M&A As An Innovation Tool

Circle K rebranding underway in Norway (Image credit: Fotograf Johnny Syversen/Couche-Tard)

As Canadian retailer Couche-Tard begins this spring to change signage at the approximately 2,300 Statoil Fuel & Retail (SFR) locations in Europe it acquired in 2012, much has been said about the refreshed Circle K brand that it will use. The real story, however, is how the company uses M&A to innovate its business.

Think less brand roll up, and more operational improvement.

“We don’t just look for strategic opportunities, but also what pieces of a business are better than ours,” said Brian Hannasch, Couche-Tard’s President and CEO.

“I want to know what we can learn.”

The company’s approach harkens back to founder Alain Bouchard’s and his three partners’ belief that teamwork and shared, complementary skills would build their business, which “set the stage for our decentralized structure, and lets us act globally,” according to Hannasch.

So when Hannasch and his team were exploring the SFR deal (or the Pantry acquisition last year), they visited hundreds of stores and asked detailed questions about things like cost of trash pickup, or how much labor was required to successfully run the store. They studied customer in-store behavior, and what parking looked like at various times during the day.
“The people working in those stores could tell we wanted to learn, and that we were interested in preserving their entrepreneurship,” said Hannasch, noting that the company has had “very good luck” retaining talent. In fact, SFR’s management remained all but intact after the acquisition, although in recent years U.S. and European business units have been exchanging leaders.

Instead, a finance person had spent the first two years benchmarking the two companies’ practices. Opportunities to standardize back office activities like accounting or procurement at SFR were implemented more quickly than anything that touched customers. Some elements, like the Scandinavians’ expertise in planning, were incorporated into Couche-Tard’s global governance.

Similarly, when it came time to start working on consumer-facing promotions, Statoil branded outlets started testing programs and category management practices first proven in North America and, in the cases of a coffee promotion and loyalty program management, those ideas were gleaned in Scandinavia and applied globally.

“It’s tempting to think you have a unique edge on good ideas, but if we imposed standards blindly, we’d stop improving.”

“The line where local autonomy takes precedence is perpetually drawn and redrawn, but our aspiration is to be very local,” said Hannasch.

It has also structured its field organization to allow it to preserve local innovation and thereby teeing-up future ideas from which it can benefit globally. Its business unit leaders, each supported by a full management team, manage no more than 500 stores. This allows them to operate like their own companies, and to visit every one of their stores at least once a year.

Where Couche-Tard insists on conformity is with its vision for the business and a common value proposition or, as Hannasch put it, “What we want Circle K customers to say about us.”

“But it’s the culture that makes it work, and doing what’s right for people and the company,” he said, adding that Bouchard and his original partners are still close friends today because of this philosophy.