Alan Bouchard would welcome the same sort of expansion in Micronesia that his group has seen in its other markets.
Bouchard is chairman of the board president and chief executive officer of Quebec-based Alimentation Couche-Tard Inc. which does business in Guam through South Pacific Petroleum Corp which does business as Circle K convenience stores and 76 gasoline brand. He visited Guam on March 21 and 22.
“Expansion into Micronesia for SPPC ” he told the Journal “is exactly what we are thinking of. That’s the goal. We are looking at what would be the opportunity to grow the base they already have here. I am an entrepreneur and we are a growth-driven company. I know Brian and Michael are entrepreneurs and I am sure we would be able to achieve something.”
Brian Y. Suhr president and chief executive officer of SPPC said the company always considered opportunities for growth. “Ideas come and go.”
As to specific SPPC plans for expansion into the rest of Micronesia Suhr said “I believe there are limited markets in other areas we could study — some opportunities in convenience store growth in other areas — those are definitely considerations.”
Although Bouchard began in the convenience store business in 1977 with one store he founded Couche-Tard in 1980 with one partner.
Richard Fortin executive vice president and chief financial officer joined the company in 1982 and Raoul Plourde executive vice president and chief operating officer in 1984. Bouchard said “I figured out I needed other skills. My strength was to get the right people with the different expertise you need to run a company — I always thought you can’t be good at everything — and is the development side of the business and the real estate side site search and acquisition.”
In Bouchard’s first years of business there was no partnership with gas stations but now 60% of group stores are partnered. “Today it’s certainly an important component of our business. We think fuel is good to drive traffic and it’s an important combination with a convenience store.” The continued recent rise in gasoline prices is not good news for the C-store industry he said. “In retail we are at the end of the line — we don’t manage refining we don’t mange the crude upstream we are a down stream market. It means the consumer has less available money in their pocket on a weekly basis. It’s not good news on either side — on the margin and on the discretionary money people have.”
Location also would determine whether the convenience store was combined with a gas station or with a more appropriate partner he said. “In the big cities in downtown we would build a full convenience store with a branded coffee offering or a Subway-type offering.”
Grouped under three main brands: Couche-Tard in French Canada Mac’s in other areas of Canada and Circle K in the U.S. Couche-Tard according to its Web site is the industry leader in independent (not integrated with a petroleum company) convenience store operations in Canada and the second largest operator in North America. The group has approximately 4 900 stores more than 3 000 of which sell gasoline.
Stores operate in six Canadian provinces 23 American states and seven international regions: Japan Taiwan Hong Kong Indonesia Mexico the People’s Republic of China — Taiwan and Guam with more than 4 000 licensees in its international markets. The first licensed store opened in 1980 in Japan where the network then expanded to include 2 934 stores followed by Taiwan Hong Kong Indonesia Mexico China and Guam.
Couche-Tard first penetrated the U.S. market in June 2001 purchasing 225 stores in the Midwest (where it now has more than 400 sites) and now boasts 2 154 stores and 803 affiliates in 23 states in the United States.
On Dec. 17 2003 Couche-Tard acquired a chain of 1 663 Circle K stores in 16 American states plus 627 licensees and franchisees from ConocoPhillips Co. The company announced in the third quarter last year the purchase from Shell Oil of 21 sites in Arizona and in February an agreement to purchase 19 sites in Georgia.
For the 16-week period ended Jan. 30 Couche-Tard announced consolidated sales of $2.92 billion compared with $1.77 billion for the quarter ended Feb.1 2004 an increase of 65% or $1.15 billion including $1.04 billion from Circle K. The company generated 75.9% of its sales in the United States up from 63.9% in the third quarter of the previous year. Net earnings for the quarter ended Jan. 30 were $46.3 million or 45¢ per diluted share.
The company owns 1 200 of its properties but Bouchard said it would prefer tenancy arrangements. Couche-Tard completed sale or leaseback transactions for 322 Circle K properties for $252.9 million since December 2003 and used the funds for long-term debt settlement. “We have sold some and we will sell a portion. Having real estate in your assets is heavy to carry and capital intensive so we prefer to lease.”
Couche-Tard has not only solidified its convenience store position but also broadened offerings with such moves as the acquisition of the master franchise for Dunkin’ Donuts for 94 restaurants in Quebec on Aug. 28 2003.
Still despite such moves Bouchard said the company does not intend to diversify extensively. “We discovered early on in our history that we should focus on what we do well.”
Couche-Tard follows a decentralized business model. Bouchard said “We have a base offering in all our stores but we like to adapt ourselves to the local market. It can be a different offering in the same city.”
In Guam the convenience store market industry experts estimate is worth about $20 million annually. Depending on size and location a convenience store on Guam can earn per month gross between $20 000 at the low end and $60 000 to $80 000. He said “For us Guam is part of our international division — which is mainly in Asia and which became very important for us after the Circle K acquisition which is why we are here.” SPPC he said contributes “under 5%” to the group.
Bouchard accompanied on the trip by Plourde Rick Hanlin president of Circle K International; and John Patton vice president of Circle K International also visited Japan. “We are focusing on Asia — Guam being part of Asia — and it’s important for us to meet Brian [Suhr] and Michael [S. Hahm executive vice president of SPPC] who have been doing such a great job.”
Bouchard was originally surprised at the success of Circle K’s Arabica brand generally acknowledged to have led the drive for on-the-go coffee in Guam and to have maintained that lead successfully. “That’s not something that comes to your mind first — coffee in Guam. It’s a warm country. But with our experience in Arizona — we sell a lot of coffee there — we had those discussions with Michael and Brian and we said ‘OK let’s test it and see how the consumer will react to it.’ They have proved it’s a good item to have. People like the Circle K coffee — it’s a strong brand and a good offering. They did a great job with the coffee.”
Bouchard complimented SPPC on its performance. “Sales overall have doubled here. The 76 fuel brand was not known here. Today it has good recognition in the market.”
As to what’s next in convenience store marketing Bouchard said in Japan Taiwan and Hong Kong evening meal offerings have been successful. “I don’t know the market here enough to evaluate the value of having that sort of product here. The challenge would be the production. I have shared some ideas with Brian and Michael — it’s something we would like to have. Our focus is breakfast and lunch — let’s accomplish what we want to there and look at dinner after.”
At 55 Bouchard has no plans to leave Couche-Tard in the near future. “I’m having fun and I don’t expect to leave early.” That enthusiasm has made its mark on his family. “I have four children. One is in the business. My older daughter wants to come in the business in a couple of years.” MBJ
