Alimentation Couche-Tard Inc. (ATD) Earnings Call Transcript & Summary

Good morning, everyone. Hope everybody is doing well this morning. Good morning. Thanks for being here. I know for some of you, it's been a big travel to get out here. And also welcome those online. I think we've got several hundred people watching us online today. Hopefully, our systems work, and we keep things moving today. Happy everybody's here. My name is Brian Hannasch. I'm the President and Chief Executive Officer of Couche-Tard I'm in my tenth year in that role. I started in the industry when I was 16 to earn money to try to go to college and really didn't have much of a view on the industry other than it was a way to make some money. A lot of years later and probably Series 7 M&A transactions later, 27 countries later. I've developed some views on our industry. So hopefully, today, you'll have a chance to share a few of those, maybe ask us some questions later on today. But there's a few things that I do want to convey before we dive in. So one, I've got 3 firm beliefs about the industry. One, we sell time. It's really the only thing we sell. We're convenient to people. We're close to people or convenient. And in my 30-plus years now, time continues to be more and more value to our customers. The second, I would say, is scale matters. I'll rephrase that. I'd say scale done well matters. I was joking with somebody at breakfast this morning. It's easy to write a check. It's hard to integrate people. It's hard to integrate systems. It's hard to integrate cultures. And I think that's something that we've done very, very well over the last decades. And the third is culture, and that's probably going to be the hardest thing to deliver today is how important culture is. We are spread across, I guess, it will be 27 countries, 28 with Total Energy, 130-some thousand people and culture is such an important part of what we do. We meet almost 9 million customers each and every day. And that can go very well. It can go okay or it can go not so well. And so how we behave in those moments and how engaged our people are with our customers is so important to what we do each and every day. And the company has gotten bigger, I've often been asked what keeps me up at night. It's really just maintaining that culture that started with 1 store in 1980 and making sure that we don't lose our way that we're focused on our stores, focused on our people. So again, those 3 things, I think, are just so, so important to our industry and to Couche-Tard, this has just been such a success over the past decades. Grab the clicker here. So today, again, we'll have a busy agenda. And for those of you that are here, we have an opportunity to go out and see some stores and hopefully experience a little bit of what we're trying to do in the field with our customers, our frontline people and enjoy that. There will be a Q&A session at the end, and I'll probably say it again, we do promise to give you breaks and do promise to feed you along the way. So we're in Grand Canyon. Somebody asked me this morning, why are we here? The company started the brand started 74 years ago in El Paso, Texas, not too far from here. But quickly, Phoenix became a big center for the growth of the Circle K brand back in the 70s. And when we bought Circle K, which will be 20 years ago in December of this year, they were headquartered here just up the road a little bit. And so it's always been a very strong market for us. Great representation of the brand, great loyalty to the brand and one of our most profitable business units that we have anywhere in the world. So I'm going to just run a quick video and tell you a little bit about the Grand Canyon business unit that you'll be seeing later today for those of you that are here. [Presentation]

All right. Take it easy now. [Presentation]

Again, welcome to Arizona. I've got with me my entire leadership team. Some of them flew from all over the world to get here for today. And they're here for you. So they're dispersed throughout the room. They will all be on the site tours later today. So I encourage you to engage with them. Our goal is to be as transparent as we absolutely can be without being too forward-looking for you. But again, they're all here. And then I've got a separate group that's going to be speaking to you today. This group largely owns the strategic pillars that we'll be talking about throughout the day. And so they'll do hopefully most of the talking. I'll do less of the talking if the day goes well today. This is the road map for the day. Again, I'll just point out, we do have a Q&A session at the end. We'll take questions both from the room and online. I won't drain the rest other than, again, reassuring you we do have a couple of breaks built in, and we will feed you later on. So I'd like to invite Filipe Da Silva to the stage. Filipe joined us 6 months ago when Claude retired. Filipe brings a wealth of retail experience and not only that, but also international experience. Filipe lived in 7 countries, I think around the world in retail capacities with a variety of companies. So it just brings a great global perspective and 6 short months seems to be fitting very well with our culture as well. So welcome.

Thank you, Brian.

A little bit of a reminder where we came from. I'm sure we have a company that started in 1980 with 1 store, Bushar, and then he quickly brought on 3 partners. All of them sit on our board today. All of them are significant, significant shareholders of Couche-Tard. This just grabs a few of the highlights. Again, I think there's been 60 or 70 M&A transactions along the way. I'll point out we're at the 10-year anniversary of just past it expanding into Europe with the acquisition of Statoil, which again set us a platform that we're able to grow from, adding Ireland and now skip to the end, December 31, we'll add about 2,200 stores that we're purchasing from Total Energy in 4 new countries for us. Another big one for me was in 2015 when we decided to unite probably 6 or 7 global brands under 1 brand being Circle K with the exception of our and our Couche-Tard network in Quebec that enables so much. And so as you talk to Kevin and Louise today, hopefully, they can really convey to you the power that, that brings to really create a global brand that's recognized not only globally, geographically, but for doing so many things that we think the average player in our industry cannot execute on. I'll get 1 more here. Back up. The other one I'd hit here is culture again. And again, I'm not a big person on awards. But through COVID, keeping the culture alive was so important and so I want to recognize everybody that's watching from Couche-Tard today. We've been named 2 years in a row as a top core quarterlies in employee engagement. And again, that's the heart and blood of our company and our operations. So we take great pride and just every year becoming a better and better people company as we continue to do the things that we get the press for like doing the M&A stuff. So here's a footprint of where we are today. And again, this is pre-Total, obviously, a big presence in North America with almost 9,000 locations. Europe with Total will grow to almost 5,200 locations. So Europe will be a very, very big piece of the footprint. And then international, that's split between Mexico, a good presence throughout Southeast Asia with licensees and then a more recent entry into Africa. So we are truly global in nature, very geographically diversified in nature, and we'll talk a little bit more about our intention to grow some of that network in the future. So a couple of stats on what we do. I think the Arizona video showed a bit of it. We just think about stores, but so much happens every day. We meet almost 8.5 million customers every day, 128,000 people in our stores, greeting those customers every day, 35 million gallons of fuel sold each and every day, and that's 8 or 9 gallons at a time. So it's a ton of transactions. 4,800 North American sites with Fresh Food Fast and then again, 14,400 stores globally, and we'll add 2,200 stores to that here very shortly. So our vision. A lot of companies talk about mission vision values. I was a part of one that had a lot of posters. We've really tried to boil this down into very plain language that whether it's me or it's someone running a cashier in our stores can relate to. We play to win. We want to work together. So no silos, no finger pointing, 1 team. We want to do the right thing. And sometimes that's not always obvious, but we don't reward anything but doing the right thing. And then finally, act like an owner, take ownership, ask for forgiveness later. And so do we do those perfectly each and every day? No. But we do -- we just -- we want to live those. I think we embody those as a leadership team and I think that's just a very, very important part of what we do every day that it doesn't show up in the P&L or balance sheet. But again, it's just hugely important to who we are and what we do. Touch on convenience. Again, it's time and convenience consistently has grown for decades. I think in the United States, we have 17 consecutive years of convenience store industry having positive same-store sales growth. This is a Nielsen stack kind of projecting the next 5 years. And just for the scale of the industry, that's a $70 billion increase in sales over the next 5 years. So as big as we talk about being, we're still a very, very small part of the global convenience industry, which, again, we think we have a lot of room to both grow organically and continue to grow via M&A in the coming years in all 3 of those platforms. Just touching in the U.S., which is our biggest presence today. Two points I'd want to make out. So despite the consolidation that's happened in my 23 years with the company that [indiscernible] cases and others have done, still 60% of the sites in the United States are owned by single operators. And that gets to be about 75% when you look at very small chains and singles. So two things. One, we think there's a lot of runway for continued growth; and two, the marginal economic set in this industry, whether that's the cost of labor, whether that's the fuel cent per gallon breakeven inside store sales largely set by those single operators. So again, what I mentioned earlier, scale can matter. Scale can matter in a fragmented industry like this, if it's done right. So double again, 4 or 5 years ago, I guess, we had a similar room to and we laid out an ambition to double the EBITDA of the company. And candidly, there were some skeptics internally and there are some skeptics in this room. So we're not bragging, but proud to say that we delivered. And that was through COVID. And COVID got messy in so many ways, both person and professionally, but one of the things I'm most proud of is we stayed focused. I think most strategies go sideways when you lose focus when you can't stay laser focused on the few things that really matter. So hopefully, today, one of the things you'll take away that we are really focused on being focused. What happened over those 5 years, and we all had a little bit of a blip again with COVID. So put the other a little video that kind of just talked about some of the accomplishments that we've achieved both internally and with our customers over the last 5 years. So we'll let the Al tell you a little story. [Presentation]

