Couche-Tard

"At Perrette, Bouchard’s supervisors would rent a space and then give him the mandate of putting in a store within a few weeks, without asking his opinion on the location chosen. He had definitely faced challenges. Often he even saw them coming beforehand, but no one would listen to his warnings. The years of trial and error had nonetheless paid off. They allowed him to develop the skill that he would later put to use: the ability to identify the best location for a convenience store, which became part of his new role at Provi-Soir. It was a responsibility that he took very seriously. To successfully carry out his task, he developed a mathematical model that he applied systematically to each new project. His basic criteria started with the number of vehicles driving to the site each day. Then he examined the number of residents who lived around the location, in expanding concentric circles to which he assigned a decreasing value according to distance. He also assessed the demographic makeup of the population, the average age, the number of children and the ethnic makup, knowing from experience that some groups are less likely to shop at convenience stores. After having been at the heart of Provi-Soir’s rapid growth, this formula, honed over time, would be one of the key elements to the success of Couche-Tard."

"More than once, Couche-Tard had doubled and even quadrupled in size, overnight. Its acquisitions both in Canada and in the United States had allowed it to develop a unique mode of operation that was simultaneously decentralized and integrated."

"Couche-Tard quickly developed a model that would guide its future stores. “Strategy 2000” is no doubt the best example of the four founders’ willingness to use the best ideas developed by other members of the Couche-Tard group as inspiration. The project was originally developed by the Mac’s division, just before Silcorp was taken over by Couche-Tard. It was then known as “Store 2000.” The model store was somewhat larger than most existing ones, sometimes as big as 280 square metres (3,000 square feet). It included a self-serve food court, with a coffee and bakery counter, as well as a fast-food section that was often concessioned to a well-known chain like Pizza Hut or Subway. Its most original feature was its decor: it could take the look of an old-time general store, mirror a European bistro or even an exotic jungle. Each establishment would determine its own interior design, based on its customer demographics. The idea was to make it an attractive destination, rather than a last resort that was convenient and nothing more."

"On the evening of Saturday, August 24, the four Couche-Tard founders found themselves at Bouchard’s home, sharing a nice meal to celebrate the start of the pan-Canadian adventure that was opening up before them. Now they had to plan their implementation schedule. In the middle of dinner, Fortin’s telephone rang. It was his contact at the Caisse de Dépôt. There was good news and bad news. The institution’s credit committee had agreed to finance the operation, but on the condition that it would raise Couche-Tard’s interest rates. Fortin swiftly took a hard stance, even though it risked scuttling the deal. There would be no question of renegotiating the agreement in principle that had been reached. If the Caisse didn’t stand by it, their word meant nothing. When the call ended, the mood at the gathering had lost its sparkle. If the financiers didn’t back down, they would have to abandon the project. Bouchard and Fortin would be flying to Toronto the following day. They had hoped they would be presenting their surprise offer to Silcorp’s president—who still knew nothing of their plan—on Monday. It was good that he was unaware, given the new circumstances. Would the meeting even come to pass? Fortin spent Sunday morning pacing at home, waiting for the telephone to ring. Had his refusal to allow the Caisse to change the deal at the last minute pushed the powerful financial institution into backing down, or made them dig in their heels? The answer came before noon: The initial agreement would be respected. They had the green light to start the acquisition process. It had been a close call, but their plan was still on track."

"A number of managers were unsatisfied with how the system worked in its early stages, and told Bouchard that they often received calls from the “head office” to resolve different problems. At the end of his tour of the stores, Bouchard rented a reception hall so he could address all the employees from the service centre in Laval, who had become so numerous that none of Couche-Tard’s buildings could hold them. “I’m not here to tell you some good news,” he told the assembly. “We all need to understand that in this organization, today and always, you and I are at the service of the stores. Not the other way around.” And that, he said, should be reflected in their vocabulary. “There is no *head office* in this company, and there never will be,” he insisted. “So, I don’t want to hear the words *head office* or *headquarters* anymore. We are a service centre and a training centre—that’s it.”"

