LAVAL, Quebec -- When Alain Bouchard was selling beer and cigarettes to customers at his first "depanneur" in Saint-Jerome, Quebec, in 1980, his dream of convenience store conquest did not include the frozen ground and fjords of Norway, said The National Post.
For Bouchard, founder and CEO of Alimentation Couche-Tard Inc., the fantasy was always about building a big c-store business. It was about figuring out and perfecting that magic formula for food retailing success, his own version of micro-marketing and merchandising that would make clients happy, said the newspaper.
But now Couche-Tard, which today oversees one of the world's largest c-store empires, has taken over a company whose main business isn't c-stores at all. Statoil Fuel & Retail (SFR), the former retail arm of Norwegian oil giant Statoil ASA, is principally a seller of transportation fuel. And with the $3.6-billion acquisition, announced in April, some investors are wondering just how deeply Canada's c-store king will jump into the oil game.
"This is a phenomenal acquisition with so many hidden jewels people don't realize," Alan Radlo, chief investment officer at Boston-based Cambridge Advisors, told the Post. "The next thing for this company could be further integration [into upstream competencies like refining]. These guys are that big."
With SFR, Couche-Tard takes control not only of 2,300 gas stations in Scandinavia, the Baltic states and Poland, but also a dozen fuel storage terminals, 400 road tankers and 50 depots. SFR's real-estate assets alone are estimated to be worth at least 10-billion kroner ($1.7 billion U.S.), said the report.
In addition, the deal gives Couche-Tard SFR's aviation-fuel business, which fills up airliners at 85 different airports; a lubricants business that sells 750 different types of products, including greases for big ocean-going ships and oils for factories; and a heating-oil supply business. Couche-Tard also takes control of a unit providing what SFR calls "aviation products and services" to the Norwegian military.
In North America, Couche-Tard's Mac's and Circle K stores are social and retail merchandise destinations. By contrast, SFR is all about the "gas-up," the report said. Its stations command one-third of the market in Scandinavia, Latvia and Estonia. Fuel has been the main profit growth driver over the past five years, expanding as other parts of the business sputtered. A quarter of SFR's fuel volumes are sold at automated stations that aren't attached to a store.
A large part of SFR's business has nothing to do with consumer retailing. It's about business-to-business motor fuel sales. About half of the company's road transportation fuel receipts come from direct sales to corporate customers. The company employs 140 specialized reps handling 200,000 business accounts for diesel and gasoline sales.
So SFR is a company that's still more about petroleum products than soda pop, the report said. The challenge for Bouchard, "a retailing whiz," is to bring his sales savvy to a group of store managers still giving too much shelf space to windshield wipers and motor oil.
"There, it's all about fuel," Bouchard told the Post, adding SFR's employees remain caught in the mindset of working for a big oil company.
He and his team are trying to change that gradually, getting them used to the idea that they have new masters and that the connection to Norwegian government-controlled Statoil may end when the current fuel-supply agreement and naming rights expire roughly eight years from now.
Couche-Tard executives are holding town hall meetings with SFR workers in Scandinavia. And SFR managers are visiting Couche-Tard's operations in North America to see how they operate. A joint benchmarking process is underway, said the report.
"I tell them, 'I'm going to ask you to change religions,' " Bouchard said. It may be a challenging conversion, said the paper.
But while everyone expects Bouchard to transform SFR into a better retailer, there are also those who ask how far he will go in embracing being an owner of petroleum products assets, said the report.
"Would they ever do a refinery? I don't know," Radlo said. "They have never demonstrated outside of what their bailiwick is…. But I would imagine they have at least done the study somewhere or thought about this."
Bouchard said he does not see further upstream integration--into things like refining, trading, wholesaling "for the time being." Asked about SFR's assets that seem most outside Couche-Tard's core competency, namely aircraft fuel and marine products, he said the company plans to continue running them in the short term, adding they seem "synergistic to our actual business."