All right. Before moving to talk about the next 5 years, maybe let's make a last half on the double again. And as you may remember, in 2018, when we unveiled the double again strategy, actually, we define 6 key strategy. And for each of them, actually, we define an ambition in terms of EBITDA incremental. And we are very pleased to say that we have made significant progress in all of them. And here, I will go one by one to tell you a little bit more about the assessment there. First, in terms of NTI and our NTM program has greatly contributed to this ambition. We have opened more than 600 stores over the 5 years period of this plan with very high returns above 15% after 3 years. On the cost optimization side, we consider ourselves as a low-cost operator. And as such, we have continued to look for ways to improve our cost operating model. So we have, for example, developed a global shared service center capabilities to centralize all the transactional activities. We have continued also to increase the productivity in our stores. We have seen some example with Mashgin, but also really working on the process and making sure that we can automate and digitize the way of working of our shared employees. On the fuel side, we have also focused our attention in key initiatives to continue to reinforce our differentiation with versus competitors. The first of one, and the video we're showing that is clearly the rebranding of nearly 4,200 stores in North America. That, of course, was very impactful and build and continue to build our brand, but also help us to grant us the flexibility to solve the fuel from any provider. And that's something that makes a big difference. We have also reinforced our supply, our sourcing and supplying capabilities, both in North America and Europe. We have signed partnership with Musket to help us to buy better. We have set up an internal fleet to improve service levels to our stores to improve efficiency as well in logistics. And in Europe, for example, we have set up a trading company. So I would say, a very important step forward in terms of a few initiatives during the 5 years. At merchandise level, many initiatives there, as you know. So we have focused our attention first on the assortment, and we are very pleased by how we have been able to adapt the assortment to our customer needs. Also, we have rolled out the localized pricing and promotional strategy across all our business units, really with the ambition to optimize our gross profit profile. And also, as you know, we have invested significantly in our Fresh Food Fast program and that has been a big focus for the company. And we are very pleased by the response of the customers. As you know, the past -- over the recent quarters, sales have grown between 10% to 20%. So really, we see a good traction there. But we are also convinced that there is still a lot of potential to unlock. Alex will talk about that later, but we'll continue to enhance assortment to improve the store execution and minimize the spoilage, but really great progress there. Finally, there was also very significant progress and great positive contribution from the age-restricted categories. We have seen alcohol categories over tobacco products going very well, growing steadily and with high level of profitability. That allows us actually to more than offset the cigarette challenges. So all in all, the double game strategy was not only a success, I would say, in terms of strategy, but also in terms of numbers. And that resulted, as you can see in this slide, by, I would say, extraordinary financial achievements. I just want to spend and focus my attention on the free cash flow, but the free cash flow of this company has expanded on a CAGR basis by more than 14% over the past decade. So it's a very, very strong cash generation power that we have built there. And thanks, of course, to the EBITDA performance, but also an effective working capital management. We have done many things there. We'll continue to do and also our discipline in terms of CapEx approach. In the following slide, you can also see that here some overall financial KPIs that show how I would say, our financial trajectory has been outstanding during the last 5 years. We can see that net earnings have been growing in a CAGR basis by more than 13%, outpacing the growth of the revenue at 9%. And as a result, what we have seen is a significant stock price appreciation. Over this 5-year period, the stock price has grew by more than 100% and exceeding the performance by a factor of 4. So very strong and outstanding results during this 5-year period. Back to you.

If you charted that over 20 years, you'd see the same story. So looking ahead, where are we going from here? I think 4 or 5 years ago, people said, "Hey, could we keep the same 15% CAGR that I've experienced my whole career. Is there a Walmart effect or a big effect where you just can't do it on your scale. But we think there's a lot of runway, both with the existing strategy and tactics we have in place, but also some of the things that we're going to focus on today. . So again, as Filipe said, we closed last fiscal year, hitting that number. And again, we're going to talk about a new strategy today. And my hope is, one, you don't find it radically different. If you did, I'd be worried if I were you. This is a lot about unfinished business. We've loaded the gun with a lot of things that build capabilities and make us better with our customer that we're going to continue to develop and then we'll talk about some things we're going to double down in. One thing that we want to touch on here on this slide would maybe be the North Star. I'm not going to apologize for who we are. We're not a quick trip if we're not a while. We don't build every store we operate. We are a consolidator. We're a global consolidator. We're going to run really high-quality assets that we buy. We're going to buy some stuff that's average. We're trying not to buy much of this below average anymore, and Aaron will talk about if we do, we're pretty aggressive in managing that portfolio to get it out. We want to own long-term winning sustainable assets. But that said, different volumes, different sizes, different shapes. And so that requires a lot of flexibility. We won't always be the newest shiniest thing on the block. The one thing we do think is important is that we are one of the most trusted brands in the convenience industry. And that means when a customer comes into our store or works with us online, home delivery, wherever it may be, that it's a positive experience and we can control that, regardless of the shape, the size, the volume of our sites. So we believe that trust and Kevin will talk about a little bit later is a true unlock and a focus point. And so when we think about what we're doing at store level, we use that lens. Does this help us build trust with our customers, whether that's how we price our fuel, our merchandise, how we train our people. So the new lighthouses, and again, we stayed with lighthouses because again, we think we did a good job with double again because we did -- we're successfully getting this strategy communicated down throughout the organization and breaking it down into bite-size pieces at the business unit level and making it actionable. So we did not change the lighthouse nomenclature. We still got the beacons guiding us. And we're going to talk today about for lighthouses underpinned by a foundation. And the foundation is not the sexy stuff. It's having a great cost structure. It's having an IT infrastructure that is not only solid and reliable but also flexible and fast. And it's having a great HR mentality and organization to build culture. On top of that, we're going to talk in depth today about winning offer, winning fuel, winning the customer and winning growth. And there are a few programs under each of those that will deep dive into today. One, I'll touch on just maybe that surprised you a little bit is running winning fuel. We'll talk about fuel. We think there are decades of runway in the fuel business. We want to grow our bottom line or EBITDA, strong double-digit growth. We don't think volumes globally are going to grow at that level. So we believe it's imperative for us to, one, have a world-class supply chain, as Filipe mentioned and Louise will talk about later, but also that we've got great value propositions to our customers that enable us to take share in what is probably not a growth market over the next decade. So when you -- that's the lens that we have on fuel, and we'll talk more about how we think we can make that happen. So I'm going to start and we'll end the day with the same. We think we're a compelling value story. We've got untapped organic growth. Again, a lot of that we believe is well underway with what we've been working on the last 3 or 4 years during COVID. And a big part of that is mastering the customer journey, making that as seamless and with the few friction points is absolutely possible. The second is the sustainability of the fuel margins. Louise will talk about that marginal economics of the industry, why we think that margin need has risen, but also and probably more important, is the advantages we think we can create vis-a-vis the industry in a very fragmented market. Financial discipline, cost efficiencies. We'll talk about a big herry goal around our cost structure. We think we bought enough companies, I bought enough companies over the years. I've never found one that has less overhead and is really more operationally effective than us, but we have bigger ambitions. We think that's one thing we can absolutely continue to control is our cost structure. And you see it in the M&A that we've done. You see there, 30% to 60% of target EBITDA, target acquisition EBITDA generally comes back in hard synergies for us. And so that just -- as we continue to become more efficient with our aspirations, I think that just gives us more and more license to do M&A and generate more synergies for shareholders. The power of the Circle K brand, we were largely in North America, partner branded, Shell, Exxon, great partners and still huge suppliers to us. But we did research and showed that our customers were confused. They didn't know whether they were to Circle K site where they were to shell site. That canopy that built that MID are absolutely the biggest signs in retail. And so having that flying the Circle K brand and then being able to provide uniform consistent messaging and programs for our customers and value for our customers is a big unlock globally, and we'll talk more about that. Strong balance sheet. will talk about it later. In a very fragmented industry, we bring us a cost of capital advantage to bear. So as we do more and more M&A, we've got an advantage. And finally, the culture and the team. I touched on that before, so I'll skip it today, but it's absolutely what's made us who we are today. And it's not me. We have a big team here. We have a big team globally that disposes and lives that every day. And so that's really the all together and makes it work when we welcome new families into the company. So put it all together, we'll break down our ambitions for you and our aspirations to again grow this company over the next 4 to 5 years. I'd like to welcome Alex Miller, newly promoted COO. I've known Alex for got I hate to say it, probably 27, 28 years and recently promoted to our Chief Operating Officer. And he's going to talk about or offers. It's why people turn left instead of right and how we can make ourselves differentiated in the future. Alex?

