Couche-Tard ‘excited,’ but being careful around controversial Juul pods

Alimentation Couche-Tard is keeping an eye on its policies around “lower risk” smoking products after controversial flavoured e-cigarette maker Juul Labs yanked mango, fruit and cucumber flavoured pods from U.S. shelves in a bid to reduce their appeal to minors.

Brian Hannasch, the convenience store chain’s chief executive, said Couche-Tard is “excited” by the growth of the market for such tobacco alternatives, but is also watching them closely because products like Juul are “probably too successful” because too many minors have been able to obtain them.

“Couche-Tard is focused on making sure we’re not part of the problem, so we’ve gone back and revisited our processes and practices around making sure that we don’t sell to underaged consumers, whether that be alcohol, tobacco or anything else,” Hannasch told a conference call Wednesday to discuss the company’s latest financial results.

“Our next step is collaborating with our partners to understand how we can bring reduced (risk) products into the stores, continuing to offer innovation but make sure those devices only end up in the hands of of-age consumers.”

In making its decision earlier this month, Juul said the Canadian and U.S. markets are different.

Hannasch said he applauds the decision to remove the flavours from the U.S., though they are still available in Canada. He added that he’s feeling “optimistic” about the future of alternative tobacco products because they have triggered a “short-term bump” for the market.

Tobacco and related products have steadily been helping to lift Couche-Tard earnings in recent years.

After the close of markets Tuesday, the retailer, which keeps its books in U.S. dollars, reported its net earnings attributable to shareholders were US$473.1 or 84 cents per diluted share, up from $432.5 million or 76 cents per share from the same period the previous year.

Its revenues also saw a spike, rising 21 per cent to $14.7 billion, up from $12.1 billion. Same-store merchandise revenues — a key retail metric — rose by 5.1 per cent in Canada, 4.4 per cent in the U.S. and 4.6 per cent in Europe.

The strength Hannasch said Couche-Tard saw in Canada was partially driven by higher taxes on cigarettes and other tobacco products, but he also noted that fuel was a bright spot for the company this quarter.

Couche-Tard’s fuel volumes grew overall by 12.6 per cent, though its fuel gross margins decreased by 2.82 US cents per gallon in the U.S. to 21.88 US cents per gallon and by 22 cents Canadian per litre in Canada to 8.42 cents Canadian per litre.

Moving forward, Hannasch said the company would be focused on being more local, building more locations and focusing on food that can be scaled across a wide variety of geographies and store types.

It will also put more effort into store experiences, he said.

“The experience of buying fuel and buying items in our stores has largely been unchanged since card readers were introduced 25 years ago,” he said.

“We think we are one of the companies that can and should play a role in disrupting what that journey looks like, so we have a variety of projects underway to significantly change how we interface with customers in the coming years.”

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