Irving, Couche-Tard swing convenience stores deal
Retail Energy company handing over Mainways, Blue Canoes and Big Stops to Que. firm
Irving Oil Ltd. is saying goodbye to its Blue Canoes as it exits the convenience store business in Atlantic Canada and New England.
The privately-owned, Saint John-based energy company is handing over its Mainways, Blue Canoes and Big Stops to Quebec-based Alimentation Couche-Tard Inc. (TSX:ATD.B), North America's second-largest convenience retailer.
Under the 20-year deal, Couche-Tard will lease 252 Irving-owned and franchised stores. The partnership includes fuel and convenience store revenue sharing.
"We think this really is a marriage made in convenience retail heaven," Harry Hadiaris, director of the business to consumer marketing at Irving Oil, said Thursday.
"The partnership will create more growth opportunities for both of our companies in the northeast, including the southern New England states and New York, New Jersey and Pennsylvania."
The Irving convenience stores will be re-branded. Couche-Tard operates its stores under the Couche-Tard and Mac's brands in Canada and Circle-K in the United States. Big Stops will retain the existing branding.
Gas pumps will retain the Irving brand and the family-owned company will continue to supply fuel to the stores.
Hadiaris said the partnership will allow both companies to focus on what they do best.
"It will "¦ give our company the opportunity to focus on our core business of processing and marketing clean fuel to our customers," he said. "Couche-Tard is a world-class leader retailer, they are a leader in our industry. They operate excellent stores."
Irving Oil first partnered with Couche-Tard in 2001. Under that deal, 56 Irving Mainway stores converted to the Couche-Tard brand in Quebec. Couche-Tard operated the stores while Irving Oil supplied the liquid fuel. In 2003, Irving Oil leased 16 stores and stations in Atlantic Canada to the Canadian Tire Corporation.
Michel Bernard, Couche-Tard's vice-president of operations for Eastern Canada, said the acquisition of the 252 Irving stores presents a strategic opportunity for his company to expand its business in the northern United States and Atlantic Canada.
"We had no platform in the north, northeast U.S., now we have platform and we will build from that platform," he said.
As Couche-Tard grows its business, there are opportunities for Irving Oil to supply fuel to new stores.
"Our preferred brand would be Irving," said Bernard.
Bernard said the Irving stores were running at similar productivity levels as Couche-Tard's own stores.
"The sales level is pretty much similar. The average is $1.1 million, about our average in Eastern Canada as well. (The Irving) network is very well operated."
At an average of $1.1 million in sales, the 252 store deal represents annual revenues of roughly $277 million.
It is not know if there will job losses or gains as a result of the deal, which still must receive federal regulatory approval.
According to Irving Oil's website, the company's store network, which includes company-held stores as well as franchises and third-party stores that sell Irving fuel, includes 737 stations in Atlantic Canada, Quebec, Ontario and New England.
That network includes 122 stores in New Brunswick, 72 in Newfoundland and Labrador, 100 in Nova Scotia and 21 stores in Prince Edward Island.
Retail gas analyst Michael Ervin, president of Calgary's MJ Ervin & Associates Inc., said Irving Oil's deal with Couche-Tard is part of a larger industry trend.
"It's a pretty astute move," he said. "They, like other petroleum marketers have begun to see kind of the limits of how far they can take vertical integration.
"When you get to the point of having to account for bags of chips and cans of Coke, I think that's where, quite rightly, most petroleum marketers are beginning to throw up their hands and say 'that's far more than what we really want to get involved with'."
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