A North American Invasion of European Convenience?

For the past twenty years, Europe’s largest supermarket groups, starting with Tesco, Carrefour, Casino, and Ahold Delhaize, have been pouring money into ‘convenience supermarkets.’ These stores are often called ‘proximity’ stores from the French name for the channel: Proximité. They have mostly done so organically – ie, by opening up their own express stores and filling them mostly with the same grocery products that you find in bigger grocery stores.

One FAQ that often comes our way is, “What’s the difference between a convenience store and a proximity supermarket?”

There are two ways to answer that question: From the consumer’s perspective and from the industry’s perspective. We prefer to answer it from the consumer’s perspective. The industry’s perspective is highly dependent on the perspectives of investors and professional market research houses.

The difference, from a consumer perspective, revolves around four elements:

a)     Location. Proximity supermarkets are embedded in the spaces where people live. Convenience stores are located where people travel.

b)     Prepare or Prepared. Proximity supermarkets allow consumers to build a basket of items which they can later prepare at home/work/school, often designed for consumption at a later time in the near future. Convenience stores provide prepared foods which are normally designed to be consumed immediately.

c)      Tables, Chairs, Washrooms.  Proximity supermarkets normally lack tables, chairs, and washrooms while convenience stores provide these - albeit inconsistently.

d)     Owned or Franchised. Finally, the main operating model for proximity supermarkets has been either owned or rigid-franchising. Conversely, convenience stores have normally operated almost entirely on franchise agreements.

Laying out these differences often creates controversy for the simple reason that many operators in Europe mix & match models. There is a blurring of lines. Yes, it’s possible to visit a Tesco Express or Carrefour Express that matches the definition of convenience. Yes, it’s also possible to visit these stores that match the definition of proximity. Said more simply – leading European supermarket groups blur concepts. They sometimes operate convenience stores but more often operate proximity supermarkets.

The Looming North American Invasion

In North America, there’s no such blurring.

The world’s three largest convenience store franchise groups, c-store operators, all have their origins in North America and all three have signaled their intentions to acquire their way into the European convenience space.

If you did not sit up and take notice back in 2021 when Alimentation Couche-Tard made an attempt to acquire Carrefour, you should sit up and take notice now, in 2024, as all three convenience operators are making gains in Europe. Let’s review:

#3. FEMSA-OXXO. Oxxo is Mexico’s #1 convenience store chain and has been expanding in Latin America and into health retail. In 2022, Oxxo acquired Valora of Switzerland, thrusting it into European convenience in 5 countries – Germany, the Netherlands, Austria, Luxembourg, and of course, Switzerland. In 2023, Oxxo’s CEO passed suddenly, and new leadership is in place. We believe the new leadership will be making further steps in European convenience and it's simply a matter of time before an announcement shakes up the news headlines.

#2. Alimentation Couche-Tard.  Couche-Tard is Canada’s #1 convenience store chain and has been expanding via M&A in the USA and Europe. At the start of 2024, Couche-Tard announced its acquisition of Total Energies, a major convenience store chain/classic petrol forecourt operator, with roadside stations in Germany and the Benelux. This acquisition brings Couche-Tard into twelve European countries. Couche-Tard has bigger ambitions than just twelve European countries.

#1. Seven & I Holdings. Seven & I, a Japanese American conglomerate, owner of the global 7-Eleven franchise, has announced a major restructuring program in 2024. The result, they say, will be the rapid expansion of the 7-Eleven Franchise in many countries. Earlier this week, Seven & I’s shareholders met and announced their desire to open 7-Eleven stores in a short-list of eight new European countries in 2024. Up-to-now, 7-Eleven was only open in Denmark, Sweden, and Norway. Back in 1985 they attempted stores in London, UK, but then pulled the plug. Will they return and try again in 2024?

Below is a chart highlighting the Global C-Store Big 3 in Europe, by store count, as of 24 April 2024.

Predictions for 2024/2025

Consolidation in Europe’s convenience sector is well underway. For instance, Ahold Delhaize announced the takeover of Profi, Romania’s largest convenience chain. Likewise, Auchan announced the takeover of Dia’s stores in Portugal. These takeovers will most likely follow the well-established pattern of seeing these stores rebannered, and then operated like proximity supermarkets.

Major announcements from 7-Eleven in Europe are imminent. According to 7-Eleven, their main approach to new country launches will be to strike deals with major supermarket or convenience store groups that already have stores in operation. We are all waiting in eager anticipation to see which partners have signed agreements.

At the moment, there are no regions in Europe where all three of the global big three compete against one another, head-to-head. The most intense competition is in the DACH region (D=Germany, A=Austria, CH=Switzerland). In the DACH countries, both Couche-Tard and Oxxo have made major investments. Given what 7-Eleven has said about their shortlisted countries, we may just see the DACH region become the first region in Europe where all three of the world’s c-store giants compete head-to-head.  As a sidenote, while the competition is intense in Canada, the USA, and Mexico, Couche-Tard and Oxxo have generally avoided head-to-head competition in North America, making DACH the first such battleground in a new global competition.

Our main prediction: The blurring of the lines between convenience and proximity will advance in 2024, making it harder to know which ‘express’ stores are food-for-now or food-for-later. All of the main operators will do a much better job of equipping these stores with express services including food-for-now, tables, chairs, washrooms, and more.

Will this change the approach taken by Europe’s proximity grocery operators? We would bet on it but maybe not just yet in 2024 when the competition heats up in the DACH and Scandinavia regions.