Thanks a lot, Brian, and thanks all of you online and in this room for your interest in Couche-Tard and Circle K. Brian already introduced me, I'm approaching 12 years with Couche-Tard, I joined to establish our centralized fuel team and work with our fuel teams for a good chunk of my time here. I've also worked with our real estate commercial optimization and various operating teams during my time here in Couche-Tard. For that, I worked for BP for a little more than 16 years. . I'm going to focus on winning offer. We, of course, have a lot of activity happening across our categories, but these are our 3 priorities. These are winning in food, owning thirst and expanding our private brands are the areas that we see for significant growth and differentiation as we look to the future. I'm going to spend about 20 minutes going into our thinking and activities around these areas. Our first focus area is winning food and owned thirst. Consumers are increasingly starved for time. Meal habits are changing. Traditional prepared at home sit-down meals are being replaced by on-the-go snacks and meals. Further, consumers are increasingly looking to our channel for this food. Brian mentioned 27 years. And when I started in this business, we didn't sell a lot of food. And I don't think too many customers were looking for us for food. That has changed. That creates a tremendous opportunity for Circle K. We think this trend will continue to rise into the future. Some of you might be thinking, you guys have been talking about food for 15 or 20 years. What's different? What's different now? I think we've accomplished a great deal over the past 3 years. We developed and rolled out a concept that can be executed at most of our stores. And I would highlight that is a key difference versus our previous initiatives. Our program requires a minimum amount of space is much simpler to execute. It requires far less labor. It's a proven program in our legacy holiday stores for over 20 years. It's really similar in execution to Tim Hortons and Starbucks food programs. And our program is growing sales. It's growing margins, and it is profitable today. And we did it all during the pandemic, which highlights the operational capability of our teams at Circle K. In Europe, we are further developed with food, and we've been on food for well more than a decade. In nearly all of our European countries, we rank first or second within our channel for food preference and we are increasingly competitive with QSRs. We continue to grow sales and have improved margins and profitability materially over the past 18 months, while maintaining fresh, which is critical with our European customers. I was just in 2 of our European countries last week. And I hope you get a chance to go visit them. But without question, we are a destination for hot dogs and sausages. I'm going to go deeper into what success looks like and our activities on the following slide. Financials. This slide highlights the journey we've been on in food and our goals for sales and margins over the next 5 years. We will sell nearly USD 2 billion in food this year, and this highlights the growth from just 3 years ago. We have been focused on deploying our Fresh Food Fast concept, training our team members to execute at every store every day, embedding and delivering against our food safety targets, really trying to get trial of our products. We know they taste great and we've got to get them into our customers' miles. And more recently, we have improved margin by 800 basis points this fiscal year in North America. As we look to the future, the base now is in place. And we'll discuss in more specificity the activities that underpin our 10% sales growth and 13% margin growth target on the next slide. These are the priorities for us in food on our road map. First, let me start with locations and specifically QSRs. We operate over 300 QSRs today and have for many years. We have a dedicated QSR team. We know that QSRs in our Fresh Food Fast concept can complement each other and both be successful at the right locations. We know the attributes of these locations. High traffic counts on both the forecourt and in the store, certain size of lot in building and the location of the site. We have identified 267 future locations for QSRs in both North America and Europe over the coming 5 years. Next turn to assortment. In Europe, we certainly have common themes across our food offers in all countries, but each country is unique and has assortment differences. This has been developed over many years and accounts for taste differences within the countries. We are going to do the same thing in North America. These are vast geographies with varying demographics, cultures and taste. We know we have a core offer of 10 to 15 items that really work everywhere. This is in place and will remain our base. We will now leverage our decentralized BU structure with the help from our central team to really get local. An example of this, I'll just give you a tidbit. We added green hatch chilis to our pizzas in New Mexico and our sales went up 5x. We need to find those solutions. We know those taste profiles are different. Next, let's go to supply chain. We won one of our own commissaries today, and we see the benefits it provides in both cost of goods and our ability to create LTOs and local products and tastes. As part of our broader merchandise supply chain work, we are going to add commissaries where we have store densities to support. That is roughly half of our network today. And last, brand awareness and trial. We're new to food in North America, and we know many consumers don't think of Circle K for these occasions. We will continue to ramp up our sampling programs and we'll be always on marketing campaigns. In Europe, we are known for food and especially hot dogs. Our focus will be increasingly competing against the QSRs, elevating consumer recognition of how fresh our products are. Think last in food, the operations improvement and providing value. Like everything we do, we are as good as the more than 100,000 frontline employees in their engagement, motivation and execution. We will continue to improve the equipment, tools and processes to make it easier for them to execute Fresh Food Fast. We -- you heard Brian talk about culture. Culture is a big thing in Couche-Tard. To develop a food culture takes time. We see it in holiday. We see it in our European businesses. We are committed to that journey. We will continue to build that culture of food in our stores here in North America and in Europe and everywhere we operate. And last is value. Across our geography, we see our customers experience the pinch of inflation and seeking out value. We know with our scale, we can offer them time and we can leverage our supply chain and scale to ensure we are always providing them value for their food occasions. Our food initiatives represent USD 150 million to USD 200 million incremental of EBITDA over the next 5 years. Let's turn to owning Thirst. I ask how many of you have a drink in front of you? How many of you had more than 1 drink today? How many drinks thirst occasions will you have today? Look around your table, look around this room and multiply that. When you're in our stores later today, think about how many products we have that can satisfy those thirst occasions. When we routinely survey our customers, the primary reason they provide to us of why they come to us, is they are thirsty. This reason continues to grow each channel blurring is real and certainly no shortage of companies looking to establish convenience. But we feel we are unique in how we cross all these thirst occasions for both ready, cold and hot to drink now, but increasingly take home. And again, I encourage you to think about that a little bit when you're in our stores, kind of see how many of the products we have that would solve your thirst occasions. We also see a tremendous opportunity as we grow food to bundle thirst with our Fresh Food Fast and food offerings. A positive of the pandemic was Brian and I spent considerable amount of time in our stores assisting our frontline employees. We stock quite a few coolers and realize that it was not as easy as it should be to stock those coolers. That resulted in a new cooler solution. This solution expands facing assortment by up to 33%. It expands holding capacity on Shell by up to 67%. This obviously depends on the legacy cooler in place and the depth of the cooler that we're touching. It makes it easy for our staff to identify which product goes were per planogram and ensures that the glides actually glide. So the product comes down and is facing the customer when they want it. We have installed this solution at nearly 3,000 sites in North America and Europe already. We will nearly double that number by the end of our next fiscal year. Similar to food, I'll go a little deeper into our actions on the coming slides. Turning to financials. First, let me highlight, this includes all of our Thirst categories. And these are highly material to our visits, traffic and overall P&L. This represents a significant portion of our nonfuel gross margin. Over the past 3 years, we have grown at slightly above industry average. Our goal for the future is to double that and to grow it twice industry across all thirst categories combined. How are we going to do that? There's an awful lot on this slide, so I'm going to try and hit on the big themes. I talked about cooler capacity and already talked about the cooler solution, but there's more than just the cooler solution. We have launched this year a One Touch remodel program in North America, where we will touch over 80% of our assets over the next 5 years. That will involve expanding our horizon interior image, upgrading our forecourts but it will also expand our cold capacity. We will add to our cold caves. We will add both front and rear loading cold capacity. In Europe, we're largely done with our Horizon remodel. So we'll run our cooler expansions as a separate project. They have started the first wave of that. We have started the first wave of our One Touch remodel here in North America. And I can tell you that the initial results are extremely positive, and we are excited for this. Costs are continuing to elevate in our industry. We actually see some of our competitors withdrawing from cold capacity, putting in fewer doors, fewer holding power. We will absolutely do the opposite. Let me focus on innovation. It's another area that it's just incredibly the pace of ramp-up of innovation across products in our stores, but specifically thirst products just continues to quicken. This is a place where our scale and our strategic strong relationships with our vendor partners, we think, enables us to outposition our competitors. Where they have provided us exclusive products or brought new products, we have delivered on operational execution. We have found win-win solutions with our vendors and think we'll continue to find more an increasing number of those. As we have enhanced cooler capacity, it will enable us to carry more of these products and determine quicker the future winners. Let me now turn to Polar Pop. Polar Pop is our dispensed beverage here in the U.S., and we absolutely sell some of the highest amount of Polar Pop or a cold dispensed of anyone in our industry. The reality of Polar Pop is it has not advanced at the pace of innovation as what's happened in the cold box. That has to change. and we are someone that can change that. And I think we're engaged with some of our vendors that are on that journey with us. That is our primary focus on cold dispensed. In hot dispensed, -- our customers, they're increasingly looking to ice products, and they want to be able to customize their drinks the way they want them. So we are focused on those 2 areas around providing really an upgraded condiment offer that allows them to make the drink they want. We will revitalize our ice programs, and we will create unique to Circle K products. Let's turn to alcohol. Again, here, there's no space that kind of the pace of innovation is more ramping. There is no place to being more local or having the right assortment is more critical. And these are areas we're good at. We have had great success with the launch of our private label line, and we'll expand our wine assortment and create wine destinations that you saw in one of the videos. We also recently purchased a small chain, had a much broader spirits assortment than we did. You heard Brian say, we take pride in taking the best ideas from the companies we purchase and then integrating and copying that across our network. This was one of those, and we took that. We will be launching this heightened assortment and destination for spirits, where we can sell spirits beginning the second half of this fiscal year. Take home beverage. It's a space that big box and grocery kind of dominate. The space we used to do more in. I think convenience used to do more in, and we've kind of backed away from it. I'd say similar to cooler capacity, some of our competitors are almost exiting the space completely. Again, here, we will do the opposite. We are carrying a much broader selection of take-home products across thirst occasions. We'll continue to expand that. And we're going to leverage our supply and our scale and our vendor relationships to make sure we can be competitive from a value perspective with our consumers' choices at big boxes and with grocery. Last, I think, is going to go deeper in sustainability ambitions later. But it would be -- these are such big categories for us. It's critical that we deliver on our 100% of our packaging will be recyclable and reusable across first tier. And again, Ian will go deeper into sustainability later on the day. Marketing. You saw America's thirst stop in the video. You'll see it at our stores today. You'll see Canada's thirst stop, you'll see Ireland thirst stop, you'll see this stop all over our company today. This will be a all on constantly on 360 campaign across all of our channels that basically never stops. We are going to push to drive traffic, get people into our stores for the thirst occasion and then bundle with these thirst occasions to build our basket. We're excited for this and Kevin and his marketing team are driving this home for us as we speak. And again, you'll see some of it today. Last, let me turn to private brands. Private brands I referenced earlier that we view that consumers are being squeezed and are increasingly looking for value. Private brands is perfect in this space. We don't see this changing in the near term and maybe even in the midterm, we think that creates an opportunity for us to grow private brands even greater than we have over the past 3 years. It's been a big contributor to our growth, and we launched it about a decade ago. It's come a long ways in that timeframe. We have very clear criteria related to private brand. It's got to be equivalent or better than the national brand. It's got to be priced a certain percentage below the national brand and earn a certain margin percentage better than the national brand. And it's got to reach a certain level of SKU penetration or category sales for long-term viability. You can see the financials. You can see the growth that we've had in this space over the past 3 years. I am for the forward 5 years is to do a little better than what we've done in the last 3. It's another area where as we build new stores, acquire stores, Scale helps here. It creates viability for new products across our different categories and geographies. This is a big year for us in private brands as we will launch over 100 new products. Increasing our overall SKU count by 25%. We have a few business units that are now approaching 10% of nonfuel revenue in private brand sales. We've moved our private brand teams directly within our core merchandising and marketing teams and have added human resource in this space to underpin this growth. We think that private brands will be increasingly relevant and attractive to consumers within this micro environment or this macro environment, excuse me, and our ambition in private brands is to add USD 120 million in incremental EBITDA over the next 5 years. To summarize, our core priorities across our offer a winning in food, owning thirst and further growing our private brands. We believe these are the right priorities where we have the greatest opportunity to provide value and time savings for our customers. And we believe if we execute our plans, we can add USD 500 million to USD 600 million of incremental EBITDA over the coming 5 years. Thank you. And I'll now hand it over to Louise to discuss fuel.

