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Taking over the world, one convenience store at a time, was Couche-Tard’s plan from day one.
There are two types of convenience stores:
- Mom-and-pop stores, often operated by local people or newcomers seeking a better life in their adopted country.
- Stores that are part of enormous multinational conglomerates, which streamline operations by supporting thousands of outlets.
The latter is where Alimentation Couche-Tard comes in.
Most Canadians wouldn’t know that Couche-Tard is one of the world’s largest convenience store chains. Only Japanese-American international chain 7-Eleven Inc. is bigger. Couche-Tard has 16,000 stores, 133,000 employees and generates almost $60 billion in revenues. Most of its stores are in North America and Europe, and include well-known brands like Circle K in North America, Kangaroo and Topaz in Europe.
The company aims to double in size in five years and it intends to start by acquiring Caltex Australia. Caltex has about 2,000 stores across Australia.
Couche-Tard’s bid is worth almost $8 billion, its largest-ever deal. After years of growth through acquisition, a deal in that region would be Couche-Tard’s crowning glory.
Convenience stores aren’t necessarily the most glamorous sector for investors, but Alimentation Couche-Tard is a true Canadian success. It has made a remarkable 60 acquisitions since 2004. Management finds good deals and seamlessly integrates newly-acquired stores into its network.
The company has grown organically by capitalizing on assets of acquired brands. This is no small feat, but the network has gotten too big and now needs to look elsewhere.
Caltex is an interesting target for Couche-Tard, which is known for its focus on high-quality food products. A convenience store is where most of us buy gas, snacks or staple goods that we’ve run out of and are willing to pay a ridiculous premium for. Not for Couche-Tard. The focus has always been to convert fuel dollars and foot traffic into food sales.
Caltex recently partnered with giant Australian grocer Woolworths to enhance its food offering. Couche-Tard can certainly learn a thing or two about working with a grocer to get fresh, perishable food to points of sale.
Couche-Tard, always looking for the next opportunity, wants to expand its network to Australia and Asia.
The offer to buy Caltex is subject to several conditions, including due diligence, financing, Australian Foreign Investment Review Board approval and a unanimous recommendation by the Caltex board. But several analysts believe a deal is possible within weeks.
The mastermind behind Couche-Tard’s success is Alain Bouchard, a self-made billionaire. He’s the 11th richest person in Canada, with a net worth of over $4 billion. He’s worth more than Stephen Jarislowsky and Charles Bronfman combined. And he did it simply by buying convenience stores.
While operating convenience stores at a very young age, Bouchard saw the potential of leveraging retail by providing more convenience than his competitors. His approach wasn’t to manage the sale of cigarettes, alcohol, gasoline or even food in isolation. For him, it was about building synergies between major components of convenience store retailing, and he did that better than anyone.
He also undertook simple but transformational changes that affected grocery retailing:
- A store that was open 24 hours a day was almost unheard of 30 years ago. Grocery chains in turn felt the pressure to open longer hours.
- Food quality wasn’t great in convenience stores, but Bouchard ensured it was good enough to make his convenience stores a legitimate contender to grocery chains. He took food retailing more seriously than any other convenience chains at the time.
Now, Couche-Tard wants to be a key player in the cannabis sector. It’s looking at buying Cannabis NB, which could be a good lab for the company as it tries to expand its cannabis business across the globe.
Selling alcohol in convenience stores has been common in Quebec for years and the company has done well in that area. As other provinces catch up to Quebec, Bouchard’s network is poised to do even better by complementing its offering with cannabis, especially when regulations in the market here and in the United States evolve.
Australia and New Zealand are other places where cannabis could become legal, which makes the Caltex deal even more interesting.
Alimentation Couche-Tard has succeeded over several decades because it saw no limits. Consumers are pressed for time and the company is always there to cash in on this. That isn’t going to change any time soon.
Dr. Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University.
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