ALAIN BOUCHARD STARTED Alimentation Couche-Tard with one store in 1980. In 1986,
with a network of 34 stores, a predecessor of Couche-Tard completed an initial public offering and
listed its shares on the Montreal Exchange. After establishing a leading position in Quebec, Couche-
Tard expanded through internal growth and acquisitions in Ontario and Western Canada in 1997. In
May 1997, Couche-Tard acquired from Provigo Inc. 245 Provi-Soir stores in Quebec and 50 Wink’s
stores in Ontario and Western Canada.

In April 1999, Couche-Tard acquired 980 stores in Ontario and Western Canada operating under
the Mac’s, Mike’s Mart and Becker’s banners through the acquisition of Silcorp Limited. Beginning in
2001, Couche-Tard moved into the U.S. market. In June 2001, the company completed its first U.S.
acquisition when it purchased 172 stores under the Bigfoot banner in Indiana, Illinois and Kentucky.
In August 2002, Couche-Tard acquired 287 stores from Dairy Mart, also located in the Midwest.

The following year in December 2003, Couche-Tard made its biggest splash in the U.S. market,
acquiring the Circle K brand, which included 1,663 Circle K stores in 16 states and an additional
616 franchised and licensed units. Despite weak margins and new competition in the U.S. and
Canada, the company produce its highest revenues to date in 2007.

2007 Company Highlights
Record revenues of $12.1 billion
+ 21.6% in the U.S.
+ 19% in Canada
Motor fuel sales $7.5 billion + 29.2%
Merchandise and services
$4.6 billion + 11.1%
Same-Store Sales Growth
Merchandise and services

Up 3.3% in the U.S.
Up 2.6% in Canada
Motor fuel
Up 2.9% in the U.S.
Up 4.8% in Canada

TO HEAR RICHARD FORTIN TELL IT, there was a time when Alimentation Couche-Tard had a hard time raising capital to fi nance acquisitions. How the times have changed.

Today, Couche-Tard, operates more than 5,600 convenience stores in the U.S. in Canada under three powerful brands, Couche-Tard, Mac’s and Circle K, and maintains a thriving international franchisee network that spans nearly 4,000 stores and 10 countries.

But it’s not just the store count and impressive retail network that earned the Laval, Quebec-based marketer Convenience Store Decisions’ 2007 Chain of the Year honors. It’s the exceptional leadership, impressive fi scal acumen and its outstanding decisionmaking that sets it apart from many of its peers.

“When we started this business, we had big goals, but certainly didn’t see the company becoming this big,” said Couche-Tard’s founder, President and CEO, Alain Bouchard. “But we had a vision that began in the early 1980s that recognized customers had needs that had to be taken care of around the clock. Many stores closed by 9 p.m. back then. We saw that as an opportunity to carve out our niche and begin growing the business. It was the fi rst step in what has become a wonderful growth process.”

But Couche-Tard’s growth almost never came to be. Fortin, executive vice president and chief fi nancial offi cer, tells the story how in 1982 Bouchard, with just three stores as the company’s only assets, reached out to his local banker to fi nance an acquisition. He wanted to buy another three stores in the same Quebec market, which would have doubled the size of the chain and boosted revenues for future acquisitions. The local banker, with whom Bouchard had worked with for years, turned him down. “That is far too aggressive,” the banker said.

“Too many stores to manage and expect a good return.”

Bouchard turned to Fortin, a long-time friend that worked in the banking industry, and fi nanced the deal. Within a couple of years Fortin; Jacques D’Amours, vice president of administration; and Réal Plourde, executive vice president and chief operating offi cer, joined Bouchard as partners. Together, the group has gone on to acquire some of the most venerable convenience store brands in the U.S. and Canada, including Circle K, Mac’s, Becker’s, Dairy Mart and Bigfoot stores. These acquisitions opened the doors to its fl ourishing international business. (See “Couche-Tard Through the Years” on P. 12 for more on acquisitions.)