"The example came from the very top. Bouchard had personally reproached employees “caught in the act” of working too many hours. One night when he passed by his office to pick up a file, Bouchard found an attorney, recently hired by Couche-Tard’s legal department, busy preparing a contract. He lectured him at length. “You have a family, a wife and kids. What are you still doing here at this hour? Go home!” he ordered. The young employee explained that it was normal for lawyers to work long hours, and that he’d been taught to stay late in the private firms he’d worked in before coming to Couche-Tard. “To me, it isn’t normal,” Bouchard responded. “You have to have a balanced life to be able to reach your potential. I’m paying you to have clear ideas. Go home to your family, and don’t let me see you in the office this late at night again.”"

"Typically, says Bouchard, the stronger a company becomes, the more it tends to impose its procedures on all of its components. Couche-Tard’s strength lies in taking almost the opposite tack. “Our DNA is the local business model,” Bouchard says. “It’s the most important element. It’s what allowed us to build everything we’ve built.”"

"In the summer of 2000, Couche-Tard incited a minor revolution in the world of slushies—the sugary mixture of crushed ice and sweet flavours adored by children. Up to that time, convenience stores in its network sold products from the American company Slush Puppie. As in many other areas, Bouchard felt he needed to impose his own brand with the hope of making another profit margin grow. Couche-Tard invested millions of dollars in acquiring hundreds of slushy distributors, developing flavours and creating an irreverent advertising campaign intended to make a big splash. Couche-Tard’s “Sloche” was named in reference to a substance well known by Quebecers in their oft-frigid northern climate: the dirty muck found along streets when the snow melts in spring. *Sloche* is part snow, part water and thoroughly filthy. And with a name like that, why not take things a step further? Raspberry Sloche, scarlet-red in colour, was christened “Sang-Froid” (“Cold Blood”). Grape was “Full Zinzin” (“Completely Insane,” with a play on the sound of the French word for grape, *raisin*). Blueberry was named “Schtroumpf Écrasé” (“Crushed Smurf”).[[34]](private://read/01j5mtjqkzkqnzrmf5b4rr6pr2/#notes34) Another flavour, unsettlingly black in colour, was called Goudron Sauvage (“Wild Tar”). Clearly, the target was a young audience, in that rebellious zone between the ages of nine and 17. The advertising campaign that accompanied the launch of the product put more weight on that strategy. The ads brazenly mocked common public health messages. Banners on busses proclaimed that a Sloche “contains eight non-essential elements,” and announced that it constitutes “a good source of crushed ice.” Their sarcastic approach went so far as to parody the advertisements imposed by Health Canada on cigarette packages, featuring graphic photos showing the ravages of cancer caused by tobacco use. Couche-Tard’s referential advertisement showed a discoloured face, with the caption “Sloche can cause colouration of the mouth.” Then there was the ad showing the interior of a human skull, with the phrase “Sloche temporarily freezes the brain.” The ad campaign for “Rosebeef” Sloche won five awards from the advertising association Publicité-Club de Montréal, including its highest distinction, the Grand Coq d’Or. The formula’s success was explosive. Sloche sales went through the roof, reaching 400 percent of Slush Puppie sales in just one summer. Gross margin on the product reached 60 percent."

"In the summer of 1996, taking advantage of a drop in Silcorp’s shares, Couche-Tard presented an unsolicited purchase offer of $16.50 per share—the equivalent of $74 million. It was a premium of 26 percent over the previous month’s average stock price. Silcorp’s share price immediately jumped to $17.00: A sign that the market anticipated a higher bid. That expectation was accurate."

"Taking inspiration from the coup they had pulled off in the company’s infancy—the purchase of their first 11 Couche-Tard stores in Quebec City—the four leaders managed to finance the transaction by leveraging the real estate assets owned by their target for purchase. They found an American buyer for all the buildings owned by Johnson Oil, and Couche-Tard would become their renters. The money they raised from this sale of assets was sufficient for an American bank to agree to extend them a loan that would cover the balance of the purchase cost without requiring additional collateral."

"Of course, more had to be done. Accounting requires a certain amount of regularity to be effective; the same goes for establishing team spirit. For that reason, Couche-Tard instituted a mandatory meeting during which each division would report its results every four weeks. Holding the meetings in person was impossible: The territory to cover was too vast, the distances too great and upper management’s time too valuable. Telephone was overly impersonal; it wouldn’t help unite the senior management team effectively. They decided on video conferences. These virtual meetings—innovative then—would become an integral part of Couche-Tard’s business cycle. They would involve comparing gross margins earned on each product line: gas, food, cigarettes, etc. Earnings, however, were not the only measure for business performance. Was store traffic growing? Did the manager turnover rate exceed the limit, fixed at 20 percent annually? “If a division is at 30 percent,” says Plourde, “there’s a problem with human resources management. You’re either picking the wrong people, failing to integrate them or not training them properly.” It’s a signal that it’s time to look closely, to find the root cause and make the necessary corrections. Failing to do so will inevitably start to affect morale at all levels. This will have an impact on customer service and, in turn, store performance. The same logic can be applied to many other indicators: the number of workplace accidents, absenteeism rates, use of overtime, employee attendance for training offered by the company. All variables were measured, compared and discussed in Couche-Tard’s meetings."

