The Top Newsmakers

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The Top Newsmakers

By Claire Pamplin - 08/27/2007
Alimentation Couche-Tard Inc.

Acquisitions and successions mark a busy year for the North American powerhouse

Alimentation Couche-Tard Inc. continues to make industry headlines with its breathtaking appetite for acquisitions in the United States. The chain purchased 509 stores in the past 13 months, according to Real Plourde, executive vice president and COO of the Laval, Quebec-based company.

Couche-Tard currently operates a network of 5,360 convenience stores, 3,308 of which include motor-fuel dispensing, located in nine large geographic markets -- including six in the United States, covering 27 states, and three in Canada, covering six provinces.

Its largest recent purchase was in December, when the company finalized a deal with Shell Oil Products US and its affiliate, Motiva Enterprises LLC, for the acquisition of a network of 236 stores operating under the Shell banner in the U.S. regions of Baton Rouge, La.; Denver; Memphis, Tenn.; and Orlando and Tampa, Fla.; as well as in southwest Florida. Of the 236 stores, 174 were company-operated, 50 were operated by independent store owners and 12 had a motor-fuel supply agreement.

The stores will be remodeled or razed and rebuilt according to the company's IMPACT prototype over a three- to five-year period, Plourde said. The IMPACT program began in 1998 as Store 2000. It involves tailoring the product and service mix to create a more attractive ambience that appeals to consumers and boosts high-margin product sales. Plourde said the chain has converted 416 stores so far to the IMPACT program, and has plans to convert 450 more within the next 12 months.

Other Couche-Tard headlines in recent months include:

March 25, 2007: Purchases Sterling Stores LLC's company-owned, northwest Ohio stores. Total 2006 sales for the 28 stores were approximately US $170 million. Under the Circle K banner, the company's Great Lakes division will operate the stores.

March 8, 2007: Announces that it has signed, through its subsidiary Circle K Stores Inc., an agreement to acquire 53 stores in the Oklahoma City area, from Star Fuel Marts LLC. Star Fuel Marts' total 2006 sales for the subject stores were approximately $215 million.

Dec. 27, 2006: Through its subsidiary, Circle K Stores Inc. signs an agreement to purchase 13 stores in the Pensacola, Fla., market from Richcor Inc. Richcor's total sales for 2005 were about $50 million. The 13 convenience stores currently operate under the Groovin Noovin banner and are all company-operated with Shell-branded gasoline. The stores were converted to the Circle K banner, while the gas brand remained intact. In addition, 10 of the stores have quick-service restaurants, nine of which have a proprietary deli doing business as Down Home Deli and one branded Subway location operated under a franchise agreement. The company bought the land and buildings for all 13 locations.

Oct. 30, 2006: Acquires a network of 24 company-operated stores from Sparky's Oil Co., operating under the Sparky's banner in west central Florida.

In March, Couche-Tard reported that third-quarter revenues grew by 18.8 percent or $553.8 million to $3.5 billion -- raising revenues for the first nine months of its fiscal year to $9.1 billion, an increase of 21.2 percent or $1.6 billion. In addition, the merchandise and service gross margin reached 34.2 percent, an appreciation of 1.0 percent.

Couche-Tard's daring rate of purchasing smaller chains, its eye-catching merchandising and other attributes also has meant that almost anything anyone working for the company does garners close scrutiny from industry analysts. When Stephane Gonthier, senior vice president of eastern North America, confirmed he would leave the company in June, analysts speculated on his departure's possible significance.

Plourde told Convenience Store News that he will take some months before announcing Gonthier's replacement, but that meanwhile, his duties are divided among Plourde, CEO Alain Bouchard and Brian Hannasch, who heads the western half of the continent. "We have a succession plan for every position at Couche-Tard," he said.

Mick Parker, marketing director of the Florida and Gulf Coast stores, whose departure preceded Gonthier's by mere weeks, has been replaced by Mike Struble as head of the region, Plourde said.

Parker moved on to take the CEO position at Indianapolis-based Village Pantry convenience stores.

7-Eleven Inc.

Integrating White Hen's best practices into the fold

The coffee's stronger at 7-Eleven stores in Chicagoland these days. Store managers have learned to put a little extra jolt into the hot beverage, just one of several valuable lessons learned in recent months, since the Dallas-based convenience store giant acquired Lombard, Ill.-based White Hen Pantry last summer.

