers. The market there is highly fragmented, with the top 10 convenience chains making up only 19 per cent of the total number of corner-store outlets. The balance consists mostly of independent mom-and-pop shops.
Driving sales from existing operations is also part of the Couche-Tard recipe. The company’s growth in EBITDA (earnings before interest, taxes, depreciation and amortization) over the past 10 years has been supported by organic growth just as much as acquisitions, according to a recent analysis published by National Bank.
The biggest challenge for Couche-Tard on that front has been trying to reinvigorate its U.S. business, which has come under pressure over the past two years as consumers watch their spending more closely amid persistent inflation.
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To push its value proposition there, the company is offering calorie-bomb meals priced at $3, $4 and $5 at its Circle K locations. It’s now selling them at an average rate of about 750,000 a week, up 40 per cent from the rate at the end of April.
The company is also betting that it can pump up its fresh-food credentials with celebrity power.
Couche-Tard on Wednesday announced a new partnership with American restaurateur and TV personality Guy Fieri, host of Food Network show Diners, Drive-Ins and Dives that will see a small menu of the chef’s Flavortown food creations offered in Circle K stores.
Among the 11 items initially being rolled out in 10 states this week: A burger topped with bacon and macaroni and cheese; a spicy chicken sandwich wedged between two waffles; and a “Chaos Cookie” made with candy pieces, chocolate and potato chips, among other ingredients.
“It is an exclusive relationship. It is not a short-term relationship,” Mr. Miller said, adding that the company is excited about accessing the chef’s major social-media following and resonance with consumers. “We fully plan to launch it across our U.S. portfolio.”
The collaboration could prove “transformational” for the convenience chain, Scotiabank analyst John Zamparo said in a research note. “It’s of course early days, but this is the type of step Couche-Tard needs to achieve to compete with food-destination convenience-stores like Wawa, Sheetz and Buc-ee’s,” he said.
Food is becoming more important for convenience-store retailers as the industry grapples with unprecedented change, including a decline in tobacco consumption and pressure on gasoline demand as more people adopt electric vehicles.
Among the moves seen in the sector, Calgary-based Parkland Corp., one of the largest gas-station and corner-store operators in Canada, bought M&M Food Market in 2022 for about $322-million, and has been expanding the brand’s frozen-food products into its On the Run locations.