Circle K, a North American retailer with more than 7,000 stores worldwide, is set to expand rapidly across the Gulf.
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The convenience store operator, a wholly-owned subsidiary of Alimentation Couche-Tard, a publicly traded company listed on the Toronto Stock Exchange, plans to open 100 shops in the UAE over the next four years. It also has agreed a leasing deal in Saudi Arabia to add up to 400 shops in petrol stations around the kingdom.
"The convenience sector is seriously underdeveloped in the UAE" said Fahmi Al Shawa, the managing director for Convenience Arabia, the franchise partner for Circle K in the GCC. "Most small stores do not have a standard offering, branding or unified pricing," he said.
Circle K joins a number of major established players in investing in the local and community retail concept. Zawya, a new small store player, entered the market in September and plans to open 90 stores across the UAE, while both Geant and Carrefour are rapidly rolling out their smaller branded supermarkets, Easy and Market, respectively.
The supermarket operator Al Maya Group has opened nine convenience outlets across the Emirates in the past three years and Lulu said recently it was expanding into convenience stores, although hypermarkets will remain its priority.
Mr Al Shawa says Circle K is offering a smaller concept than the major competitors. "The big players are looking at the small supermarket segment," he said. "None are looking at the traditional convenience stores."
Circle K mainly sells snacks, drinks, food-on-the-go, baked goods and daily household items such as milk. It does not offer the same range as a standard small supermarket and the shops are much smaller in size.
Euromonitor, a researcher, estimated total grocery sales of US$8 billion (Dh29.38bn) last year, of which small convenience stores made up $1.3bn. The small grocery retail sector has grown sales 25 per cent over the past five years, according to Euromonitor.
Despite the large market in the UAE, Mr Al Shawa says convenience stores are mainly independent, family owned affairs. "There are more than 9,000 traditional, independent grocers in the UAE," he said. "If Circle K can get a 1 per cent market share, that's 90 stores, but we eventually should be able to get 2 to 3 per cent market share."
The company says it will open 60 stores in Riyadh, with the option of opening up to 400 in Aldrees petrol stations.
Alongside the 100 planned stores in the UAE, the total investment in the Gulf will be $30 million to $40m in the next five years, Mr Al Shawa said.
He says he hopes to achieve a return on equity of 15 to 25 per cent for shareholders in the long term.
Circle K is the second-biggest convenience store operator in North America, behind 7-Eleven. It has more than 3,300 stores across the US and more than 4,000 international locations. "For Circle K it's a matter of being the first market mover in the convenience sector in the Gulf," Mr Al Shawa said.
"They see huge growth potential in the GCC and they want to start developing the market."
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