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Brian Hannasch

A clear set of guiding principles help Alimentation Couche-Tard navigate COVID-19 crisis

In a statement outlining its business stance in the wake of COVID-19, Alimentation Couche-Tard says it is adhering to a clear set of guiding principles as its business navigates the COVID-19 outbreak.

Brian Hannasch

Brian Hannasch

“During these troubled times, Couche-Tard is committed to being part of the solution in the communities where we work and live. Our mission as a company has always been to make our customers’ lives a little easier every day, and we know the best way to get through these difficult days is to band together and support each other,” president and CEO Brian Hannasch said in a business update published on the company’s website. “In most areas where we operate, we are considered an essential and critical business. As such, we have worked hard to stay open and serve the needs of our customers and employees. While the effects of this crisis may be felt for some time, our business model is robust and resilient against economic cycles, which will allow us to ride out this storm.”

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From the start of the crisis, the company says its response has been defined by a clear set of guiding principles across all banners:

  • We are all in this together: our company, our employees, our customers, and our suppliers.
  • We must put the health and safety of our employees and customers as our first priority.
  • We must stay true to our mission of making our customers’ lives a little easier every day.
  • We must think and act with a long-term mindset.
  • We must ensure the safeguard of our assets and manage the business with a strong focus on maximizing cash flows.

Measures to protect staff and customers

Couche-Tard’s global Health, Safety & Environment team moved quickly, capitalizing on its experience in dealing with past emergencies, such as hurricanes, floods, and widespread fires, to put in place preventative measures. These included, the installation of Plexiglas dividers at checkouts, the addition of queue line separators and floor markings to ensure proper social distancing, and the supply of gloves at the fuel pumps in certain parts of our global network.

On the food safety front, the c-store giant introduced strict cleaning and sanitization procedures in stores and food preparation areas, adding single-item packaging to bakery and other self-serve food items, suspending the use of refillable mugs and cups, and ceasing in-store product sampling.

At its distribution centres, the company did temperature checks to screen employees for possible symptoms of the virus.

Couche-Tard also put additional measures in place to support and reward employees for their efforts, including:

  • An Emergency Appreciation Pay Premium of $2.50 per hour in North America for all hourly store and distribution center employees.
  • An Employee Assistance Program to all North American employees for the duration of the pandemic.
  • An Emergency Sick Care Plan for hourly employees in North America that included both a bank of sick pay, as well as a pay continuation benefit for anyone that is either diagnosed with COVID-19 or placed under mandatory quarantine.
  • Access to virtual healthcare for hourly employees in the United States.
  • A COVID-19 Assistance Fund to help employees most severely impacted by the pandemic. The Fund is seeded through substantial salary contributions by company founder Alain Bouchard, as well as Hannasch and members of the company’s executive leadership team. The company said some employees also donated to the fund.

Like most organizations, Couche-Tard put supports in place for office employees to work from home whenever possible, while also moving ahead with plans to adapt spaces to comply with social distancing requirements and limit participants for in-person meetings.

As offices open around the globe in accordance with local health authority recommendations, the is introducing detailed checklists of cleaning and sanitization procedures, social distancing of seating and common areas, and potential work shift options have been put into place across the network.

 Community support initiatives

  • Couche-Tard launched an offer globally of free dispensed beverages for all first responders, medical personnel and employees. To date, more than two million drinks have been given out.
  • In Europe, the Company put in place the Circle K Patrol to help local communities by delivering, free of charge, merchandise to people who are most vulnerable to COVID-19 and assembling care parcels for hospital workers and those under strict confinement.
  • On April 9, Couche-Tard launched the “Little Thank Yous” initiative in Canada, which empowers customers to directly thank someone with a free Polar Pop or coffee on behalf of Circle K and Couche-Tard. On May 8, the initiative was launched in Europe. To date, close to 19,000 “Little Thank Yous” have been gifted in Canada and more than 3,000 in Europe.
  • On April 10, the Company pledged to donate 25 million meals to Feeding America. On May 4, that target was reached and Couche-Tard extended the pledge to 40 million meals to be given to local food banks. This commitment will continue through June 30.