Ari Goldsmith, advertising and marketing manager at White Hen Pantry, explained: "Chicagoans like their coffee a little stronger than in other areas of the country." As a result, she said one of the first things 7-Eleven learned was to increase its "throw weight" per packet. "This means that there are more ounces in a single package of coffee grounds that makes a pot of coffee at White Hen and now at 7-Eleven Chicagoland stores," she said.

White Hen president Nancy Smith, who previously headed 7-Eleven's Midwest division, added, "White Hen customers are very loyal to the chain's coffee, just like 7-Eleven customers are to our brand. We will keep White Hen coffee as an option for the customer as we rebrand stores, and as they discover it in 7-Eleven stores here today."

7-Eleven operates, franchises or licenses more than 7,200 7-Eleven stores in North America. The company's decision to acquire the White Hen Pantry chain last year made a lot of sense: 205 of the 260 stores were in Chicagoland, where 7-Eleven already had a presence with some 400 stores, and where both chains had been focusing on building new stores downtown, Smith said. (The other 55 are in Boston, run under a separate, Master-Franchise agreement, Goldsmith said. See "Beantown Booming" in the April 16, 2007, issue.)

Smith explained why the two chains made a good match: "Two key initiatives that are on our company's strategy map are 'optimize and grow the store base' and a 'regional product assortment and fresh foods.' The acquisition of White Hen lined up perfectly on both counts."

With the acquisition, the company doubled its size in Chicago, putting the market just behind New York and Los Angeles in store count.

7-Eleven likely will continue its impressive growth, considering the recent news out of Tokyo. The chain's parent company, Seven & I Holdings, will invest approximately 300 billion yen (US $2.4 billion) in the next four years to open 1,000 convenience stores in the U.S. and revamp 6,050 existing outlets here.

7-Eleven is integrating key White Hen brands and practices, but stores are currently undergoing conversion to the 7-Eleven image, many with new shelving, fixtures and other upgrades, new product placement and the installation of 7-Eleven's trademark Slurpee machines.

Smith said an important measure of the success of a merger and acquisition is how well the two cultures fit together or can be transferred across chain boundaries. "Both 7-Eleven and White Hen were franchised convenience store chains in the Midwest, so we had a good start," she explained.

The 7-Eleven integration team did much listening and learning upfront, a key to ensuring a successful transition. "We met with White Hen's franchise advisory council many times in the first 90 days after the acquisition," Smith said. "The White Hen franchisees gave us some great advice on how to approach the White Hen franchise community, and I think it paid off."

One hundred White Hen franchises are working through the qualifying process to sign the 7-Eleven franchise agreement, she said.

White Hen Pantry has offered many appealing products, programs and ideas, but Smith emphasized that "the 7-Eleven purchase is really good for many of the White Hen employees and franchisees. We are in it for the long haul here in Chicago. White Hen franchisees have been through a lot in the past half a dozen years or so, and we bring stability to them."

She cited 7-Eleven's strong support system for its franchisees. "Our business system has blown a lot of the White Hen franchisees away. They are beginning to see the power in Retailer Initiative, the heart of our business strategy," she said. "We are going to give a lot of employees the opportunity to grow with our company. The acquisition was good for 7-Eleven, but I think it will prove to be good for White Hen, as well."

A big part of the attraction for 7-Eleven was White Hen's food program, including the Pantry Select brand, which includes the Hot & Fresh sandwich line, cold sandwiches, meal replacement entrees, salads, milk and bread, according to Goldsmith. The Pantry Select name and logo have carried over into Chicagoland 7-Eleven stores.

Smith said, "Because White Hen was a regional chain, 7-Eleven could gain some learnings and move quicker on our regional product assortment work."

She explained that White Hen had partnered with well-known local brands in developing its sandwich recipes. For example, the chain used Vienna Beef in its roast beef sandwiches. "Chicago customers recognize that brand name and then give White Hen credit for quality ingredients. We will use that learning as we develop our regional fresh-food products through our daily-delivered, fresh-food business system."

MAPCO Express

A new convenience powerhouse arises in the South

In April, Delek US Holdings Inc., parent company of MAPCO Express, completed a $57 million acquisition of 101 of the 107 Dalton, Ga.-based Favorite Markets stores, the lion's share of Calfee Co. of Dalton's family of stores, located primarily in east Tennessee and north Georgia. Delek was closing the remaining six Favorite Market stores, and Calfee Co. of Dalton continued to own and operate 21 stores in the Mobile, Ala., market. Delek is based in Brentwood, Tenn.

During the previous three fiscal years ending April 30, the 107 stores produced average sales of approximately $242 million, average merchandise sales of $87 million and average fuel sales of 83 million gallons. The company also owns a 60,000-barrel refinery in Tyler, Texas.