"This type of exercise was nothing new for the Couche-Tard team—although they were used to a more modest scale. They had become experts in their unique choreography: Jacques D’Amours handled leases and distribution, Richard Fortin examined the financial records and debts, Réal Plourde analyzed human resources and the operational structure, and Alain Bouchard looked at real estate and the global business plan. Each team member was important, each had his own strengths. It was a given that no decision of that scale could be taken unless they all agreed."

"As soon as the deal was announced, Bouchard declared that Couche-Tard’s objective was to increase the number of establishments in its new American Midwest division from 225 to 600. It would take place through small acquisitions, and by building new convenience stores inspired by the “Strategy 2000” concept. To succeed, they had to rely on the management team already in place in Columbus, whose jobs Couche-Tard had promised to protect."

"“They both said the deal was the best thing that ever happened to them in their career, and they encouraged me to give it a try.” Hannasch asked them why they thought so. The answer: because Couche-Tard management did what they had said they would do, they told him. They invested in the stores, took care of their people, worked to grow the business. And, they told him, since the company had acquired Silcorp, Couche-Tard’s management hadn’t broken its word—not once. “They’re four very humble guys with a vision of growing and doing the right thing,” said the two men, who added that in the business world, that’s “very refreshing.”"

"⁠It was Pierre Peters, one of the longest-serving executives at Couche-Tard, who had the responsibility of going to Columbus and explaining to the management of the group’s fourth division how Couche-Tard operated—the administrative procedures they followed. The 225 stores had to be grouped into smaller units of 10 to 12 stores, with a market manager placed in charge of each unit. The market manager would act almost as an owner of the micro-chain of stores; he or she would be expected to visit two stores a day to ensure they were running well and to resolve problems as soon as they appeared. This would give the store manager time to focus on customer service. “The efficiency of an operation doesn’t come from offices,” says Peters. “Any problem is going to be found in the store, and so that’s where the solution will be.”⁠"

"When the presentation was over, all the interested groups were granted access to a room containing all the company’s data: contracts, leases, financial results, accounts, employee records, technical assessments. Each potential buyer had two days to dig into the massive amount of information. Réal Plourde remembers a funny scene at the marathon. “The seller was pretty impressed to see the founders of Couche-Tard with our noses in the books, while the other groups had sent lawyers and accountants.”"

"Acquiring Johnson Oil and its Bigfoot stores would add USD $350 million to Couche-Tard’s annual sales. The USD $66 million price tag was therefore fairly modest—particularly since the company was already making a profit."

"After purchasing Circle K in 2003, Couche-Tard’s sizeable appetite seemed to be satiated. It was time for the bear, amply fattened up, to hibernate in its cave and metabolize some of the abundant mass it had taken on. To reduce the weight of its debt, Couche-Tard would shed some of its less profitable stores, and hundreds of real estate properties."

"Couche-Tard management had been making big promises about their next conquest; but they couldn’t deliver the goods. Prudence, Bouchard urged. Patience, Richard Fortin added. “Our logo is an owl,” says Fortin. “We perched on our branch, looked at the numbers, and when we spotted prey that seemed weak enough, we swooped down on it.”"

"The share price for the company, as was the case for many other companies, took a beating during this period, although Couche-Tard took on very little debt. In fact, its value neared a record low in proportion to profits. This prompted management to launch a massive share buy-back program. In two years, Couche-Tard acquired 20 million of its own shares at an average value of $14 per share, then delisted them, thus increasing shareholder equity. This time, to weather the storm, the Couche-Tard founders were placing their bets…on Couche-Tard."

"While busy opening a service centre in each division, training employees and renovating American stores—and spending hundreds of millions of dollars a year doing so—Couche-Tard was nonetheless making profits."