Hi, everyone. My name is Louise Warner. I'm Senior Vice President of Global Fuels. I joined Couche-Tard, Circle K in January '21, so a bit over 2.5 years ago and I've worked across all parts of the fuel industry for the last 24 years. Today, I'm really proud to present our wonderful fuel business to you. On this slide, we've put together just a few of the statistics of the fuel business that we've been growing over the last few years. We can count trucks, we can count transactions. But really, we're really proud of this platform that we've been able to build. And I'm here today to tell you that we're just getting started. Last time we went together, we made a promise to you as our investors that we would deliver on additional earnings in fuel. And hopefully, you can see from the graph that we've been able to deliver on that promise and in fact, outperform what we said we would achieve. But importantly for us, it's not just about financial performance. What we've been doing over the last few years is building the foundations for our future growth as well as delivering on strong financial returns. We heard from Brian about our fuel brand. We know that we have to have a strong customer offer to be fast and easy to provide everyday value to have the best locations, to have high-quality fuel and to have the best supply chain underpinning all of that. But we can't achieve this without our customers, our employees and our stores and the thousands of people that work in our fuel supply chain every day. And so today, I have the privilege to tell you about how we're going to use that foundation to continue to grow as we go forward. But before we get started on us, let's talk about the world around us. So lots of people kind of ask me questions about what's the future of fuel and where are we headed. It might surprise people that the demand for mobility is actually growing. So you read lots of articles in newspapers about the decline of the industry, but both the car park and the miles travel globally continue to grow. We also see the car park aging. So the OEMs or the car manufacturers have done an excellent job at extending safety and reliability of the vehicles, which keeps them on the road for longer. And with the current economic pressures, people are finding that the big step-change investment of buying a new vehicle becomes increasingly more difficult. So we expect this car park aging trend to continue. As we turn to EVs, we see the fleet diversifying, and the introduction of EVs is being dominated by China and Europe with the rest of the world following. So we see this trend as being very different across all of our geographies. We should also note that many of these vehicles are adding vehicles to the fleet, not just substituting for internal combustion engines. As we look ahead, there's plenty of forecasts around this is just one of it. It's not ours. It's an industry forecast. But we see the demand for transport fuels, so in the transport sector as being largely flat, but the biggest effect in this flattening of the curve is actually the efficiency of internal combustion engines, followed by EVs, but we also see an encouraging trend that's important for Circle K, which is ongoing growth in biofuels, both the traditional biofuels and advanced biofuels, which we believe are important and pragmatic solutions that we can bring to our customers every day and right now through dropping them into the traditional systems. Now Brian said that he got a lot of questions on fuel margin at his table this morning. So let's get into it and talk a little bit about fuel margins. I'm going to talk about the U.S. market and mainly because of its significance, but also it's a transparent market that we can think about. So if we have a look at these graphs here, we see that, that fuel margin is following a fairly simple economic fundamentals. Which is fuel margin rising in line with CPI in this case, but you can trend this against a bunch of macroeconomic factors. We know that inflation has been high in the last few years and that has abated somewhat with labor and other inflationary effects. But we do see cost of borrowing easing, which is also important for operators in our sector. When we look at breakeven margins, and these are information that comes from and the gap in my chart here is just the code and we can look a little bit cleanly at the data. Hopefully, this gives you a really good indication of how much Circle K outperforms those small operators that Brian talked about in the fragmented industry. So if you're a 1 to 5 site chain, it's much more difficult to operate with the same cost base that we have, and we see this breakeven margin setting the long-range trend for fuel margins. You also see on the graph that our ability to beat the industry margin continues to improve. And we'll talk about today that this isn't an accident. This is not just a chart that we're doing many things to make that true today, but also into the future. So we believe that this trend will continue. And we also believe our gap between the smallest participants, and the strongest participants like us at Circle K will continue to broaden. So then if we look ahead, what does this mean? We know that from quarter-to-quarter, fuel margins will continue to vary. But we're a long-range company, and we're focused on that trend. And if we think about all the things that are happening around us, we expect in the U.S. that the U.S. fuel CPG will remain in the low 40s and obviously continue to adjust for inflation and other market effects. So let's come back to us and talk about some of the reasons why we believe that we will sustain this outperformance. Brian has already talked a lot about our Circle K brand and how important it is to us. It's been a really critical part of what we've been doing over the years. But really, it's a symbol of the promise that we're making to our customers. For us, the promise we want to send to all of our customers whether the individuals choosing to come to Circle K or businesses, they will have a fast and easy experience that we'll show them every day value and then we'll have the best locations and the highest quality fuels. The brand is important for us to help customers recognize that that's the promise, that's the experience that they're going to have at Circle K. And so as you drive up to a big red Canopy and the Circle K logo up on the MID, our customers are now understanding what that means. In Europe, we've been operating under the Circle K brand for many years. And you can see on the chart the progress we've made in North America, establishing 4,200 sites now out of our 6,400 globally operating under the Circle K brand. So I think as well as talking to our customers, letting them know about our offer. It's also important to help us operate in our -- in some of the other aspects. By having the Circle K brand, we buy ourselves flexibility and control in our fuel sourcing, and I'll talk a bit about that. But it also helps simplify some of our back-office systems and allows us to bring offers to our customers in a more consistent and quick way. So let's talk about B2C, so our consumers, the individuals that come and choose to shop at Circle K every day. For fueling, we're selling convenience and time. And when someone is coming to fuel at Circle K, that's got to mean fast and easy. You'll hear from Aaron today about what we've been doing in our network, the quality of our sites, making sure that we have the best locations and the best way to get to see a Circle K and then get in and out as quickly as people can. But fast and easy isn't just done by having the best sites all the right sites. It's done by a huge number of little things that are happening every day with our store teams. That might be simpler or quicker payment. It might be making sure our technology works every day for all the different types of customers that come. It's our store teams that we're really proud of, keeping our forecourts clean and tidy. It's having directional signage to help people come on and off the lot and hundreds of other little things that our store teams commit to every day. We also think it's really important to show our customers every day value. So we know that there's huge economic pressures, fuel is always a big spend item in our -- for our customers. And so showing everyday value to our customers is really important. You'll hear from Kevin later about our loyalty programs, and obviously, they're really important for our fuel customers. Often, a loyalty program will draw a fuel customer to our sites. We've also been showing our customers value in different ways. And one of the biggest successes we've had over the last year is our Circle K fuel days, where we surprise and delight our customers by dropping the price for a short period of time, welcoming them to our sites, both our existing customers and new customers celebrating their custom with us at Circle K. And if you look at the photos, you might even recognize a few faces of people running around our sites on those Circle K fuel days. And so as we go forward, we're looking to expand what we're doing loyalty, you'll hear from Kevin, we're also working on other things like broadening our payment options, making them frictionless and also looking at things like cross-sell between our different mobility products, and you'll hear a bit from Aaron about our fuel and car wash cross-sells. If I move on to B2B, this is probably a hidden cigarette of Circle Ks. Today, we have around 60 million transactions a year by business customers coming to our sites. And so we think about Circle K as a consumer-facing brand. But actually, we have many relationships and a lot of traffic coming from business customers. This has been a big strength of our European business, who have got long-standing and direct relationships with a broad range of businesses across all of the industries that use transportation fuels and mobility. But in the U.S., we think that this is an underindexed opportunity for us. So let's talk a little bit about why it's an opportunity for us, and it's Circle K. The first is probably the obvious one. U.S. market is the world's biggest fuel market. It represents 20% of the globe's fuel demand and has around 282 million vehicles on the road. So a pretty huge number. And we estimate that the number of commercial and publicly owned vehicles is around 50 million of that fleet. So about 20% of the fleet. But importantly, those vehicles are driving further and some of the more reliable or predictable customers. And so you might ask, why haven't we gone after this opportunity before? Well, firstly, we -- Brian talked about our history operating under a range of brands. That made it difficult for our customers to recognize our network and also on the backside for us to bring a consistent and direct B2B offer to our customers. So we talked about the brand unlocking value. This is another place we're having our own Circle K fuel brand unlocks value both in terms of the customer we've been overseas and in terms of being able to bring a consistent offer to those customers. And obviously, having the ability to do this doesn't just mean it happens. This is something that we've decided to focus on as well, which honestly in our history may not have done as much. So you'll see some charts here as well about the fleet size and the types of vehicles that are happening and the types of transport. We believe that the over the road sector, so the big trucks running along highways, there's lots of networks servicing those customers really well, big trucks and highways. But we've seen a trend towards regionalization of transport. So where more fleets are operating in local areas. So shorter haul rather than these long distance transports. And so that's a natural fit for our network. And so we see our opportunity to capture that opportunity there. We also are showing some data that's largely for large trucks, but that's just because it's easy to get your hands on that data. We also believe that fleet applies on any type of vehicle. So from the biggest add to the smallest vehicles. So what are we focused on? In Europe, we'll continue to build on our strengths. So we see the types of mobility evolving in Europe. And we know our customers are looking for Circle K to bring different types of mobility solutions the businesses we work with. So we have this opportunity to broaden across EV, advanced biofuels or other fuels as they evolve and you'll hear a bit from later about B2B in context of EVs and e-mobility. In the U.S., for us, it's about making sure that our customers know we have an offer in B2B. So recognition, building direct relationships and then making sure that we're meeting their needs. And we believe that there's plenty of opportunity to have direct relationships in the U.S. with the range of businesses that are operating. And then this is one of the areas where we think scale really matters. So as we build out our scale in B2B and as we build out our scale in other programs, we have the ability to bring that to our business customers. That might be with driver loyalty. It might be with frictionless payment systems. It might be with mobile apps. Because we have the scale globally, we're able to build that across Europe and the U.S. as we develop these relationships. So the last one I wanted to talk to is our fuel supply chain, and Filipe talked earlier about the work that we've been doing here. So we've built 2 platforms, but following the same philosophy, the same principles across our geographies. So as we know, the fuel brand allows us to do this. So by having flexibility in our sourcing arrangements unlock through the fuel brand decision, we're now able to establish these platforms. In the U.S., we have a strategic partnership with Musket and we have a team based in Houston that are working today every day with our suppliers with Musket and with our logistics team to look at all the different opportunities in the broad U.S. market. And similarly, we've established a capability in Geneva, which is one of the trading hubs of Europe and where we see the intersection of the traditional fuels in the biofuels market, which is critical for our European business. So we have some common principles that underpin what we're building. This is not setup that's designed for anything other than the Circle K system. We believe that this supply chain capability is there to supply our stores and nothing else. And so we maintain a conservative risk position across everything we do. And so maybe if I just give you a little example of what the sorts of opportunities we're capturing through the capabilities and draw some parallels between U.S. and Europe situation. So in the past, we had locked in contracts with 1 supplier for each of the geographies we worked in. And so basically, we just set and forget. We would just buy the fuel, deliver the fuel from the same place to our stores every day. Now with the flexibility we have, we're constantly looking to the markets as they move around. And we say each and every day and then actually, in some cases, each and every minute an hour, where is the best place to be buying this fuel for this store? And we then identify opportunities often in adjacent markets where we say, "Hey, we can buy that same fuel and bring it to an adjacent market at a lower cost". So that adjacent market in the case of the U.S., we might move it by truck across geography, so we might transport across a couple of states. And in Europe, we might put it on a ship and move it across different geographies. But we're following the same principles of being outward facing, understanding the market, being dynamic in our decision-making and controlling our supply chain each day. As we've established these capabilities, we continue to see more and more opportunities that follow this trend. And so we are confident we can continue to deliver value and create the sustainable advantage that we have in our fuel supply chains. So then if we bring this all back together, what does this all mean? So we know we operate in a highly competitive market, and we have a mature product demand as well. But we're not afraid of that challenge, and we believe that we can continue to win even with those challenging circumstances. We have built the foundations over the recent years in our brand and our offer, in our supply chain. We have a track record of outperformance, and we have our global scale. So this winning formula will allow us to gain share in fuel 1 of our 5 focus areas as well as maintaining our sustainably advantaged margins. And that's why we're confident to promise an additional $400 million to $600 million of EBITDA across the strategy period. So that's all for me. I know you're excited about that promise, but you're probably even more excited about a break. We've got a 15-minute break coming up. And so that means we'll return for the next presentation by Kevin and Alex around 9:30 out time. Thanks, everyone. [Break]