But what’s even more impressive than the company’s remarkable growth over the past dozen years is how intelligently it has grown and how well-positioned it is to continue an aggressive growth strategy. Take a look at the numbers:
• Couche-Tard owns 1,400 properties valued at $1.5 billion that it could tap into at any time to fund an acquisition, Bouchard said.
• For Fiscal-Year 2007, Couche-Tard reported record revenues of $12.1 billion, up 19%.
• Motor fuels sales jumped 30% to $7.5 billion, which is sure to grow as the company adds fuel to new and existing sites. Customers are catching on to Couche-Tard’s services:
• At a time when competition from other convenience store chains and retail channels has never been higher, Couche-Tard’s same store merchandise sales are up 3% in the U.S. and 3.3% in Canada.
• Same store motor fuel sales are up 5% in Canada and 3% in the U.S. Couche-Tard is aggressively going after new customers. Over the next year, it plans to acquire as many as 300 stores, complete 400 store makeovers as part of its IMPACT (or Innovation Marketing Personnel Alimentation Couche-Tard) retail program and place more of an emphasis on fresh foods, new products and store marketing, the price tag for which will surely stretch north of $100 million.

In 2007 alone, the company, which has 45,000 employees, added 506 stores to its network and renovated 413 stores. If only the local banker could see Alain Bouchard now. But he is hardly one to gloat. The biggest message he wants to deliver is how excited he is about the future of Couche-Tard and the convenience store industry.

“Our industry has survived the test of time. We have outstanding operators everywhere that have made convenience stores the leading destination for items like foodservice and everyday groceries,” Bouchard said. “At Couche-Tard, we have the talented people and resources to carry out our business plan to become the biggest convenience store operator in North America, and that makes us very proud because of the enormous respect we have for the industry.”

Bouchard and Plourde are relentless in their pursuit of acquisitions and new store sites. The pair estimates in the past year, they spent more than half of their time touring the regions, stores and potential acquistions, either together or individually.

“We both really enjoy getting out and meeting the people who are pulling the wagon,” Bouchard said. “I have never doubted that the single most important ingredient in our success is people. Especially the store managers, dealers and customer service employees, but also the market and regional directors, the talented and motivated support teams, and the industry’s most accomplished group of leaders.”

The company is also not afraid to take chances. For example, Couche-Tard is managed through a decentralized management structure, which includes nine regional offi ces in the U.S. and Canada, each run by what Bouchard calls “CEOs,” that have full decision-making power and support from the parent company.

“I get used to the comments when visitors realize my offi ce looks out on the parking lot, but the message here is we don’t have a head offi ce,” Bouchard said. “At our executive offi ces [in Laval, Quebec], we propose management strategies to the board of directors and steer the company’s direction. Each of our divisions is run by a vice president who is essentially a CEO of his own multi-million dollar company. Responsibility is delegated generously at the base of the pyramid where each store manager has wide discretionary powers.”

Despite the strong retail network and financial portfolio, Couche-Tard operates as a lean, cost-conscious group that puts a lot of emphasis on the feedback it receives from employees. “Back in 2003, we nearly gave up on the Circle K stores we had acquired in El Paso, Texas, which were in very poor shape. But the store managers persuaded me to give it a trial,” Bouchard said. “Last year, those stores returned operating income of approximately $7 million and doubled projections. This not only showed the mettle of the team in El Paso, it also validated for me our whole philosophy of empowerment. Circle K had been very centrally run and it was a test of our values when we took over.”

Couche-Tard is now the main consolidator in the North American c-store market and its methodology doesn’t vary. “We adhere to a very disciplined program to buy strategically and well, to integrate new assets effectively and to rapidly pay down any debt encountered in the process,” Bouchard said.

The formula also dictates: • Couche-Tard will not go below an average 25% return on capital invested within fi ve years. • It invests in upgrading the acquired assets. • Regional teams are skilled at swiftly applying and teaching shared processes and benchmarking.

“Right now, good opportunities are plentiful and I expect this to continue for several years,” Bouchard said. “This is due to the same economic pressures that reduced profi ts last year, particularly the tightening motor-fuel margins.”

