Dive Brief:
- Alimentation Couche-Tard’s merchandise and service gross profits in the U.S. slightly decreased in the third quarter due to promotional efforts for its foodservice program, President and CEO Brian Hannasch said during the company’s earnings call Thursday.
- Hannasch noted that “heavy promotional activity” around Couche-Tard’s coffee and Sip and Save beverage programs depressed margins last quarter, as did the rapid acceleration of its Fresh Food Fast program into 350 more stores during the period.
- Despite the fall in margins, Couche Tard — the parent company of Circle K c-stores — still saw a 4.8% year-over-year increase in same-store merchandise revenue in the U.S. last quarter, according to its earnings report.
Dive Insight:
Since debuting its Fresh Food Fast concept in July 2020, Couche-Tard has already brought it to 4,500 stores globally, Hannasch noted during the call. Because of this rapid expansion, he said scaling the program is similar to “building a plane while we’re flying it.”
This growth doesn’t appear to be slowing anytime soon, as Couche-Tard is planning to add its fresh food program, among other services, to its newly acquired network of Big c-stores, Hannasch said during the call.
The expansion of that program along with its beverage and coffee promotions have boosted total revenue but decreased margins for the company.
“You put all that together, and while our sales are actually exceeding plans… our margins are short of where our plans are and certainly short of where our pro forma is,” Hannasch said.
Still, as revenue continues to grow, certain foodservice categories have become standouts. The retailer’s $5 pizza and fresh-baked cookie programs are popular, while its new griddle cake sandwiches have so far seen “very positive feedback” from both its customers and sales, Hannasch said.
On the dispensed beverage side of the business, Circle K’s recent free coffee day helped bring in new coffee customers, which resulted in over 450,000 cups being given away that day, Hannasch said. Meanwhile, its expanded partnership with Mountain Dew for Purple Thunder has exceeded 11 million cups to date, driving growth for its Polar Pop segment, Hannasch noted.
Although Couche-Tard isn’t where it wants to be on a performance basis, the company is pleased with its top-line growth and is confident moving forward, Hannasch said.
“Our focus right now continues to be on growing sales while continuing to put the right tools and disciplines in place to control shrink and other things over time,” he said.
Laval, Quebec-based Couche-Tard operates more than 5,700 c-stores in the U.S. It is the second-largest c-store company in North America behind 7-Eleven.