So hello, and welcome back. I'm Kevin Lewis. I'm the Chief Growth Officer here at Couche-Tard. I have spent my career at the intersection of retail, technology and globalization. I'm coming on 7 years here, and I couldn't be more thrilled to be a part of this journey. I get the pleasure today with my partner here, Alex, to talk about winning the customer, something that's dear obviously, to every retailer's heart. This is generally, by the way, when they tried out the marketing guy and you get to sit through 25 minutes of flat sheet commercials and loud Technomusic. I promise you that's not what we're going to do. Candidly, it's not who we are, and it's not how we roll. Our brand is incredibly important to us, to our customers, to our shareholders. So I want to talk to you about how we are building it. And it candidly is similar to what you've been hearing along the way. Leveraging our physical footprint, focusing on the occasions that matter to our customers and using the right level of scale to drive differentiation in ways that nobody else could. So let me give you some examples. And if I start on the left side of this page, and you saw it from Louise, using our stores around the world to drive Fuel Day in Circle K, getting new and existing customers to understand who we are, what our offers look like is a huge advantage we have to those who don't have those physical locations or who don't have the kind of staff and capabilities we have, takes advantage of who we are and what we do every day. Secondly, in the middle, no surprise, thirst, fuel, food are the constant reminders of why we are relevant every single day, sometimes multiple times a day to those consumers. And lastly, and something I'm particularly proud of, is the use of scale to drive differentiation in ways that, quite honestly, no one else is able to. If you look at what we did in Purple Thunder, I hope many of you try it today, if you're here in the audience. It's an exclusive flavor of Mountain Dew Circle K. It's one of the best performing SKUs in our collective history with that vendor. If you look at what we've done, and by the way, I assure you I had no influence over this, our global partnership with Messi just before the World Cup win was our opportunity across geographies to hold hands and create a promotion that otherwise wouldn't exist. And on and on and on. Our brand has developed not through flashy campaigns, although we have plenty of those. And we won more awards for them this year than we have in our company's history, but through the hard work across our physical assets, focused on the relevant occasions and equally on the scale and differentiation that gives us great things. Now we're just getting started. As we talk about winning the customer, an important part is using that knowledge we have with them, that personal relationship to do even more and leverage those capabilities even more fundamentally. So I want to show you a little bit, you all have the little notebooks. It shouldn't be a surprise. Inner Circle and extra in Europe, our membership program, I want to give you a little flavor, and then we'll talk more about it. So let's hit the video. [Presentation]