Faced with declining margins and increasing competition, owners of small and medium size chains face a Darwinian choice: acquire and evolve or look for a buyer. “Organizationally we are well positioned. Until quite recently, Réal, Richard and I would chase down opportunities ourselves, and I loved that part of the job. But we all move on. Today’s process refl ects both our scale and administrative scope.”

Under the guidance of Vice President of Real Estate Development Mike Guinard, who accepted Couche-Tard’s Chain of the Year award at a CSD dinner honoring the chain at the NACS Show last month, regional teams in every division are mandated to seek out growth opportunities, whether by acquisition or by new-to-industry construction. Each team follows a strategy dictated by its marketplace. Recommendations pass fi rst through the division vice presidents, then the appropriate senior vice president before going to the home offi ce in Laval. “It’s an excellent system with the right decisions being made at the right place along the way,” Bouchard said.

Successful business alliances are another distinction in Couche- Tard’s success.

“When we form a partnership with another organization, we’re not looking for quick fi xes,” Plourde said. “We’re looking for fundamental, long-term value and the cooperation of people who share our views and our values.”

Couche-Tard counts many notable companies among its business associates. Prominent among them are many of the major oil companies. With motor fuel sales contributing 68% of U.S. network revenues (39% in Canada), the company markets wellknown brands of fuel in various regions as well as its own brands. Its partners include global and national companies such as Shell, ConocoPhillips, Esso, BP, Marathon, Ultramar, Irving and Petro Canada. Many of these oil companies also operate convenience stores at selected gas stations. However, recent trends are making partners out of former competitors as the oil companies refocus on their core business and sell off in-store merchandising efforts.

For example, last December, Couche-Tard acquired 236 outlets from Shell Oil in the Western U.S.

“Shell had decided to look for specialty operators of its convenience store network,” said Brian Hannasch, Couche-Tard’s senior vice president of Western North America operations. “We have known Shell for years and have great respect for the brand so the partnership was a natural for us.”

The fuel facilities remain Shell branded and the stores become Circle K. Add-on arrangements to offer Shell fuel at other Circle K sites will make Couche-Tard one of the largest Shell wholesalers in the U.S.

In the Midwest, Couche-Tard is the largest branded partner of Marathon Petroleum Co. LLC, one of the area’s leading fuel suppliers. The partnership has grown fi ve-fold in four years, refl ecting a solid and mutually respectful relationship.

On the supplier front, manufacturers have the same mutual respect for Couche-Tard. A shared focus on innovation drives a strong relationship with Anheuser-Busch, whose products are in almost half of the company’s stores.

“We have a great working relationship with every level of Couche-Tard Management,” says Joe Vonder Haar, the St. Louisbased brewer’s vice president of national retail sales for the convenience channel. “We are focused on growing the beer category and they really work to drive each category and share best practices. For example, Couche-Tard brought walk-in coolers to the U.S. convenience store industry. They elevate the image of beer and give the beer consumer a unique shopping experience.”

As part of Couche-Tard’s overall retail strategy, stores are located in high-traffi c areas, which includes nontraditional locations like linear strip malls and shopping centers. The design of the stores is based on attracting customers in their local markets rather than conforming to a single model. The average store size is between 2,000 and 2,500 sq. ft. compared with approximately 3,000 sq. ft. for all new stores. The additional space is to accommodate quick-service restaurants (QSRs) and seating.

At the core of its retail offering is a quality assortment of freshly-brewed coffee, frozen/iced beverages, fresh sandwiches and other fresh food items that are marketed under several proprietary brands including La Maisonnee, Sunshine Joe Coffee Co., Thirst Buster and The Frozen Zone. Couche-Tard also sells motor fuel under multiple private labels, including Couche-Tard, Mac’s and Circle K. While branding is considered an important asset, the company maintains is not dependent upon any single trademark or trade name.

“Our brand is something we have worked hard on building,” Bouchard said. “At the end of the day, our company brands and the equity we have built with our loyal customers is what we want them to remember. A big part of the brand we have built is our relationship with the customers and our employees.”



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