Circle K Owner Goes on Food Marketing Push
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Brian Hannasch, who runs the Circle K chain of gas stations and convenience stores, is a man obsessed with food. Not eating it, but selling it.
Circle K parent Alimentation Couche-Tard Inc. gets about half of its gross profit from fuel, hardly an ideal situation as the auto industry shifts toward electric vehicles. That has Hannasch, who鈥檚 been chief executive officer since 2014, thinking about how to kickstart the company鈥檚 fresh food business, which represents just 11% of sales in its 9,000 North American stores.
Couche-Tard has been looking for a major acquisition 鈥 it came close to buying a French grocery chain last year 鈥 but hasn鈥檛 done a major deal in years. So in the meantime, it鈥檚 expanding a marketing push in thousands of Circle K outlets, using food trucks and other forms of advertising to spur consumers to try a lineup of hot sandwiches, pizza, chicken and other meals.
鈥淎s COVID has backed off in most of our geographies, you will see a lot more sampling and marketing around food,鈥 Hannasch said in an interview. 鈥淲e have a lot more options than what Couche-Tard and Circle K of the past had for customers.鈥
The longer-term goal is to increase fresh and prepared food to 20% to 25% of North American sales, in line with what the company does in its much-smaller European division, Chief Financial Officer Claude Tessier said in an interview.
鈥淭he quality of the food in stores that I visited in Europe was a little bit more complex and sophisticated than what I could see here in North America,鈥 Stifel GMP analyst Martin Landry said. The company has been looking for ways to improve its food offering in North America for a long time, he added.
Hannasch鈥檚 plan is to have universal production facilities in stores that allow for regional tastes. Food is brought to stores by suppliers and is then prepared and made ready-to-eat by employees, a model that鈥檚 more efficient that running full kitchens on-site.
The concept comes from Holiday Stationstores, a Minnesota-based chain that Couche-Tard bought in 2017, Landry said. Holiday stores generate about $500 a day in fresh-food revenue, more than double what Couche-Tard sees in its other North American stores, according to a company presentation last year.
To free up in-store staff for food-related tasks, Alimentation Couche-Tard is rolling out 10,000 smart checkouts in 7,000 locations.
Couche-Tard is making other investments in the food business. In July, it joined Kroger Co. and Burger King parent Restaurant Brands International Inc. in a $100 million funding round for Kitchen United Inc. The U.S. firm operates so-called 鈥済host kitchens,鈥 food production hubs that allow restaurants to streamline takeout orders.
Hannasch said the company is 鈥渋ntrigued鈥 by the business model and said it鈥檚 possible Circle K could eventually use Kitchen United as a distribution point for food and grocery items. 鈥淲e can provide snacks, chips, drinks, our food sandwich out in that same ecosystem or in conjunction with a Chick-Fil-A order or others,鈥 he said.
Diana Rosero-Pena, a research analyst with Bloomberg Intelligence, notes that food is 鈥渢he most profitable side of the store.鈥 In the next two years, Couche-Tard鈥檚 gross margin in fresh food should grow from 37% to 41%, she said.
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