Businessmodel of Core-Mark

Customer Segments

Core-Mark is a leading wholesale distributor to the convenience retail industry in North America, providing sales, marketing, distribution and logistics services to more than 36,500 customer locations across the US and Canada. The Company has three principal customer segments:

• Traditional convenience stores, comprising a number of major national and super-regional convenience store operators, as well as independently owned convenience stores;
• Alternative retail outlets, comprising grocery stores, drug stores, liquor stores, cigarette and tobacco shops, hotel gift shops, military exchanges, college and corporate campuses, casinos, hardware stores, airport concessions and other specialty and small format stores; and
• Manufacturers, comprising manufacturers of various consumer products. In 2015 Core-Mark’s top ten customers accounted for 37.4% of its net sales, including its largest customer Alimentation Couche-Tard, which accounted for 14.2% of the Company’s total net sales. Other customers include 7-Eleven, Rite Aid, and Murphy USA.

Core-Mark’s principal market is its native US, which accounted in 2015 for more than 90% of its net sales. The Company’s remaining sales were to customers in Canada.

Value Propositions

Core-Mark provides value to its customers in the following ways:

• Its reputation and industry standing, with the Company established as an effective operator within the industry and one of the largest wholesale distributors the North American convenience retail industry;
• Its track record for delivering reliable and efficient services, with the Company operating an efficient distribution and logistics systems for timely delivery of products to customers;
• Its innovative and flexible service offerings, with the Company enabling customers to place small quantity orders, inventory management and access to trade credit, as well as innovative marketing programs, technology solutions, and logistics support services; and
• Its extensive distribution capabilities, with the Company able to service large national chain accounts, through its broad network of logistics and distribution facilities across the US and Canada. ### Channels

Core-Mark operates a website at www.core-mark.com, through which it provides information on its services, company structure, and distribution network. The Company also operates an online customer portal under the name My Core-Mark, through which customers are able to connect with local divisions and retrieve information regarding certain services.

Core-Mark serves its customers through a direct sales and service teams that operate through the Company’s network of offices. The Company’s distribution and logistics services are provided through the Company’s own distribution infrastructure, including 20 distribution centres in the US and four distribution centres in Canada. Core-Mark utilises a proprietary Distribution Centre Management System platform across its distribution network.

Core-Mark also operates four consolidation centre, which buy products from suppliers in bulk and re-distribute the products to distribution centres, as well as two additional facilities as a third party logistics provider.

Customer Relationships

Core-Mark provides a small portion of services to its customers on a self-service basis through its online customer portal. This channel allows customers to manage certain account details and access information without interacting directly with members of the Core-Mark sales team.

Core-Mark’s customer relationships are managed by dedicated relationship management staff and sales and support team, which work closely with customers in order to fully cover the individual needs of each client. The majority of the Company’s sales are made under purchase orders and short-term contracts with convenience retail stores. The Company often agrees multi-year service contracts and seeks to secure recurring business.

Core-Mark provides ongoing support to customers through its online customer portal. Customers are also able to contact support staff directly, and receive personalised responses to enquiries, by filling in an online contact form. The Company also operates social media accounts, including with Facebook and Twitter, through which it is able to interact with customers directly.

Key Activities

Core-Mark operates as a wholesale distributor of products to convenience retail businesses across North America, providing sales, marketing, distribution and logistics services to numerous customers across the US and Canada.

The Company utilizes an extensive network of owned and leased distribution facilities. Core-Mark reports its activities in two geographic segments: US, and Canada. The Company’s product categories include cigarettes, food, candy, other tobacco products, health and beauty products, beverages, and equipment. Core-Mark’s customer base principally comprises traditional convenience stores – including high-profile companies such as 7-Eleven – as well as alternative retailers, including drug stores, liquor stores, cigarette and tobacco shops, hotel gift shops.

Key Partners

Core-Mark collaborates with a range of companies throughout the acquisition and distribution of its products. These partnerships include:

• Supplier and Vendor Partners, comprising suppliers of stock and products, tools, and services, which support the Company’s supply chain and distribution operations; and
• Strategic and Alliance Partners, comprising a range of companies with which the Company shares resources and collaborates on joint projects. Core-Mark’s supplier partnerships include tie-ups with strategically-located dairies, fresh kitchens and bakeries that enable the Company to deliver fresh products to its customers, including sandwiches, cut-fruit, pastries, and bread. The Company is in the process of transitioning portions of its fleet to compressed natural gas, owning and operating two compressed natural gas plants in partnership with US Oil.

Key Resources

Core-Mark’s key resources are its supply chain infrastructure, its distribution infrastructure – including its fleet of vehicles, its IT and communications infrastructure, its sales channels, its partnerships, and its personnel.

The Company owns and leases a number of properties, including 24 distribution centres across the US and Canada, as well as four consolidation centres. The Company also operates several compressed natural gas plants, and has a fleet of 870 tractors, trucks and vans, the majority of which are leased.

Cost Structure

Core-Mark incurs costs in relation to the operation of its supply chain and the acquisition of stock, the operation and maintenance of its distribution and logistics infrastructure, the operation and maintenance of its distribution fleet – including the purchase of fuel, the maintenance of its IT infrastructure, the management of its partnerships, and the retention of its personnel.

In 2015 Core-Mark accrued warehousing and distribution expenses in the amount of $352.60 million, and selling, general and administrative expenses – including the payment of salaries and benefit to its workforce of 6,655 employees across the US and Canada – totaling $196.00 million.

Revenue Streams

Core-Mark generates revenue through the provision of marketing, distribution, and logistics services to the North American convenience retail market. This includes service and sales revenue derived from its core services, as well as shipping and handling fees and related costs.

In 2015 Core-Mark generated total net sales of $11.07 billion, up on the $10.28 billion in sales recorded by the Company the previous year. The Company’s sales are divided into several product categories. The majority of its sales relate to products from its Cigarettes category, which accounted for $7.53 billion in sales for the year. The only other product category that contributed more than $1 billion to the Company’s total net sales was its Food category, which generated $1.59 million in sales in 2015.