(Montreal) 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 tobacco control group.
“Our numbers are in line with the industry trend, we need 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 will be thinking about how to use these tools in a very targeted way to generate more sales in the combustible product category, 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,” said 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 get an immediate reaction from the company about Mr. Seilback.
In the United States, the discount sale of cigarettes through a loyalty program is permitted, 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 serve as “a wake-up call” to demonstrate the need for tougher regulations, Seilback believes. He points out that this type of prohibition already exists in local jurisdictions. “It is imperative that the price of tobacco remains high. Retailers know that discounts make people buy more. »
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, a historic 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 in all regions where the company operates, in fiscal year 2023 ending April 25. Last year, that figure was US6.48 billion.
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 shift to the black market,” Chief Financial Officer Claude Tessier said in June 2022.
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 Laval company’s net profit increased by 40% to US670 million. Diluted adjusted earnings per share reached 71 cents. Revenues, for their part, reached US$16.26 billion, 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, Hannasch said the discrepancy was due to “a hundred little things.” He said the company is handling more of the fuel transportation internally.
Couche-Tard shares gained $2.16, or 3.31%, to $67.51 on the Toronto Stock Exchange in the early afternoon.