A little flashy music, I know. I am thrilled that you are here with us today, so we can show you what InnerCircle really is. But let me give you a sense of what it means for our consumers and also what it means for us as a company. For consumers, three pillars off of which we've built our membership programs. No surprise value. You've heard Alex, you've heard Brian, you've heard others talk about it, consumers searching for value, especially in these economic times, it's an important thing to make sure we acknowledge. But candidly, if you're not careful, that simply becomes a bidding war. What we believe is the real opportunity with customers is in two other things: an ease and in personal connection, creating experiences, creating products, creating services that only we at Circle K are able to provide. We'll show you some examples in a moment. But there's three pillars: value, ease and personal connection are the essence of our loyalty program. For us, as a company, openly, we know that getting more personal, more individualized, better understanding of who our customers are, what they want and how to help them, but as importantly, how we make money, is important, collecting data is literally the lifeblood of these programs. That allows us to do three things: for our best customers, defend them, make sure they don't go somewhere else; two, for folks who are actually pretty profitable today, see if we can do more to make them more profitable; and then lastly, how do we identify that set of customers who has the potential to be the valuable customer of the future, where we can begin to test into how do we drive them more often to our stores, what do we need to do to attract them, how do we use the power of what we know about them, plus our assets together to increase their lifetime out. We believe those are symbiotic. These aren't actually competing interest. We and the customer are aligned in our desire to save time, save money and on our side, make more money and deliver the brand promise. What that says in both Europe and North America is we've created a tiered program. First time we've rolled it out in Europe. Europe had a program called Extra for over a decade. As you spend or visit us more often, your benefits increase. No surprise there, but that has an interesting parallel. It says that means as we know more about you, we can know what to talk about, how much to spend towards and how openly you're going to be interested in some of these other services and products. Our vision over time isn't simply to drive coupon use and discount. That's not what you'll see from us. Of course, that will be part of the program. But long term, driving more experience, more ease through our InnerCircle and Extra programs is exactly the game we play. And we believe that's fundamentally different than what you'll see in most of the loyalty programs across the world, not only in our channel, but in retail more broadly. It's a really important difference that I hope you take away. And I hope you feel it today for those of you who are visiting stores. What that means in practice is uniting two worlds. On one hand, every touch point that you have as a consumer, we need to make sure we understand who you are, what you care about and make it as easy as possible. If you are at the dispenser, if you're at the smart checkout, if you are on the app, if you're on the website or any of those other touch points, we brought them together. That is the technology lift that you might imagine is heroically large and with Ed and his team have made it happen. The other side of this is making sure that all of the different products and services that we sell are ultimately aligned, whether you're a B2B customers, Louise talked about, whether you're part of a subscription services, if you're an EV customer in Europe or in the U.S. How do we make sure these come together, both from an experience point of view and a product point of view? That's really what Inner Circle is. And we're super proud to have launched Version 1.0 in the U.S. And we continue to use Europe who is further along as a test bed to make that happen. So I know you like numbers. I like numbers. I'm going to give you some. Right now, as we sit here, there are about 1,900 stores that have launched Inner Circle. Our plan this year, candidly, was 400. We've had such demand from our consumers, our BUs have been so supportive and the operations folks I just can't be more thankful for as they have really embraced this program. We will be at roughly 3,000 stores by the end of Q3 this year, and this is the U.S. numbers, 4,000 stores in the U.S. by the first half of '25. You can see the Europe numbers. Remember, Europe already had a program. This is moving their existing Extra program to the new plan that we've got today. Now the video you saw said 2.7 million members. That was true when we made the video. As of this morning, we're over 6 million members in the United States. We cover one out of every 52 transactions, both on the fuel side and the merch side, and we are just getting started. We need to prove financially. This works, and I assure you the idea of reinvestment rate, making sure we're reinvesting the money that they're spending towards this program and the right customers in the right way is absolutely a key piece of this. This is going to be driving our marketing strategy going forward. Now there's a little number in the corner that may have had your attention, I imagine, which is $200 million of EBITDA. You're not going to see a line item that says loyalty. Let's be clear that would be silly. But inside of fuel, inside of merch, inside of our costs, we believe that these programs play a role in driving incremental value. And my team is going to be measuring ourselves and we are going to be holding hands collectively as a team to beat that $200 million, but that's the number we've gone on the page today. You may be wondering because there are some Canadians in the room, what happened to Canada? I'm aware that there is a country called Canada. I know it is not on the page. The reality is our fuel brand partners are so strong in Canada today that it would be silly in the near term to develop something that sits on top of that. The focus is on the U.S., the focus is on Europe. And I promised at some point in time, just the unlock was in the U.S., which was the rebranding. Right now, as we have the fuel partners in Canada, we continue to focus on the U.S. and Europe as those areas, okay? It's not an oversight that's intention. Good. I'm going to move on. I promise this isn't a typo. I want to talk about the present, future. In other words, stuff that exists today that feels a little out there, but is an inherent part of our business. We look to technology and new experiences for three things: cost efficiency, making it easy for our customers and making it easy for our staff. You'll hear about smart checkout. Hopefully, many of you will see it. You'll see a lot of technology, a lot of the processes and systems in the store, but you'll also see under this umbrella of digital acceleration, the use of data and insight to combine with these things. And one of the areas we haven't spent a lot of time on that I wanted to just touch on. It's a program that we have called Lyft. You may have heard of a retail media network. Many other retailers have them. They play ads, they get paid for the ads, whatever, it's nice. We have something pretty unique. We have a digital upsell network. So think about today, if you were to walk into a grocer and they said, "Hey, as you're checking out, did you know that you can get chicken breast, two for one, tell you what. Just we'll wait here. Go back to the store, grab the chicken breast don't worry about all the other customers in line and add that chicken breast". You'd never do that in a grocery store. But in our store, the ability at the time of transaction, personalize an offer, add it directly into the basket and post transaction, have the consumer do the fulfillment is a behavior that is unique to us with the infrastructure and technology to make it happen. Could be in the age restricted area, could be in beverage, could be in any part of the store. You might say, well, that's pretty interesting, but we like numbers. Well, let me show you some. Over the last 12 months, we've made over 600 million offers to consumers using this technology and this capability. All of our operations team is trained to do this. There is a customer-facing and associate-facing screen. Of that 600 million offers 100 million times, they've said, "Yes, please", added something that when they walked up to the counter, they weren't planning on purchasing. Not necessarily something random. We're not there to be evil. We're there to say these are things you might like that are logically consistent with what you are buying. The 150 offers per store per day, 15% conversion rate. That is now expanding to Europe, that is net new news for all in the room. There are now thousands of stores that have this capability that did not. We will also continue to take this and now integrate it with our Inner Circle and Extra programs to make those even more logical and more personalized. Next, you can't have all of this without some sort of home. Our new global mobile app, what we call GMAP is a global ability using one technology platform to localize as a consumer. Sometimes it has EV, sometimes it has subscriptions or car wash. It will have offers. It is your digital hub. We've had over 2 million downloads in the U.S. We're approaching about half of that number in Europe and about 15% of that base daily use that app, not weekly, not monthly, daily. But here's what I love. When we hold hands and get this right, when the technology teams, the ops teams, the shared services teams, the fuel teams, all of us hold remarkable things come out. That app is a 4.9 rating in the App Store right now, 4.8 in Android. I guess Android users don't like it, but more part, I just think the more difficult. More importantly, the day we launched Inner Circle in Florida, we were the #7 retail app in the App Store. I don't think you would have expected that from Circle K historically. We are massively investing in Inner Circle, not dollars, but time, energy and resources to make sure that what we're doing consumers really like. The combination of Inner Circle and Lyft give us data at an unprecedented scale. That data plugs into our data and analytics team. We have three hubs in Oslo, Delhi here in Tempe and allows us to do a variety of things to understand our business better. Sometimes that's in loyalty, sometimes that's in fuel, sometimes that's in real estate. Sometimes that's in pricing. But the combination of those two from our perspective, is an unlock that most other companies can't figure out and helps us solve problems like where do we put our stores, how do we think about our competitive set and what do our customers need. None of that is possible without operations, and so I want to invite Alex up to talk about ops because this is the core unlock. How do we take our digital capabilities and bring them together with our people. So hopefully, you've went a little bit, please send up for Inner Circle, and I'll hand it over to Alex.

[Audio Gap] than our staff and in our pilots received very poor NPS scores. We are approaching having 3,000 of these units deployed. We have utilization rates of 50% of eligible transactions. We will be on annual run rate of removing 2 million hours by the end of this fiscal year. Just pause and make sure you got that. Ed and our tech teams, and you heard Kevin talk about it, are working with our Smart checkout vendor so that our digital experience and payment options will be the same as our primary POS. The consumer will see no different. These units help significantly at peak traffic times to minimize lines and support our staff. A final benefit is that at stores with evening security concerns, we have gone to Smart checkout only with our employees having no access to cash. This has proven to be a strong deterrent. Next, I'm going to turn to easy office, what we call easy office. We established this in our fiscal year of 2022. This is a combination of our operations excellence teams in our shared service and accounting teams that Kathy leads. When we started, this slide highlights that we had an average of 73 administrative hours per week per store. These are hours that our staff is not cleaning, not stocking, they're not engaging with our customers. We classify these as nonvalue-added time. Over the past 2 years, we have removed 26 of these hours we aim to take another 9 hours out by the end of this fiscal year by executing the things you see on the left side of this slide. Every hour we take out represents $7.5 million annually across our network. Our focus currently is on removing paper, reimagining point of sale, further utilizing AI to prioritize work and moving our manager workstations to the front checkout so they are always present with our staff and customers. Kathy and I as our ultimate goal is to remove all administrative hours. And we believe the technology and process will become available for us to achieve this at some point in the future. Turning now to inventory management. We recently launched a new AI-driven holistic inventory management system across Europe. This enabled our on-shelf availability to what is now above 98% from the low 90s before we deployed this system. Further, we realized material working capital savings as we have less back stock. And last, we have much better space allocation analysis, promotion and merchandising effectiveness reviews. We are now focused on deploying across North America and will do so over the coming 18 months. Once we are complete, we will have all of our data in a highly usable consistent format to monetize to interested parties. We are pleased, as you heard from Kevin, with the initial results from our Inner Circle launch and are accelerating the pace of rollout. Our digital journey is about creating one common platform that is easy and our customers recognize us as providing value and improved experiences. We believe we can further differentiate our consumer experience through the deployment of tech and improve processes. Our scale enables this differentiation and our ambition is to realize $200 million to $400 million of incremental EBITDA over the 5-year period of our strategy. Thanks. And I'm now going to hand it over to JP and our panel. I think. I hope.

Good morning, everyone. We are now ready for our panel discussion on the foundation. The bedrock or foundation is very important as it outlines some of the key enablers that will allow us to deliver on our four lighthouses. This section also defines who we are at Couche-Tard, Circle K and talks about some of our core values as an organization. With us today for this panel discussion, we have Ina Strand, Chief People Officer; Ed Dadoski, Chief Technology Officer; and Niall Androgen, Senior Vice President, Operations. Ina, I would like to start with you. Before we get the customer-centric team, may I please ask you to introduce yourself.

