Consolidation Continues Within Convenience Retail Industry

Sunoco LP (NYSE: SUN) has agreed to sell a majority of its gas station/convenience stores to 7-Eleven Inc. (owned by Tokyo-based Seven & i Holdings Co. Ltd.) for $3.31 billion in cash. The sale includes 1,108 convenience stores in 19 geographic regions, primarily located along the East Coast and in Texas.

By acquiring the bulk of SUN’s c-store and gasoline retail business, 7-Eleven will expand its store network while also improving profitability, according to a Seven & i filing. 7-Eleven is aiming to achieve average daily merchandise sales per store of $5,000 and to operate 10,000 stores by the fiscal year ending Feb. 29, 2020. This deal with Sunoco puts it at 9,815 in the US and Canada. After getting regulatory clearances and meeting customary closing conditions, the sale to 7-Eleven is expected to close by the fourth quarter of 2017.

Meanwhile, in a move that will make it the largest U.S. independent convenience store operator in store count, Circle K parent Couche-Tard announced plans to acquire CST Brands Inc. for $4.4 billion in August 2016. As part of the deal, Couche-Tard will acquire 1,146 CST Brands c-stores. Closing is expected early in Couche-Tard’s fiscal year 2018. They also announced an agreement on July 10, 2017 to buy Upper Midwest U.S. convenience store player Holiday. The transaction will see Quebec-headquartered Couche-Tard acquire 522 locations and is expected to close in the fourth quarter of fiscal year 2018 for an undisclosed amount.

Circle K USA
Circle K USA

Convenience store industry insiders are beginning to speculate on the future industry impact of these transactions. A huge challenge competitors face will be competing with these retailers on price. The bigger they get, the more buying power they have. They will be getting better deals from vendors, leaving neighboring stores to find other ways to stand out. Competing stores will have to accept the fact that they can’t get the same deals from vendors. It’s no different than when Walmart came to town and put people out of business or what amazon is currently doing to many brick and mortar businesses.

These announcements continue the trend of ongoing consolidation within the industry and should give both companies a boost moving forward.

KW Net Lease Advisors