Circle K sees business in shrinking smoking market

Cigarettes aren’t extinguished yet, and one of America’s biggest convenience-store chains wants to squeeze what it can from that shrinking market.

Alimentation Couche-Tard Inc., the Canadian owner of Circle K stores, launched a “Tobacco Club” this year in the U.S. that offers discounts on Marlboro packs and other products to more than 4 million patrons who sign in with their mobile number. The company also expanded distribution of its own cigarette label to recently acquired chains, giving more customers a lower-priced alternative as the cost to light up climbs with tax increases on tobacco.

The number of cigarette smokers has been dwindling in the U.S., and many retailers — including Couche-Tard — have their eyes on the burgeoning market for legal cannabis products. Yet the convenience-store giant still wants to boost its share among the thinning ranks of the tobacco crowd, who are potential clients for high-margin products such as sandwiches. The booming market for products such as e-cigarettes also helps.

“We’re going to fight to take market share,” Couche-Tard Chief Executive Officer Brian Hannasch said after the company’s annual shareholder meeting last week outside Montreal. “We’re committed to that category, committed to that customer.”

Hannasch was upbeat about U.S. tobacco growth on a call with analysts this month, when the company reported strengthening samestore sales in the country following a lull at the start of the year. He singled out “very, very, very strong sales” from newer categories such as e-cigarettes.

On the traditional tobacco front, the loyalty program is part of a push by Couche-Tard to create more targeted promotions and spur impulse purchases. The program is in place in about 5,000 of its almost 7,800 U.S. stores, Hannasch said.