Quick Stats

Quick Stats

    You are here

    What's to Come for CST Under Couche-Tard Ownership?

    Store and fuel branding among question marks.

    By Tammy Mastroberte, Convenience Store News

    LAVAL, Quebec and SAN ANTONIO — In a move that will make it the largest U.S. independent convenience store operator in store count, Circle K parent Alimentation Couche-Tard Inc. announced plans to acquire CST Brands Inc. for $4.4 billion in August 2016. The company has been expanding through a number of acquisitions as of late, but this one offers an opportunity to purchase one of the few remaining North America c-store chains with more than 1,000 stores.

    As part of the deal, Couche-Tard will acquire 1,146 CST Brands c-stores, primarily operating under the Corner Store, Nice N Easy and Flash Foods banners, and also control the general partner of Allentown, Pa.-based CrossAmerica Partners LP. Additionally, Couche-Tard plans to sell CST Brands' Canada retail assets to Parkland Fuel.

    As the completion of this deal draws near — closing is expected early in Couche-Tard's fiscal year 2018; the company is currently in its fourth quarter of fiscal year 2017 — convenience store industry insiders are beginning to speculate on what the future will be for CST's stores.

    While Couche-Tard has not announced any specific plans regarding the rebranding of CST Brands' stores, industry analysts and experts believe the stores will eventually be turned into Circle K sites. This will allow Couche-Tard to expand the global Circle K brand and gain brand recognition in new areas of operation.

    "They are buying sites with c-stores so they can immediately re-identify and rebrand to expand their brand in Texas, where they are already pretty big. It also gets them in California and a few other states where their presence is not as heavy," Ken Shriber, managing director and CEO of Petroleum Equity Group in Chappaqua, N.Y., told Convenience Store News.

    Dennis Ruben, executive managing director of NRC Realty & Capital Advisors LLC, based in Scottsdale, Ariz., suspects that within the first year, rebranding will begin.

    "They look at each deal separately to see how to transition it. We sold them a chain in Texas and some stayed and some were converted. There may be markets they convert to Circle K and some where they keep the Corner Store name, but generally they convert stores to their brand," said Ruben.

    Terry Monroe, president of American Business Brokers and Advisors, based in Naples, Fla., compared the deal to the acquisition of Amoco by BP, where everything was eventually rebranded BP. He foresees the same future for CST and Couche-Tard. Speedway also did the same thing with Hess’ retail assets, which were all converted to the Speedway brand in less than a year, he pointed out.

    "If McDonald’s acquired a chain of stores, they wouldn't leave them Joe's Hamburgers. They would eventually convert them over," Monroe said.

    The only exception to the rebranding could be CST's Nice N Easy locations because 21 of the locations are franchised to a single owner, explained Steven Montgomery, president of b2b Solutions LLC, based in Lake Forest Ill.

    "Should the Nice N Easy company-operated locations be rebranded, they may determine that occurrence diminishes the brand's value and elect to create their own standalone brand," Montgomery said.

    The future of CST's fuel brand, which is currently Valero, is also a question mark.

    "I'm fairly certain the stores will be rebranded Circle K, but the gas brand is in question," Shriber acknowledged. "Do they keep Valero, do they convert to other brands, or do they leave it as Circle K and be unbranded? It depends on the terms of the deal."

    ADOPTING NEW PRACTICES

    With the likelihood of the CST stores being rebranded, many of the current brands or offers found within Corner Store are also likely to be changed to Circle K, and this includes the work CST Brands did on its foodservice offerings. However, Monroe believes Couche-Tard will look at the aspects of CST that are working well and may consider incorporating some of those into the Circle K brand.

    "They may take an aspect CST was doing well, such as foodservice, and test it. If they can incorporate it into their other stores, they will," he said. "Couche-Tard is publicly traded and will look for profitability."

    Ruben cited the example of Sunoco LP's purchase of Susser Holdings Corp., where Sam Susser had developed the Stripes chain and Laredo Taco Co., which was a "big money-maker." Sunoco is trying to roll out Laredo Taco Co. now.

    "It will be interesting to see what Couche-Tard decides to do after they take a look at what CST Brands is offering," said Ruben.

    Circle K does have its own brands and concepts, including the Simply Great Coffee program, which as of November 2016 had been rolled out to more than 400 stores in its North America network. The chain plans to introduce the offering to 750 stores within the year, according to Couche-Tard CEO Brian Hannasch.

    Additionally, Couche-Tard is expanding the offering of fresh sandwiches, pastries and salads to more of its stores, and the chain’s fresh prepared food program – referred to as "foodvenience" – was operational at 10 sites as of November.

    During the company's second-quarter earnings call for fiscal year 2017, Hannasch commented on the foodservice operations of CST, saying: "They've been on the same journey with regard to foodvenience or made-to-go type offer. And I think they've got an offer that fits very well for the southern half of the U.S." The chief executive added that his company is anxious to get the experts together from both retail chains "in the coming years, as I'm confident that it can accelerate our journey."

    When CST acquired Nice N Easy, one of the reasons the acquisition was attractive was because of the foodservice capabilities the locations demonstrated, Montgomery noted. This is something Circle K will want to apply where it can, but would be limited to its larger-format stores, he said, explaining Circle K will also utilize the loyalty program knowledge gained from CST's purchase of Flash Foods.

    For more on the future of CST and Couche-Tard after the merger, look in the April issue of Convenience Store News.

    By Tammy Mastroberte, Convenience Store News
    • About Tammy Mastroberte Contributing Editor Tammy Mastroberte is an award-winning writer, with more than 16 years of experience in the magazine publishing industry. She writes on a variety of subjects, including retail technology. Mastroberte previously served as executive editor of EnsembleIQ’s Convenience Store News.

    Related Content

    Related Content