Success Clue Casey's General Stores Foodservice

When you expand your business model and that new model drives up customer satisfaction, transactions, and day-part sales it time to expand that model. Well that is exactly what Casey’s General Stores did with the success of its foodservice offerings 10+ years ago.  They tested, found success then rolled out the new products to existing markets both large and small.  Guess what. 

It drove top line sales and bottom-line profits at all units while driving up year over year customer counts.  With that knowledge in hand Casey's General Stores Inc.'s they looked for an acquisition, so they could garner incremental sales and customers according to Steven Johnson, Grocerant Guru® at Tacoma, WA based Foodservice Solutions®.

Guess what, Casey’s announced a definitive agreement to acquire Omaha, Neb.-based Buchanan Energy, owner of 94 Bucky's Convenience Stores, in an all-cash transaction for $580 million. The purchase price includes tax benefits valued at $80 million for a net after-tax purchase price of $500 million. The transaction, which is expected to be completed by the end of 2020, will bring Casey's network count to more than 2,300 stores.

Casey's President and CEO Darren Rebelez said the biggest opportunity lies in prepared food . "The mix of prepared food for Bucky's is about 7 percent vs. our 31 percent, so there is a significant opportunity to add that capability," he explained during a company call on Nov. 9. "These are already high-volume stores on the grocery and other merchandise side of the ledger. The prepared food business would be a truly incremental add."

Battle for Share of Stomach

Grocerant niche Ready-2-Eat and Heat-N-Eat food is still in it’s infancy according to Johnson, “the foodservice marketplace channel by channel continues to evolve and the only constant is continued customer migration too Ready-2-Eat and Heat-N-Eat fresh prepared food.”

CS new reported that “Some Bucky's locations have kitchens already — although Casey's may have "to make some tweaks to equipment" — while other locations are smaller and may need some more work. Casey's has capital set aside to "make all of this happen,".

Rebelez continued saying “Any store that Casey's remodels and adds its pizza program to will be rebranded Casey's.” .."We will not rebrand anything Casey's unless it has our full complement of our assortment, including our prepared foods,"

DEAL SYNERGIES

Casey's expects to realize approximately $23 million in synergies from the transaction by the third year, according to Chief Financial Officer Steve Bramlage.

These synergies, he explained, will come primarily from four areas:

1.       Improved Casey's retail fuel margins and gross profits based on the addition of the Buchanan Energy network.

2.       Increased merchandise profit margins, with expected gross margin uplift on select merchandise categories by rolling out Casey's product and in-store offerings, increased procurement leverage, and distribution of Casey's private-label portfolio.

3.       Reductions in operations and selling, general and administrative expense related costs through the combination of operations and distribution synergies.

4.       Upgrades to Bucky's locations allowing Casey's to bring its menu to the stores.

The transaction is expected to provide "substantial, incremental and accretive EBITDA and earnings per share for Casey's, and is expected to generate returns on our investment well in excess of our cost of capital," Bramlage noted.  How and where can you expand your successful business model?

Invite Foodservice Solutions® to complete a Grocerant Program Assessment, Grocerant ScoreCard, or for product positioning or placement assistance, or call our Grocerant Guru®.  Since 1991 Foodservice Solutions® of Tacoma, WA has been the global leader in the Grocerant niche. Contact: Steve@FoodserviceSolutions.us or 253-759-7869