The purchase brought MAPCO Expres' store count to about 501, and helped make it a chain worth nearly $1 billion, according to news reports. Uzi Yemin, president and CEO of Delek US, commented to Convenience Store News on the acquisition in terms of its geographic market: "Together with the 43 Fast Petroleum stores acquired last summer, we believe the Favorite Markets stores establish MAPCO as a market leader in the Chattanooga market."

Paul Pierce, vice president of marketing, explained Favorite Markets' appeal. "The stores are predominately located in a key strategic market right outside our home-base in middle Tennessee.The locations are a natural fit for us and complement the Fast acquisition we made last July," he said. "The combination of stores from the two acquisitions makes us the lead player in the Chattanooga/north Georgia market. This was our third major acquisition in less than 18 months."

In five years, the chain more than doubled in size. Delek US was formed as a Delaware corporation in April 2001, in connection with the acquisition of 198 retail gasoline and convenience stores from a subsidiary of The Williams Cos. Stores operate under the MAPCO Express, MAPCO Mart, East Coast, Discount Food Mart, Fast Food and Fuel and Favorite Markets brand names. The stores market gasoline under the company's fuel brands, as well as the BP, Exxon, Chevron and Shell brands.

The MAPCO Mart concept is larger and more upscale than the typical MAPCO c-store, although the management team scaled down the stores from the original 5,500 square feet to a 4,200-square-foot floor plan. The stores include the company's Grille Marx in-store restaurant.

Pierce said leaders at Delek US spent the past two years developing the next generation store, and they are currently evaluating all of the Favorite Market properties to evaluate potential raze and rebuild [R&R] sites. "One of the real strengths of Favorite Markets was the exceptional real estate within the chain, and part of our strategy is to acquire the real estate.We have identified several locations that appear to be great candidates for our new store."

In July, Pierce said he and his team were still finalizing plans and conducting final portfolio reviews. "Once we determine which stores are R&R candidates, we will take a look at which stores might be a 'fit' for upgrading to our new brand and imagery."

Pierce said Delek US management was attracted to Favorite Markets not only because of its strategic locations, but also because of its strong food program, the potential upside in sales and the fact that the majority of the properties were owned by Calfee. Pierce and his colleagues also liked the consistency of store layout and configuration: 85 of 107 stores feature a similar layout.

He said the stores held a lot of promise for the company's goal of appealing more to women and professionals. "The market is ripe for innovation around women and business professionals who may want to steer clear of traditional fast-food/takeout, but who are busier than ever and need a place to stop and get fresh items for breakfast, lunch or dinner.We believe our new foodservice program and other in-store products will attract women and professionals as they become more acquainted with what we have inside our doors."

A majority of the company's stock is indirectly owned by Delek Group Ltd., a conglomerate whose core business is fuel supply. Delek Group Ltd. is based in Israel, where it is publicly traded on the Tel Aviv Stock Exchange.

Fas Mart/Shore Stop Stores

One "good fit" after another

Another Israeli-owned company, GPM Investments, parent of Mechanicsville, Va.-based Fas Mart and Shore Stop stores, will close on a $46 million acquisition next month that will bring the chain's store count to 203 company-operated stores and 127 dealers.

The purchased chain, whose brand name has not yet been made public, promises to be such a smooth transition to the Fas Mart brand that leaders at GPM Investments, who have a policy of nicknaming its pending acquisitions, have named this one "A Good Fit," said Dave McComas, president and CEO of the company, which is owned by Israel-based Petro Group.

CSNews Online reported earlier this year that the 58 stores changing hands in Tennessee and Virginia generated $132 million in 2006.

The purchase will integrate readily into the existing family of stores because its fast-food offering is very similar to Fas Mart's, McComas said, including some Subway-branded offerings. The stores also offer a smooth transition regarding distribution because McLane Co. is the major distributor to both companies. In addition, "[the acquired stores] have a solid management team, with tenured store managers, and the stores are in very, very good shape," McComas said. "We've been looking at this chain for a couple of years, and could not acquire it until now."

He added that he was "reasonably sure" the various brands of gasoline at the acquired chain would be converted to Fas Mart's two brands, Valero or BP.

Conversion of the new stores to the Fas Mart image will begin immediately upon closing the deal, with three or four contractors engaged in different parts of the market to get the job done quickly. McComas said he expected the change to be complete by the end of this year or early in 2008.

