ACT Boosts Midwest Presence

Indianapolis stores, supply contracts nabbed from Shell

Published in CSP Daily News

INDIANAPOLIS -- Alimentation Couche-Tard Inc., through a wholly owned subsidiary, has officially signed an agreement to purchase 40 convenience stores and to assume an additional 13 fuel supply contracts in the Indianapolis area from Shell Oil Products US.

As reportedTuesday in a CSP Daily News Flash, Couche-Tard said it would buy the land and buildings for 29 stores, buy the land and lease the premises for one and lease the other 10. The company would not have any fee or leasehold interests in the 13 fuel supply contracts, but would have a fuel supply agreement with the 13 retailers [image-nocss] to sell Shell-branded motor fuels.

Strategically, these acquisitions would be excellent complements to our current network in the Midwest and would efficiently complement the network expansion plans. Consistent with our development strategy, we selected these 40 stores based on the following criteria: prime locations, potential for growth and quality of people. Under our operation model and with the efficiency of our marketing programs, these 40 sites would contribute to improve profitability of the Division, said Darrell Davis, vice president of operations for Laval, Quebec-based Couche-Tard's Midwest Division.

Shell's strategy of growth through the wholesale class of trade is exemplified through this sale, said Stu Crum, Houston-based Shell's general manager of U.S. retail strategy and portfolio. We are very pleased that an operator of Couche-Tard's stature has acquired these assets and will continue to grow and enhance the Shell brand in the Indianapolis area.

Should the transaction close as planned in March 2006, the company would have a total of 640 stores in the region. The acquisition would add sales of approximately $160 million (U.S.) to Couche-Tard's revenues and contribute to its earnings on an annualized basis. Attempts to reach Couche-Tard officials for comment were unsuccessful.

As first reported in yesterday's CSP Daily News, sources close to the transaction say the stores were previously operated by Shell multi-site operators (MSOs). With the MSO model having experienced somewhat mixed results, some industry sources wonder if the class of tradein which self-employed contractors operate clusters of stores while Shell manages the fuel islandremains in Shell's future plans, as virtually all the major oil companies continue to dial back their retail presence.

MSO is a good concept, but [Shell] appears to be having a tough time getting good people to do things the Shell way, a midsized multi-branded operator in the mid-South told CSP Daily News on condition of anonymity. All the majors are the same way, with Exxon moving out of the Northeast and BP moving out of the marketplace. They're looking toward jobbers and super-jobbers, and we've been seeing that transition for a few years now.

Shell spokesperson Karyn Leonardi-Cattolica, however, said the company values mutually beneficial relationships with dealers and MSO operators and will continue to support invested markets with strong programs. Shell will use the MSO marketing model in selected markets to strengthen and grow the Shell brand by actively managing assets and supply.

Existing MSO clusters will either be renewed for a three-year period, offered to a new operator or, in some markets, extended. Extension periods will vary depending on the timing of projected market-divestment activities, according to the spokesperson.

Shell remains focused on enhancing support for the wholesale channel of trade, said the spokesperson. Shell continues to grow in invested markets, and it will place greater emphasis on becoming the fuel supplier of choice to wholesalers by delivering a world-class wholesaler value proposition.

According to the spokesperson, Shell believes a more intentional focus on developing the wholesale business enables it to further simplify the business, improve its focus on delivering value to customers and aligns its resources with existing distribution of sites among the various channels of trade. Today, Shell sells almost two-thirds of its total U.S. volume through the wholesale channel.

Shell believes effective execution of this strategy will help it to become even more competitive in the marketplace, improve the sustainability of its network and firmly position the Shell brand for growth. Shell will continue to own retail real estate and will make investments in sites on a selective basis, the spokesperson said.