Couche-Tard is seeing strong growth in fresh food

The convenience retailer is seeing opportunities in new products, segments and bringing back its marketing spend.

Alimentation Couche-Tard Inc--McGill University and Alimentation

Convenience giant Couche-Tard is reporting a net earnings spike – $746.0 million in Q3 compared to $622.0 million in the same period a year earlier – in part because of solid fresh good growth.

The company is seeing total merchandise and service revenues of $4.8 billion, an increase of 5.8%. Same-store merchandise revenues increased 3.7% in the U.S., 7.2% in Europe and other regions, but decreased 0.8% in Canada.

“Same store merchandise sales were particularly strong in Europe as well as in the U.S. with our freshly prepared food programs and packaged beverages among the main drivers of growth,” says Couche-Tard president and CEO Brian Hannasch.

In today’s earnings call, Hannasch reports that its “Fresh Food, Fast” and packaged goods segments have continued to grow across the globe, with over 3,200 stores now carrying the program (2,900 in North America) adding that it is seeing strong year-over-year sales growth. Over time, if the supply chain gets right, the fresh program will increase loyalty too and the company says it’s “just starting” on the promotion and assortment side of it..

Couche-Tard is also reporting a pipeline of new items are coming to stores, as it gets more into the chicken sandwich business, one of its strongest SKUs and a “hot hot commodity” but a difficult one to source. 

Sports drinks and energy drinks are driving its beverage category and Hannasch notes there are first to market opportunities with new products. Both have driven strong sales increases year over year, he says, adding that its single serve wine and seltzer categories are growing as well.

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Making customers’ lives a bit easier a key priority for the company, including expanding delivery, convenience and pantry items. It’s working with partners by testing and learning and seeing about potentially adding restricted sales items like wine to its delivery options.

Couche-Tard is working to enhance the instore experience, installing fast and innovative checkout in Europe to let its people “focus on serving the customer.” Queue lines are showing strong value in building basket size, especially with salty snacks.

It will be unveiling a new loyalty program too, currently being piloted in South Carolina and Denver and according to Hannasch, it’s trying to differentiate as retail is stuck in “buy 5 get one free” model. Therefore, it’s focusing on providing value across products, fuel, services, and layers of benefits. NPS scores thus far, he says are very strong and the goal is to be in a couple a thousand stores early in next fiscal year.

For Q3 and first three quarters of fiscal 2022, expenses increased by 13.8% and 12.8%, respectively, compared with the corresponding periods of fiscal 2021. 

During COVID, the company reduced marketing significantly and now it’s bringing back spend levels “that are normal for the industry,” the company says.

Alimentation Couche-Tard recently announced it is investing $55 million – just over half of its $100 million Circle K Venture Fund, established in 2020 – into startups geared around boosting the shopping experience and responding to evolving consumer needs.