Why a Canadian convenience store giant wants to become a grocer
With fewer gas stations as electric cars become more popular, many Couche-Tard-owned outlets will need to think differently
We heard this week that Alimentation Couche-Tard is looking at acquiring European-based Carrefour, the seventh largest food retailer in the world. Buying a grocery chain would be a significant departure from what Couche-Tard is known for.
A non-binding, friendly offer of $25 billion was sent to Carrefour.
Couche-Tard is all about the convenience store economy. The Quebecbased company has achieved greatness by building a massive business out of a piece of the retail landscape that’s often overlooked; convenience stores.
Other than 7-Eleven, no company in the world has been as committed to the customers who are in between meetings or meals, or service people on their rounds. But running supermarkets is a different story.
Couche-Tard, which is worth about $46 billion, has grown through acquisitions of companies that didn’t manage to capitalize on being at the right place and the right time, with quality products at people’s disposal.
Carrefour would be the largest acquisition in Couche-Tard’s illustrious history. The company’s largest transaction to date was Texas-based CST Brands for about $6 billion in 2017.
What may be motivating Couche-Tard is how the car industry is transitioning toward electric vehicles. Couche-Tard has been a formidable force turning fuel business into food and convenience dollars. With fewer gas stations as electric cars become more popular, many Couche-Tard-owned outlets will need to think differently about the market.
Carrefour also presents a rebuilding situation Couche-Tard would enjoy exploring. Carrefour’s network and brand need to be re-energized. For the last decade or so, despite posting decent figures, shareholders have been left wondering if the grocer could do better. What is also largely unknown about Couche-Tard is that it has a highly effective supply chain. The company has been able to provide above-par products in stores just because of how it deals with suppliers and how it focuses on in-store merchandizing.
A deal between Couche-Tard and Carrefour could also present an opportunity for Canadian products. Food manufacturing in Canada offers some of the best products in the world and some of the safest ones. Having access to a portal like Carrefour in Europe, coupled with favourable conditions provided by the Comprehensive Economic and Trade Agreement, a Couche-Tard-owned Carrefour could become the food ambassador Canadian companies need.
Couche-Tard is arguably one of the least understood and appreciated Canadian companies out there. Most investors will understand the company since it has delivered financially, time and time again. But most Canadians have never taken the time to appreciate how an empire can be built by selling fuel, chips and slush and soft drinks.
Food retailing is not beyond what Couche-Tard can do in the future. The deal is not only about hedging against fossil fuels and the move to electric energy in the car economy, but also about making an iconic company more successful.
An acquisition of Carrefour by Couche-Tard offers an interesting storyline. There are so many intriguing elements to this deal, it would be regrettable if it doesn’t happen.