Cigarette consumption is down in the United States and Alimentation Couche-Tard wants to deploy a “very targeted” promotional offensive to slow this decline in its American stores. The strategy is however denounced by a group of fight against the tobacco addiction.
Updated June 28
Stephane Rolland The Canadian Press
“Our numbers are in line with the industry trend, we have to do better than the industry,” President and CEO Brian Hannasch said on a conference call Wednesday to discuss the results of the fourth trimester.
The Quebec company intends to take advantage of its loyalty program in its American stores to achieve this objective. “We are going to think about how to use these tools in a very targeted way to generate more sales in the category of combustible products, particularly tobacco. »
The promotional effort displeases the American Lung Association, which calls the strategy “cynical.” “We see that it’s not just the tobacco companies, but also the convenience stores, who continue to promote their deadly products to as many people as possible,” denounces the association’s public policy officer, Michael Seilback, in interview.
This kind of effort can make it even more difficult for those who want to quit smoking, he says. “Nicotine is one of the most addictive products and most smokers want to quit. When we have companies promoting, that’s one more hurdle that the industry knowingly uses to keep them hooked. »
It was not possible to obtain a reaction from the company to Mr. Seilback’s remarks at the end of the afternoon.
In the United States, the discount sale of cigarettes through a loyalty program is allowed, according to an industry guideline published in March 2023 by the Food and Drug Administration (FDA), the US Health Canada equivalent. “For example, the sale of a subscription to a program that offers a 10% discount on tobacco would not be prohibited,” the document reads.
Couche-Tard’s strategy should be a “warning signal” to demonstrate the need for tougher regulations, believes Mr. Seilback. He points out that this type of prohibition already exists in local administrations. “It is imperative that the price of tobacco remains high. Retailers know that discounts make people buy more. »
Tobacco sales down
Tobacco consumption is declining in the United States and the stores of Couche-Tard, which operates the Circle K brand south of the border, are no exception to this trend.
About 11% of Americans identified as smokers in 2022, an all-time low, according to a survey by the Centers for Disease Control and Prevention released last April. This rate was 12.5% in 2020 and 2021.
Tobacco products helped Couche-Tard generate sales of US$6.39 billion across all regions where the company operates, in fiscal 2023 ending April 25. Last year, this figure was 6.48 billion US.
Cigarette sales are also under pressure in Canada. Mr. Hannasch attributes these difficulties to the strength of the illicit market in the country. “It’s sad,” he laments. The illicit market is approaching 40% of the total volume. »
This time last year, Couche-Tard speculated that the rising cost of living linked to soaring inflation had given impetus to the illicit market in Canada. “There seems to be a transfer to the black market,” said the chief financial officer, Claude Tessier, in June 2022.
Results above expectations
The operator of convenience stores and service stations announced the day before results that exceeded analysts’ expectations for the fourth quarter ended April 25.
The net profit of the Laval company increased by 40% to reach 670 million US. Diluted adjusted earnings per share reached 71 cents. Revenues, for their part, reached 16.26 billion US, a decrease of 1%.
Prior to the earnings release, analysts had expected earnings per share of 49 cents, according to financial data firm Refinitiv.
The results stand out with high margins in the fuel sector, notes analyst Martin Landry of Stifel GMP. “To our surprise, margins remain strong at 45 cents per gallon, higher than our forecast of 37 cents per gallon. It outperforms the industry by more than 20%. »
During the conference, Mr. Hannasch said that the discrepancy was due to a “hundreds of little things”. He pointed out that the company handles more of the fuel transport internally.
Couche-Tard shares gained $2.65, or 4.1%, to $68 at the close of trading on the Toronto Stock Exchange.
2023-06-28 16:01:46
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