Couche-Tard Seeks to Be a Key Player in North American Cannabis Market

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Couche-Tard Seeks to Be a Key Player in North American Cannabis Market

09/19/2019

LAVAL, Quebec — Alimentation Couche-Tard Inc. wants to be one of the "key players" in the North American cannabis market by using its position in Canada, where use of the substance for recreational purposes is legal, to achieve this goal.

However, the convenience store and fuel operator will have to develop a capability to sell the product outside of Quebec, where it’s headquartered, due to provincial rules limiting the sale of marijuana to government-run stores and online, BNN Bloomberg reported.

"I think it's a shame for Quebec because this expertise will go outside Quebec," said Alain Bouchard, Couche-Tard founder and executive chairman. "When we deploy a network in the United States or any other activities in the U.S., it will come from outside Quebec."

Unable to penetrate the Quebec market, the c-store retailer has invested in Alberta retailer Fire & Flower Holdings Corp., an independent cannabis retailer. The move could enable Couche-Tard to eventually acquire a majority stake in this company, as Convenience Store News previously reported.

Couche-Tard also has an existing partnership with Canadian cannabis giant Canopy Growth surrounding the operation of private stores.

Even though the recreational cannabis market is still in its infancy, Couche-Tard wants to go out of its way to set up a strategy that is ready to be deployed where regulations allow it, Bouchard emphasized. "It's still very small. We will learn from that and I really believe we can succeed."

The Circle K parent company has turned its sights to the United States, where recreational consumption of marijuana is legal in 13 states, added CEO Brian Hannasch, who noted the retailer has long experience selling age-restricted products, but it must take the time to know the rules of the game.

Couche-Tard has already started selling cannabidiol (CBD) products, a compound with potential medicinal qualities but without significant levels of THC — a compound in cannabis that produces a high — in some stores in the U.S. and Ireland.

"It's kind of the Wild West, but I think we have a place in this market," said Hannasch. “But this is only the beginning.”

Although the company wants to double its operating profit by 2023, it did not identify marijuana as a growth driver in its strategic plan because of the many regulatory uncertainties.

Hannasch did not hide the fact that the market for recreational marijuana could, however, make it easier for the company, which currently operates a network of approximately 16,000 outlets in Canada, the United States, Europe, Latin America, Asia and the Middle East.

In the meantime, the retailer hopes that its organic growth will allow it to generate half of its growth target. Couche-Tard particularly wants to focus on millennial customers who are "less loyal to stores, but more loyal to brands," said Bouchard.

As of July 21, Couche-Tard's network comprised 9,792 convenience stores throughout North America. Its North American network consists of 19 business units, including 15 in the U.S. covering 48 states and four in Canada covering all 10 provinces. In addition, through CrossAmerica Partners LP, Couche-Tard supplies road transportation fuel under various brands to more than 1,300 locations in the United States.

In Europe, Couche-Tard operates 10 business units across Scandinavia, Ireland, Poland, the Baltics and Russia. As of July 21, Couche-Tard's European network comprised 2,706 stores. In addition, under licensing agreements, approximately 2,250 stores are operated under the Circle K banner in 16 other countries and territories.

Couche-Tard is No. 2 on the 2019 Convenience Store News Top 100 ranking.