Canadian convenience store giant Couche-Tard was not successful earlier this year in acquiring international food retailer Carrefour SA but one expert believes it will eventually enter in some way into the growing food retail market.
Sylvain Charlebois, Professor, Director, Agri-Food Analytics Lab and Former Dean of the Faculty of Management, Dalhousie University, said it was no coincidence that Couche-Tard was trying to buy Carrefour earlier in the year.
“In fact, Carrefour is the seventh largest grocer in the world. It’s actually larger than Loblaw. I think it took a lot of people by surprise to see Couche-Tard’s appetite to become a grocer essentially. I certainly wasn’t surprised because you have to look at the writing on the wall for Couche-Tard. They’ve been masterful in converting gas dollars into food dollars by getting people into their stores and buying some premium products,” said Charlebois.
“But if people don’t gas anymore, in a decade or two how do you actually generate more growth? And they are very good at food retailing. A lot of food products that you find at a Couche-Tard or a Couche-Tard owned and operated store some of these products are of high quality. So it’s not just necessarily a convenience store chain. I have to say that Couche-Tard is a very good food distributor as well. As much as anybody else in the game in Canada.”
Charlebois said the company in the future will likely become a grocer.
There is a trend these days for consumers looking at smaller format grocery stores for the convenience and ease of shopping. This would benefit Couche-Tard if it were to enter that market.
“With telecommuting and people working from home a lot more often, I think it’s going to be one of COVID’s major legacies to actually get people to work from home more often whether it’s on a part-time or full-time basis, it’s a reality. The real estate market has been affected by this and people have made long-term commitments to where they actually live and where they’ll be working,” said Charlebois.
“So the food network, or food retailing, will be impacted by where people live. If you actually spend a lot of time close to your kitchen, it will make you a cook more often. You’ll eat different products. You’ll probably be focused more on retailing and meal kits. And so as a convenience store operator you have to think about that too. Convenience stores are actually very accessible for people working in suburbs or in smaller communities.
“I know of a few startups that have started to look at using convenience stores as outlets for meal kits. So you can see there could be an ecosystem that would be built around convenience stores as a result of seeing more people working from home.”
And Couche-Tard has locations well situated for that because of the real estate they own.
“And they’re not very big. You can go in and out very quickly. If people are working from home and they have maybe half an hour between meetings, they can actually go in their cars, pick up whatever they need and come back home,” added Charlebois. “Very convenient. Very practical for a lot of people.”
He said Couche-Tard definitely has the capital to become a grocer.
“I think the conversation is happening right now. I think a lot of people will see Couche-Tard as a potential buyer of a grocer in Canada. I don’t know which one. It’s hard to speculate but if you ask me whether or not it is more likely to see Couche-Tard become a grocer versus a new entrant in the market, I would probably vote for Couche-Tard. I think Couche-Tard has a better chance of becoming a grocer than seeing new players in the Canadian market.”
In mid January, Couche-Tard and Carrefour announced that preliminary discussions around a transaction were no longer continuing.
But Carrefour and Couche-Tard, however, also announced they decided to extend their discussions to examine opportunities for operational partnerships. Among the preliminary areas of cooperation to be explored are sharing best practices on fuel, pooling purchasing volumes, partnering on private labels, improving the customer journey through innovation, and evaluating ways of optimizing product distribution in the overlapping networks.
“The opportunity for operational partnerships with Carrefour will further our journey towards becoming a leading global retailer. The discussed areas for cooperation align with our five-year strategic plan, as well as our commitment to strengthening our core convenience and fuel business and pursuing opportunities in multiple, related growth platforms,” said Brian Hannasch, President and CEO, Couche-Tard.
“Building innovative partnerships is a key part of Carrefour’s transformation strategy. The promising partnerships anticipated with North American leader Couche-Tard is fully aligned with this strategy, which has enabled us to return to a profitable growth path,” said Alexandre Bompard, Chairman and CEO, Carrefour.
Couche-Tard is the leader in the Canadian convenience store industry, with a market cap of approximately C$46 billion as at January 12, 2021. As of October 11, 2020, Couche-Tard’s network comprised 9,261 convenience stores throughout North America, including 8,085 stores with road transportation fuel dispensing.
With a multi-format network of some 12,300 stores in more than 30 countries, the Carrefour Group is one of the world’s leading food retailers. Carrefour recorded gross sales of €80.7 billion in 2019.