Store performance

In Europe, from a broad perspective, shopping behaviour started to change during the second week of March, as the World Health Organization officially declared on March 11 that the novel coronavirus had reached a state of pandemic, according to a the company. In North America, the impact on shopping trends was similar but lagged that of Europe by one week. Sites remained open throughout most of the countries and regions in which Couche-Tard operates, as fuel retailers and convenience stores were deemed essential.

couche-tard2-780x520On the fuel side, the company said: “volumes declined rapidly during the first few weeks that followed the implementation of restrictive measures across the different regions, but stabilized during April and began to see a gradual improvement in the latter part of the month. Fuel margins overall have benefitted from the rapid and steep declines in crude pricing.”

From a merchandise perspective, “sales benefitted from pantry stocking in the early days of the crisis. Starting in mid-March, merchandise sales decreased due to reduced customer traffic, but were mostly stable in their decline week-over-week since then. Overall, a higher average basket helped offset a portion of the lost customer visits.”

What are people buying?

The company said, “demand has been greater for alcohol, tobacco products, basic staples, canned and dry goods, and cleaning and sanitation products. This has helped mitigate the negative impact from lower demand in the prepared food category.”

Informed by their early learnings, Couche-Tard’s teams in Europe recommended adjustments to the in-store assortment, which allowed stores in North America to better anticipate the changes in shopping behaviour.

What’s next?

Couche-Tard said it “has taken many actions aimed at right-sizing such things as non-critical capital expenditures, marketing and promotional expenses, and various professional fees.” Additional measures include:

  • Adjustments to store hours and shifts based on the analysis of data from labour models.
  • The sharing of best practices across business units and frequent scenario modeling to help optimize decision-making and minimize business risks.
  • The required authorization by a member of the executive team for all hiring related to non-store vacancies and for all business travel.

Couche-Tard said its Global Procurement team was in frequent contact with key vendors to discuss possible issues in the supply chain, identifying areas of potential shortages and putting plans in place. For instance, leveraging its Private Brands team, the company worked to source key items and maintains “there have been few meaningful stock-outs across Couche-Tard’s network.”

Innovation continues

On March 18, Couche-Tard discussed with analysts and investors its target to implement the Food at Scale program in 1,500 locations by fall. This company said this “continues to be an important area of focus and capital expenditures for this initiative remain in the budget for fiscal 2021.” It continues to build out and installing structures and equipment inside stores and the planned rollout pace remains on track. A number of stores have suspended team training sessions related to Food at Scale, however, the plan is to “turn the switch back on and support the program with sampling and marketing when safety measures are relaxed.”

The company said is has many every effort to adapt to changing customer behaviours. For instance, it has been able to expand many delivery platforms and pull forward enabling technologies, such as:

  • The expansion of home delivery in North America to more than 620 stores.
  • Click & Collect and curbside delivery in both Europe and North America, with pre-ordering and payment through the Circle K app.
  • Frictionless payment technology in Norway to accept fuel payments using license plate recognition.

Looking ahead

Couche-Tard said it “is taking action to preserve its cash position and financial flexibility, including a pause to share repurchases.”

On April 19, the company halted plans to acquire Caltex Australia Ltd. to “focus its energy on managing operations and maintaining its financial strength through the crisis.”

As at February 2, 2020, Couche-Tard had $1.8 billion in cash and equivalents on its balance sheet and a further $2.5 billion available on its revolving credit facility. The company’s cash balance has since improved, in line with the focus placed on maximizing cash flows through the crisis.

CFO Claude Tessier said: “Couche-Tard has always been managed with a disciplined mindset and a readiness to face possible rainy days ahead. We have come into this crisis in a strong position from both a financial standpoint, with a solid balance sheet and well spread debt maturities, and from an operational standpoint, with experience in temporary network shutdowns that permitted us to respond quickly to the changing landscape. We have implemented weekly COVID-19 financial reporting focused on daily cash position summaries, working capital, as well as details on retail sales, volumes and margin trends. We are taking all necessary steps to be ready to reinvest in our business and in the economy when the time comes to exit this crisis.”

In the company’s business update, Hannasch concluded: “I want to thank all our employees, customers, suppliers and partners, the leadership team, and our shareholders for their trust in the face of this pandemic. Our heart goes out to all who are suffering from the virus or taking care of loved ones. I have never been prouder to be CEO of this company, as during the most difficult days our employees have shown great kindness and care for each other, our customers, and our communities. Whether working tirelessly in our stores or remotely to support our operations, it is clear we are all in this together and will come out of this a stronger, better company.”