Sure. So I'm Ina Strand. I joined Statoil Fuel & Retail over 20 years ago after first working 5 years as a management consultant. I've had several roles across the business in operations, in marketing and when we were acquired by Couche-Tard, I was leading up the European marketing. I later worked with the Skyfall project or the rebranding to Circle K before I moved to the U.S. 6 years ago to become our first Chief People Officer.

Thank you, Ina. We just heard Alex talk about how a customer-centric team supports fast, friendly and in-stock and the base of our operations with turnover and labor shortages as a big issue for the retail industry especially during the pandemic, how can we sustain consumer-centric teams?

Yes. So I'm glad to be able to share today that we are seeing some significant improvements in our labor force. If you look at the graph to the left over here, we are making tremendous progress in bringing down turnover. It's been one of our most important challenges on the people side. But even more importantly, on the other side, you can also that we have much greater access to talent. So this is an uptick in applications to our jobs, and it's been increasing year-over-year and on a stable 40% years after the pandemic. While part of this is a correction in the labor market, you probably see this across many other organizations. It's not just the market. We've had this as a big priority, and we've had some really smart people putting together some very successful programs from improved career sites to self-scheduling of interviews, instant hire process with prequalifications of qualified applicants and we've also been strengthening our employer value proposition in the way we present ourselves to candidates. And last, as you heard Alex talk about recently, we've also leaned into the gig economy and have access to quite new labor pool that works in a different way, and that has been alleviating a lot of the pressure on our teams and is becoming a competitive advantage for us.

Those are great news, Ina. But with a 100,000-plus workforce, we still hire quite a lot of people new to retail. Must be a real challenge to train them and develop them as consumer-centric team members.

Yes. And we still have high turnover, some of that seasonality of our industry. So we bring on board on average 250 people every day. So think about that number. So obviously, training all those new people is a big focus for my team. And from thinking about this onboarding process in 30, 60, 90 days, we've learned over the last few years that this is really about winning the first day and then it's about wining the first 40 hours. So to support that, we've totally revamped our onboarding practices and we've introduced much sharper content engaging videos about the system where someone actually helps you get used to the new job. We've introduced gamification, which we will talk about a little bit later, and some of you had the opportunity to try that. But also built in alerts. So when now in our new onboarding program, someone reports a bad experience or don't feel ready for the job after completing the program. There's alerts going to the market managers that can intervene and see what's going on at that particular store. So today, we can say that at day 14, 9% to 6% of our teams that are going through this new revamped onboarding are feeling ready for the job. So that's a huge improvement, double digits over what we saw before.

That's great. So now we have hired them, we have trained them, how do we keep these new team members, especially in operational roles?

Yes. And same thing with the pace after 30 days, we switched to retention tactics. So where we before we're onboarding thinking. Now we're all about retention already after 30 days. Our award-winning culture that you heard both Brian mentioned and Alex talk about is really the key. We have now twice been awarded Gallup's Exceptional Workplace Award, one of the [indiscernible] businesses of our size to win at once and let along twice. People join organizations -- Okay. It's back. People join organizations, but they leave leaders. In our case, they because we have very [indiscernible] so leadership is based on analytics. The import [Technical Difficulty]

Help, maybe.

Most important factor that is a -- and that's why we have focused on leadership development. You saw it video earlier, and Alex also alluded to it that over the last 3 years, we've had all of our regional directors and around 800 market managers through leadership training. And currently, we're in the process of having over 7,000 store managers in various levels of leadership training, and that's specifically targeted to the opportunities we have at our store level. So on the picture behind me, you see a crowd of those smiling store managers with our trainer Paul, and they're having a great time learning about how they can better retain their people at the store level.

Thanks, Ina. While I have you and now that you have a well-functioning mic, let's talk about responsible retailer. In other words, sustainability, which is also under your purview as CPO. We know this is important to many of you with us today. And what we're seeing on the large screen are pages from this year's sustainability report and our ambitions and initiatives. Please tell us more about our work here.

Yes. And Brian again alluded to this in his opening with our values that do the right thing has always been one of the fundamental values at Alimentation Couche-Tard. So when I took over the responsibility for our sustainability efforts, we already had a lot of things going on. But over the last few years, as we have been progressing on this journey, we have established goals for both 2025 and 2030 that you see on this page. We have been focusing on transparency and really stress that and made more of the work available, both our actions and our goals available on our pages. And then we've been converting to the known standards for sustainability reporting or SASB and GRI and most lately, the TCFD to make the work that we're doing in this space, easier to access and more transparent for those who are interested. I'm really proud to see the progress that we're making. Our ESG rating agency are also recognizing that we are improving like Sustainalytics. And recently, we were upgraded to AA with the MSCI. But we're not really doing this for the ratings. It's back again to our culture and do the right thing. This work is really important for our customers. It's more and more important for our team members, especially the younger generations. And as JP just said, I know it's an important theme for many of you in this room today. Meeting sustainability standards is increasingly becoming a part of the license to operate in most countries that we are in. And in addition, it becomes more important to any consumer brand and employer brand. Simply put sustainability is good for our business.

Great. Great. Thank you, Ina. And last question for you, I promise. Can you please give us some concrete examples on how doing the right thing for our planet, people and prosperity is also good for our business?

Yes, we already heard from Louise, about our mobility work with both biofuels and EV, and you will hear more from Hans Ola on the same topic later, but those themes are really becoming a competitive advantage for us with consumers and especially in the B2B segment. And other things we could mention are energy savings that we have targeted with ambitious targets as well. They're very good for the planet, but they do translate into real dollar savings on the bottom line. And the same is true for our packaging and waste when we're eliminating 40 million single-use cups like we did last year, that translates into bottom line effects as well. And we're proud to see programs like are too good to go, that we have launched, we have been able to sell over 1 million meals that would have gone to waste and bringing benefits to both our customers to the climate and is minimizing our spoilage. While our programs of bringing down rubbers and injuries were developed with care for our people and communities, a positive side effect is reductions in losses from both our claims and from theft. Promoting diversity and inclusion is a key component of our culture of growing together, and it's critical to continue to be a preferred choice for our diverse customer base. Last but not least, I want to mention our community engagement. These campaigns create a lot of engagement with our consumers. We collected $2.7 million to Ukraine in a few short weeks, so a huge engagement with our customer over the same topics. And the same is true for all of our youth at risk campaigns that we do across Europe, and many of our activities in North America as well as in our Hong Kong business units. So as we continue to apply sustainability as a lens to our view of our business, we're also improving our business in many different ways.

Thank you, Ina. I will now turn it over to Ed to discuss the broader topic of IT. Ed, can you please introduce yourself first?

Yes. Hello, everyone. Ed Dzadovsky, CTO for the organization. I'm coming up on 6 years so in Circle K. It started just before the double game strategy. Prior to that, over 20 years with McDonald's going from a crew person in the store. -- to doing digital transformation in the largest countries around the globe. And I could not be more excited to be doing digital transformation here at Circle K, partnering closely with Kevin and Alex on some of the really cool technologies you just saw, and you'll see later today in the stores. And based here in Phoenix, Arizona, welcome to Phoenix.

Thank you, Ed. As we can see on the slide here, Ed, you've recently refreshed the global tech agenda, which plays a star role in fortified fundamentals. You call this strategy modernize, automate hyperscale. Can you please define what this means?

Modernize, automate hyperscale just rolls off the tongue, right? The words are tough, but I promise you the meaning behind it is very relevant and resonates with our key stakeholders. I love this question. And for all of us, if you think about tech and retail or maybe you don't think about tech and retail. The focus is traditionally on organic growth and fuel margins and operations. And that's okay. In our space, that focus on the core business has given us some air cover. We were kind of behind the scenes. And so the tolerance for speed to market and the tolerance for quality was a little more moderated, give us a lot of room to operate. Today, tech is front and center. It's at the center of our customer experience. It's at the center of our employee experience and the entire executive leadership team here, and many of you are paying attention now. So our strategy had to fundamentally change to how we operate and meeting changing consumer behaviors and expectations. So modernize. Modernize for us is all about upscaling our tech teams. It's enhancing processes and tools. It's moving to agile development. It sounds like a buzzword, but it's so important in our industry, and it's investing in new capabilities. We don't do a whole lot of automation today. So we're moving to automate our service desk. We're going to automate our infrastructure. We're going to automate testing and deployment. And we're going to reduce our effort on repeatable activities to make sure that our teams can focus on the most important strategic parts of tech. And we're going to be more proactive in solving problems. We want our store teams to never know that they have or had a tech issue. So we'll be doing some work behind the scenes to simplify that for them. Last hyperscaling is about operating at the size and scale of Circle K around the world. So having platforms and systems that can enable 6 million-plus digital transactions to flow through them. So for us to sum it up, we're making key investments in these 3 areas with a laser focus on speed and quality.

Very, very clear. Thank you. As a follow-up to that, how do you envision this will enable or power the lighthouses and ultimately, our stores' performance.

