Sobeys sees future benefits in Quebec gas station deal

A swap of several gas station and corner store locations between Sobeys Quebec and CST Brands will help both companies grow their respective brands in la belle province, the dealmakers said.

“This alliance makes sense from every angle,” Pierre St-Laurent, first president principal business development of Sobeys Quebec, told Canadian Grocer the day after the deal was announced on Nov. 25. “It is a no-brainer, a win-win, however you want to characterize it.”

Under the reciprocal agreement, which will come into effect in early 2014, American convenience merchandise and motor fuel retail giant CST will acquire four Sobeys locations and operate them under its Quebec banner, called Dépanneur du Coin.

Those outlets will continue to sell Shell fuel, however, and five other Dépanneur du Coin stores will change their fuel brand to Shell.

"This agreement is in keeping with our plans to expand the presence of Dépanneur du Coin in Eastern Canada as a convenience goods retailer,” said Christian Houle, CST Brands’ senior vice president Canadian retail. “This is a first for CST Brands, expanding our fuel offerings by broadening our brand offerings with Shell."

According to St-Laurent, Sobeys Quebec, which last year bought 205 Shell stations across Quebec–and will start to roll out its new IGA Express gas/grocery locations next week–will also reap substantial benefits from the deal.

“We are adding five new Shell stations that are located close to existing IGA stores (which) will add value to our Air Miles program and provide more and better local service to our clients,” he said.

St-Laurent added that the mutual benefits of the alliance were immediately apparent when Houle, who was already a client because CST, a spinoff from the Ultramar chain, buys its snack and fresh food offerings from Sobeys, called this summer to discuss the idea.

“Sure we lose four locations,” said St-Laurent. “But those four will sell more food that we supply (and) we now have five new locations that will sell gas near IGA stores that didn’t have a Shell station nearby before.”

For Martin Qiu, an assistant professor of marketing with the Desautels Faculty of Management at McGill University, the CST-Sobeys swap is a reflection of a growing gas-groceries-convenience trend that is already well underway south of the border.

“Consumers are very aware of the high price of gas and they are eager to capitalize on their savings by combining trips to the grocery store and the gas station,” said Qiu.

He added that food retailers in the U.S.–notably Walmart, which gives a 15-cent discount on a gallon of gas is customers use their Walmart card–are actively targeting that consumer desire for thrift.

“Loyalty programs are a great way to attract people, but you need the locations to make it work,” said Qiu. “That’s why this deal (between Sobeys and CST) seems to make a lot of sense.”