Canada-based Alimentation Couche-Tard announced last week that it plans to divest itself of 1,250 stores in the U.S. market in anticipation of gaining U.S. Federal Trade Commission approval of a planned purchase of Marathon Petroleum Corp.’s Speedway chain.
Couche-Tard is the second largest convenience retailer in the U.S. with just under 6,000 stores under the Circle-K and Holiday Stationstores brands, as well as approximately another 4,000 stores in Canada, where it is the largest c-store operator, with Circle-K and Couche-Tard flags.
According to convenience industry analyst, speaker and consultant Frank Beard, if the purchase happens, the question operators should be asking is less what it means for Circle-K, but more what it means for the rest of the industry, especially smaller operators.
“Anyone that’s operating your standard convenience store model finds themselves in a market now where they have to compete against these consolidators,” he said, “that have just been rapidly expanding their brands and are able to drive economies of scale out of their business.”
Should the acquisition happen, Couche-Tard’s total U.S store count will rival that of 7-Eleven’s 9,400.
Longtime c-store industry veteran Richard Meyer said he isn’t surprised that Couche-Tard would want to bring Speedway into its fold. He said it makes perfect sense. While Speedway is a very large chain, growth has been a Couche-Tard trademark.
“Couche-Tard, who, when I first saw them the first time 30 years ago, only had 1,000 stores and they were all in Canada,” Meyer said. “So, this was a company that had a direction and had a focus and did it well. And they just kept growing. … And Circle-K has done a tremendous job of re-marketing.”
Meyer called both “quality chains,” adding that Couche-Tard has made a lot of smart business moves throughout its history and Speedway, going back to its days when it was known as SuperAmerica, was adept at selling fuel.
Beard said that the consolidation of the No. 2 and No. 3 U.S. c-store chains will probably hurt smaller chains, who will have an even tougher task competing with even more consolidated purchasing and marketing power.
“I think what’s concerning to me is there’s a very large segment of the fuel and convenience industry, a lot of the independent operators and the small chains, that are attempting to operate a model very similar to Circle-K, that kind of store,” Beard said.
Beard said that the c-store industry giants are going to continue to grow and become increasingly efficient at running their stores in ways chains with a fraction of the locations won’t be able to. “And they’re good at it,” he said.
To compete, Beard advised that instead of imitating the likes of Circle-K and 7-Eleven, smaller operators will have to set themselves apart from the uniform corporate c-stores.
“Rather than trying to be that same business model,” advised Beard, “they need to be thinking about, ‘How can we be something that’s completely different from what they are?’”
But, he said, it is possible for smaller operations to put a signature stamp on their stores.
“There are countless examples all across the United States of even single store operations that are in a completely different class of their own with an entirely different business model,” said Beard. “I would say, I’ll just give you one of my favorite examples, High Country Market Bistro and GastroPub in Round Rock, Texas, right outside of Austin.”
In the event the purchase happens, Couche-Tard will have to decide whether to rebrand the new stores or keep the highly-recognized Speedway brand.
“Couche-Tard has made some acquisitions of brands that are large enough where they actually have to ask this question now, similar to what happened with Holiday,” said Beard. “When you look at Holiday, people really like that brand. It has a name behind it that people know and recognize and have shopped at for years. To a certain extent, Speedway’s in that same boat.”