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Couche-Tard Makes Progress on Foodservice Initiatives


LAVAL, Quebec — In addition to building up its physical footprint and rolling out the new global Circle K brand, Alimentation Couche-Tard Inc. is gaining traction with its new foodservice efforts.

Speaking during the company's second-quarter earnings call for fiscal year 2017, CEO Brian Hannasch said the retailer has rolled out its Simply Great Coffee program to more than 400 locations in its North America network. In all, Couche-Tard plans to introduce the dispensed offering to 750 North America stores this year.

Noting that the company is "seeing this potential come to life," Hannasch said, the "Simply Great Coffee concept recently won the Convenience Store News Innovator of the Year Award for 2016, which adds to our confidence that we're doing the right thing for this category."

Citing locations in Quebec, Hannasch reported that results have been stronger in some areas than others. "We may be a little early, but we certainly think that's where the younger consumer is headed as evidenced by the success of McDonald's and Starbucks with their offers," he said, adding Couche-Tard is committed to the rollout.

"We plan to be aggressive in the context of our balance sheet in the coming year on coffee" he said.

As for Couche-Tard's logistics solution of supplying fresh offerings like fresh sandwiches, pastries, salads and fruit cups to its Circle K stores, Hannasch explained the solution has reached 1,285 locations as of this latest quarter. Plans call for it to reach an additional 200 stores before the end of the 2017 fiscal year.

Couche-Tard has also launched an initiative to add fresh bakery items to a greater percentage of its retail network.

"This year, we've added 1,120 sites bringing a producer that we've used in Arizona for several decades to the East Coast to assist us in this effort," Hannasch said. "We've currently rolled out all of Florida and we'll be adding an additional 500 sites on the East Coast in the next six months."

The chief executive also explained that Couche-Tard's fresh-prepared food program — which he referred to as "foodvenience" — is operational at approximately 10 sites.

"I would say we've got some sites far exceeding expectations and we've got some sites that are not meeting it," Hannasch said. "Since the year — it was about a year ago that we launched it — there's certainly continued learnings and menu refinement, and we'll continue to evolve that offer and adjust the menu as appropriate."

The retailer is "excited" about the CST Brands Inc. acquisition and what it will mean for the "foodvenience" offering.

"They've been on the same journey with regard to foodvenience or made-to-go type offer. And I think they've got an offer that fits very well for the southern half of the U.S.," Hannasch said, adding the company is anxious to get the experts together from both retail chains "in the coming years, as I'm confident that it can accelerate our journey."

When asked which of Couche-Tard's initiatives are driving the strongest growth in same-store merchandise sales and gross margins across all regions, Chief Financial Officer Claude Tessier responded that the company's food programs are starting to deliver results across all geographies: growth in Europe is being driven by food and coffee, while the Simply Great Coffee program is showing positive results and impacting margins in Canada.

"Overall, all the geographies are enjoying good trends in the food categories, with the positive impact in terms of margins also," Tessier said.

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