From a single convenience store in a suburb of Montreal in 1980 to more than 10,000 convenience stores across North America and Europe, the Couche-Tard story is an extreme example of effectiveness . Led by its founder Alain Bouchard, Couche-Tard (French for sleep-late) has spent decades consolidating the convenience store industry by relentlessly focusing on margins at its stores and using the cash flow generated to grow inorganically. The result of these efforts has been the creation of the largest convenience store chain in the world, with plenty of room to continue growing in the fragmented industry.
Couche-Tard’s business model focuses on consolidation of the convenience store industry, using operational expertise to differentiate its store base and leveraging that advantage to acquire and improve its competitors’ businesses . As CEO Brian Hannasch explains, Couche-Tard is “in the business of selling time” – constantly seeking to improve the customer experience by maximizing the speed of service and convenience .
Couche-Tard owns and operates the vast majority of its stores, taking on the operational risk, as well as the rewards that come from its expertise. Choosing to own the stores (rather than franchise) allows Couche-Tard to execute on its core operational capabilities and ensure a consistent customer experience across the network.
The company also places a relentless focus on merchandising, introducing food prepared on site (hot-dogs and other quickly prepared food) and developing private labels to generate higher margins than traditional fuel sales. Since May 2014, the company has introduced over 100 private label goods across its network, generating improved margins and differentiating itself from its competitors . The optimization of the store offerings is complemented by Couche-Tard’s use of its scale to improve supply chain conditions across its network. This skill is particularly helpful with new stores in the network that benefit from supply agreement renegotiations, such as Couche-Tard’s newly acquired chain, The Pantry. .
Couche-Tard operates through a lean, decentralized management structure. The company centralizes back-office issues such as IT and accounting to generate efficiencies of scale but leaves customer-facing issues such as marketing and pricing to relatively autonomous business units. With these business units separated by geography, Couche-Tard believes it is critical to transfer its personnel across units to share best practices and create executive-level talent that understands all aspects of Couche-Tard’s business .
Alignment of Business & Operating Models
Couche-Tard has been a smashing global success (the stock return 50% CAGR over the past 5 years), thanks to an alignment between the business and operating model that makes positively reinforce each other. The business model is built upon the premise of industry consolidation, which requires significant cash flows from the existing asset base to acquire a competitor and to pay down debt in the future. Couche-Tard’s operating model has therefore been heavily geared towards generating as much cash-flow from the business as possible through complete store ownership, heavy focus on high-margin merchandising and minimizing overhead and corporate costs.
The alignment between models allowed Couche-Tard to make major acquisitions, like the purchase of Statoil in 2012, then leverage its operational capabilities to repay the debt required for that acquisition. As the company grows, its economies of scale and operational expertise also develops, allowing it to generate greater cash flow for future acquisitions. By continuing to demonstrate discipline in its acquisition decisions and in its operational focus, Couche-Tard can easily continue this winning strategy and make it increasingly difficult for the competition to surpass the company. With its latest acquisition of Topaz, an Irish chain, Couche-Tard and its winking owl are steadily marching towards a global convenience store empire, an empire built on organizational effectiveness .