In other Fas Mart news, the company's loyalty program, Fas Back, in place for three years, recently rolled out a new feature that allows customers to choose to be contacted through e-mail or text messaging on their cell phones. At no cost to them, they can receive messages about special offers not available to other customers. The Fas Back program offers three levels of awards, and earns customers discounts on gasoline and free products, such as beverages, he said.

McComas said 100 percent of the stores participate in the loyalty program.

The chain also tested an "always fresh, never frozen" rotisserie chicken program in eight stores that it will roll out to all fast-food stores, McComas said. Currently, 62 stores offer foodservice.

The most recent acquisition, which adds to a 70-location purchase from Sweet Oil Co. that was finalized in March, is one of three acquisitions the company has planned for 2007 -- including a $1.8 million deal and a $17 million acquisition, both of which have yet to close -- that were announced at the company's 2007 Trade Show in early March, as reported exclusively by Convenience Store News earlier this year.

The Pantry Inc.

An appetite for acquisition positions the retailer for future earnings growth

When Sanford, N.C.-based The Pantry Inc. announced its second-quarter financial results this spring, Chairman and CEO Peter J. Sodini said the company was disappointed with the bottom line.

Total revenues for the second quarter were approximately $1.5 billion, a 10.7-percent increase from last year's second quarter. Net income was $8.4 million, or $0.36 per share on a diluted basis, compared with $9.2 million, or $0.39 per share, a year prior.

But the weaker figure was due to The Pantry's continuing ravenous acquisition march through the southeastern United States. Just three weeks earlier, The Pantry announced the acquisition of 66 Petro Express convenience stores in North and South Carolina from Petro Express Inc. The purchase brought the chain's store count to 1,691.

In commenting on the second-quarter results, Sodini said, "We are pleased with the continued solid performance of our merchandise operations in the quarter, despite sluggish retail sales trends in several of our key regional markets. In addition, margins in our gasoline business were above the seasonally strong year-ago levels, and significantly improved from our first fiscal quarter. Finally, we believe our year-to-date acquisitions have positioned the company for stronger growth in the quarters and years ahead."

At the time of the Petro Express purchase, its stores generated revenues of approximately $629 million for the 12 months ended October 2006. The acquisition also included the wholesale fuels business of Carolina Petroleum Distributors of Charlotte Inc., which sells more than 100 million gallons of fuel annually to more than 450 commercial customers.

"We are very pleased to complete this important strategic acquisition," Sodini said at the time. "We believe the addition of Petro Express significantly strengthens our presence in the Charlotte market and provides us with an excellent platform for future growth in one of the Southeast's fastest-growing metropolitan areas. Not only does Petro Express command a leading market position, but its stores are primarily large, modern facilities that generate average revenues well above those of any previous acquisition in the company's history."

In March, the company acquired 11 convenience stores in the Spartanburg, S.C., market from Willard Oil Co. Inc. The stores, under the Fast Phil's banner, generated revenues of approximately $38 million in 2006.

In February, the company announced that it completed acquisitions of 33 convenience stores. The largest of the transactions was the acquisition of 24 Sun Stop convenience stores in Florida, Georgia and Alabama from Southwest Georgia Oil Co. Inc. These stores, which generated sales of approximately $110 million in 2005, marked the company's initial entry into the Tallahassee, Fla., and southwest Georgia markets.

At the time of the Sun Stop purchase, Sodini said, "These stores will help fill in the gap between our large eastern Florida store base and our recent acquisitions in Florida's panhandle."

The company also completed the acquisition of eight convenience stores in Gainesville and Ocala, Fla., from Rousseau Enterprises Inc. Those stores operate under a variety of banners, including LeStore, and generated sales of approximately $21 million in 2005. In addition, The Pantry bought its second convenience store in the Naples, Fla., market.

Separately, the chain entered into definitive agreements to acquire two additional convenience stores in the Naples market, as well as a single store in Louisiana. These acquisitions, which are subject to regulatory approvals and other customary closing conditions, were expected to close in the company's third fiscal quarter.

In January of this year, the chain announced that it completed the acquisition of 16 Angler's Mini-Mart convenience stores in Charleston, S.C. The stores generated revenues of approximately $73 million in 2005.

Late in 2006, the chain bought eight convenience stores in Mississippi and Florida.

Seven of the stores were in northern Mississippi, where they have been operating under the Rascal's name, and they generated revenue of approximately $20 million in their latest fiscal year. Separately, the company has purchased a single store operating under the Go Time banner in Naples, Fla. That store -- The Pantry's first in the south Florida market -- generated revenue of approximately $10 million in 2005.