So this is a long-term strategy. It's got multiple programs that run through it. It's focused on people, process tech and cybersecurity. And I would love to talk to you all day long about the things that are in here, and I'm happy to talk after this when we're on the bus visiting stores. But I'm going to highlight a couple of the things that are a little bit near and gear to our hearts. We've got a program we affectionately call reimagined retail systems. So it's a program focused on modernizing our ways of working for retail systems. It's all about leveraging automation, and it will be focused on delivering with quality and speed to our markets. More specifically, implementing agile, streamlining deployment and implementing proactive monitoring tools. So why is this important? Today, when we deploy new capabilities to the stores, it can take months. We're working to do this now in a matter of days or weeks with minimal downtime to the store. So we want to activate and Inner Circle or smart checkout. It doesn't take a half a year to do that. So the teams are building tools to also identify and resolve issues with those technologies before the employees are even aware and then deploy software upgrades with minimal to no downtime for the stores, not introducing any new defects. Work has already started, and we're super excited about the benefits that come with it. I want to talk for a minute about CGI. So you might have heard that we just entered into a 10-year strategic partnership with a managed service provider. We expect some really significant benefits out this, the traditional stuff, predictable outcomes, well-defined SLAs, flex capacity. So as we need to scale up on big initiatives, we'll have the ability to do debt through CGI. Again, they're going to bring boatloads of automation to the table for us that will leverage across our tech stack and a bench strength, a global bench strength happening into new talent markets around the globe. We'll consolidate a lot of our services to one vendor, which will really simplify our world. And last but not least, important, reduced service and support costs with a predictable and managed budget. It's a large operating model change. And the question often comes up, why CGI. They're a company that gets our complex environment. They're able to bring us talent. They've got great automation capabilities and really great leaders doing strategic thinking that we know will supplement our people and our culture very, very well. Finally, I want to put a spotlight on a proprietary cloud services solution that we believe is the foundation to our digital capabilities. This platform allows us to launch new programs and capabilities to our stores and our customers faster than ever. We call it our next-generation retail platform or NGRP, for sure. And you heard from Kevin about loyalty earlier, NGRP is the platform that enables us to deliver loyalty with speed and scale across North America. The same proprietary solution also enables our smart checkout, which you're going to see later in the stores today. And I will tell you, this is something our competitors aren't able to do. It's our secret sauce. And we're just getting warmed up. These are just the tip of the iceberg in our modernized automated hyperscale agenda. I'm looking forward to spending some time with you later today. Again, happy to take any questions you have or talk tech throughout the afternoon.

Thank you, Ed. This is fascinating. Now pivoting to you, Niall on the topic of Fit to serve. Why is this part of the strategy? And why now? But before answering this, can you please introduce yourself to our guests here?

Yes. Thanks, JP. My name is Niall Anderton. I'm the SVP of Operations and the token Irish man in the room, I think, I've been with the business now almost 8 years in various roles. I'm actually a finance guy by trade. I joined the business under the guys of Topaz, which was the Irish entity that Couche-Tard acquired 8 years ago and then moved in to run the Irish business unit and then more recently into SVP of Operations running many of our business units in Europe. And back in January, Brian and Filipe's predecessor asked me to step away from my day job to run this fit to serve project, which is a huge hairy goal, so I'll explain it now in a second to you. So you asked me what is it? Well, and why now? I suppose Circle K has always been a very lean operation. It's been up the heart of our DNA since the start. Fit to serve is the next journey -- next stage of that journey for us. As you saw, cost optimization and double again achieved a $400 million hit the goal of $400 million, which is fantastic. And this time last year, when we were setting up the strategy for the next journey, we were talking about the headwinds that we could be facing as a business, high inflation, high interest rates, wage pressures, geopolitical challenges going on. And we said we had to put down a big hairy goal to make sure that our business was lean for the future. I set the bedrock. And I think the goal we put down is meaty. It's $1.2 billion of a target we're going after. So I'll repeat that again, $1.2 billion, we're going after, $800 million of EBITDA and $400 million of balance sheet improvements. Now it has to be sustainable for us because, as I said, we're a very lean organization. And our approach has to be sustainable, and we can go off cut costs. But for us, we're a successful business. We need to make sure we're looking at things differently and how we're going to do that. You heard earlier, we're going to start leveraging our global sales better. We're going to challenge the way we do things and why we do it. We're going to reengineer many of our processes. We're going to reassess how we resource our capabilities. That's the people we employ and you heard from Ed in terms of CGI and how we work with partners. We're going to look into our supply chain and how we procure. And finally, we're going to use data to drive some value. As a result of this formulaic approach, that's how we got to our target, and I'm glad to say we're on that journey.

That makes perfect sense. Now can I please ask you to walk us through the main areas on which fit to serve will focus as I'm fairly confident our guests here in the room as well as online are very curious about the components leading up to that $1.2 billion figure you just mentioned?

Yes, it's not pie in the sky. We've got some very specific targets and some very specific areas we're going to look at. So we have seven work streams established, and we probably got ahead of our strategy by establishing these back early this year when I stepped into the role, and those seven work streams are go through each of them. The first one is cost of goods sold, and we've given this a target of $200 million. And this is basically all the products we buy from our suppliers and sit. Now that doesn't mean just negotiating better. We're now going to start using data and we're going to make sure that we're using customer-led information to drive some value in that. The second area we're going to look at is goods not for resale. The primary focus of the double again cost optimization was in this area, but we're going to have to go deeper. We're looking at our electronic card payments. We're looking at our IT spend, professional fees, right across the board and looking at how we procure. We're looking at our supply chain. We're looking at how we source our goods right across the business. So looking at new opportunities in terms of new markets in terms of bringing products into our business. The third area is general and administration. And this is really the support cost in the business. And this is what we just spoke about, CGI as an example, looking to see how we can resource capabilities better and get them obviously in a different way, partnering with partners that can bring value. but it's also looking at where we are replicating tasks in the business and making sure we're as efficient and lean as possible. The fifth area is -- sorry, the fifth or fourth area, sorry, store operations. And this is the nuts and bolts of what you heard earlier in terms of our labor costs, our labor modeling, how we remove inefficiencies in our stores, cleaning costs, security costs, et cetera, right across that. The last piece on the EBITDA impacting is fuel controllables. And this is looking at our logistics efficiencies, looking at the fuel shrink we lose and optimizing our forecourt spending. So those add up to an 800 million EBITDA impact. Then going on to the balance sheet. We've identified two specific areas that we need to go after. The first being CapEx, which is a $200 million target. And this is really looking at reengineering how we buy our capital products. Looking at how we reimagine them and looking at just different ways of approaching that. And that goes right across everything. So you'll hear about EV later on the spend. You've heard about the -- and you'll hear about the new sites we build, et cetera, we're looking right across the chain there. And then finally, net working capital. We set ourselves a target a significant target again of $200 million. And I think this 1 -- we've got a lot of room here in terms of AP and AR stuff, looking at eliminating prepayments and all that type of managing our inventory, et cetera, the usual stuff, and we're getting after that as well. So very specific targets, very specific areas. We've still up all the projects, and we're in good shape.

Wonderful. Thank you. One last question now for you on Fit to serve. What kind of traction are you seeing thus far 6 months into fiscal year '24 on fit to serve?

Yes, it's going very well so far. We are -- as you'll see in our first quarter results, we are seeing some of these benefits coming through already. So we got ahead of ourselves in this program. And you can see from our first quarter results, the OpEx in the business grew 2.9% and normalized OpEx at 3.7%, which is behind inflation and significantly down on last year's increase in costs. So I think we've got the right size of inflation now in the business, and these initiatives are really adding value to the bottom line. So it's going very well.

Thank you, Niall. Very, very comprehensive. The last question here will be for you Ina. As we close this panel section, can you please talk about customer Star and the importance this plays into our training strategy, which you highlighted earlier? And also, may I please ask you to announce our winner?

I will. So I hope you have fun. I know some of you who tried the customer Star and had a good experience with that. So I'll get back to the winner in a second. Just a few things about gamification. That has become a really important part of our overall people strategy. And if you tried it or you can see it on the picture here, it recreates the life at the store in a very credible way and takes the audience to where they need to be when they're learning. And it allows us to reach this big group of employees in a very engaging way. Obviously, this can be made available on everyone's individual device, which is important for our younger team members. With customer STAR specifically, so we have several different gamified modules supporting all our different programs from food to fuel to safety and whatnot, but customers star is really targeting to educate our people in sales and service. So hence, underpinning this customer-centric team focus that we have in our strategy. So we're teaching them all the basics in the stores, meeting customers, upselling and when not to. And it helps them understand our loyalty platforms and how they really help present them to our consumers. So all in all, we think this is a good program for us. We are pleased to see that the sales are following the launch of this program. So when we do introduce customer Star, our baskets increased, the upselling is better in all those stores. And if we ask our people how they feel about it, I think the key number on this slide is the 94% that better understands what it takes to be delivering a good customer meeting. So all in all, pretty successful. There's one of you who did better than the others. And I'm not so surprised when I saw who was topping the list of attendees here on this conference that had done this. This is our good friend, [Irene Natel]. And Irene, I have something very special for you here, if I can hold it up. It's a T-shirt, what else would you want? I mean when you win something and it says, winning the customer has never looked this good on the #beatBrian, you've deserved it because you did actually beat Brian, and you did beat JP as well. So that's something to take back in addition to the t-shirts. So come up here Irene, big hand of applause for Irene.

At this point, we are at the end of the panel session. So we will take a 15-minute break. We will be back at 10:40 local time with the winning growth lighthouse. Thank you. [Break]