LAVAL, Quebec-- The last time executives from Alimentation Couche-Tard groaned about cigarette contracts, it was a precursor of the corporation rolling out its Crown private-label cigarettes. In Wednesday's earning's conference call, vice president and CFO Raymond Pare again suggested the parent company of Circle K convenience stores is primed to make additional moves in the cigarette category.
"It's a category that is declining overall, while some manufacturers out there have programs where they push a deflation in the price of the product, and on that minimum price, the margin is not always healthy," Pare said. "We're looking at other solutions to maximize the contribution of [the category. I'm sure] we'll be able to find a solution in order to maximize the contribution."
Pare's comments echo an earnings call from November when Pare said, "We don't like to see these kind of programs that affect our capacity to price our product in our store." He added, "You will see soon one of the steps that we will take to work around this program."
Less than four months later, in February, Couche-Tard rolled out its Crown cigarette brand, an initiative that president and CEO Alain Bouchard said has been well received.
"Crown is evolving quite well, even better than planned, growing every month with better margin than the tobacco-company products," Bouchard said yesterday. "So we're very, very happy with that. Obviously, [it's] not enough to compensate for the Altria and other manufacturer initiatives."
What has made up the difference is Couche-Tard's fledgling foodservice initiative, which executives promise to continue to pursue in coming months and years.
"What is very satisfying is to see how our progress in the foodservice category allowed us to more than offset the lower contribution of tobacco products," Pare said. "We consider that our foodservice offering strategy implementation is still at the early stage, so this leaves substantial room to further improve in the near future."
As of July 22, 2012, Laval, Quebec-based Couche-Tard's network included 6,109 convenience stores throughout North America, including 4,534 stores with fuel dispensing. At the same date, Couche-Tard had agreements for the supply of motor fuel to 357 sites operated by independent operators. Its North-American network consists of 13 business units, including nine in the United States covering 40 states and the District of Columbia and four in Canada covering all 10 provinces. Through its acquisition of Statoil Fuel & Retail, Couche-Tard also operates a broad retail network across Scandinavia (Norway, Sweden, Denmark), Poland, the Baltics (Estonia, Latvia, Lithuania) and Russia with 2,307 stores as at June 30, 2012, the majority of which offer fuel and convenience products while the others are unmanned automated service-stations (road transportation fuel only).
For a complete rundown of Alimentation Couche-Tard's first- quarter 2013 earnings, see Related Content below.