Alimentation Couche-Tard announced on Friday that it planned to buy Żabka, Poland’s largest convenience retailer, for about $8.6 billion. If the deal goes through, Żabka’s 13,000 stores in Poland and Romania would significantly bolster Couche-Tard’s presence in the region.
But what’s inside the stores may be just as important for the Canadian retailer. Key parts of the Polish retailer’s business could support Core + More, the forward-looking strategy Couche-Tard rolled out earlier this year.
“This is a unique opportunity to invest in a business we deeply admire, one that is already operating at the leading edge of convenience in areas such as food, digital engagement, supply chain and innovation,” said Alex Miller, president and CEO of Couche-Tard, in a presentation on Friday. He added, “many of the capabilities we believe will define the future of convenience already exist at scale within Żabka.”
When an analyst asked if Couche-Tard would proliferate the best parts of Żabka across the rest of its footprint if the deal closed, Miller listed off areas where the European chain could help improve its business in North America and elsewhere.
He highlighted food as a main area, noting Żabka’s food program is not too different from Circle K’s Fresh Food, Fast program. With Couche-Tard seeking to grow the food side of its business, Miller sees a lot the Canadian company could learn from its Polish target.
“One in every five [Żabka] transactions includes a quick serve meal, so they skew much higher on food and foodservice,” he noted. He also pointed out that the Polish retailer has a heavy emphasis on beverages, which is another area of focus for Couche-Tard.
Miller said that Żabka is Poland’s leading provider of warm snacks, showing just how strongly entrenched in daily life its offerings are. Żabka’s fresh food menu includes pizza, burgers, fried foods and sandwiches.
This isn’t the first time Couche-Tard has looked to M&A to build out its foodservice capabilities. The company cited food as part of the reason for its acquisitions of both Holiday Stationstores and GetGo Café + Market.
Tomasz Blicharski, current group chief strategy and development officer and incoming CEO of Żabka, said during the call that the Polish retailer is constantly updating its offering “to create excitement for the customers to come more often.”
Private label is another area where Miller sees Couche-Tard learning from Żabka.
“Żabka is absolutely winning in own brands and private label,” Miller said. “I think how they go about that practice is absolutely applicable here in Europe and in North America.”
Innovative technology and supply chain approach
Żabka brings experience in multiple facets of in-store technology. For example, the company has waded into the autonomous c-store space with its Żabka Nano stores. Dozens of these unmanned sites, which use smart cameras to record what people take from the shelves and charge them once they leave, are currently in operation, according to the company’s website.
Blicharski also highlighted the company’s app, which he said is one of the most downloaded apps in Poland and gets about 2 million users per day seeking personalized offers, loyalty program access and other services. When it comes to technology, Miller said he thinks the information sharing can go both ways.
“I think we're both really excited to get our digital, our data, our AI tools together and see where best practice lies and how we can apply those across our broader business,” said Miller during the call.
Miller also noted that Couche-Tard could learn from Żabka’s approach to its supply chain.
“Żabka has full control of their entire merchandise supply chain, supplying well over 99% of their own products to their stores,” said Miller. “Here, we think we have applicability and learnings across both Europe and North America.”
That includes Żabka’s 19 cross-docking facilities and eight distribution centers, Miller said. Blicharski added that most of these distribution centers were opened in the last few years.
“Some of them are fully automated,” he added.
Overall, Couche-Tard clearly sees a lot in the Polish retailer that it plans to try applying to other areas of its business as it contends with macroeconomic headwinds and a rapidly evolving industry.
“In many respects, Żabka is a real-world example of where Core + More can go,” said Miller. “It brings complementary capabilities that can advance our strategy, which is why we view this opportunity as much more than simply adding stores.”
