Businessmodel of CST Brands

Customer Segments

CST Brands serves a range of commercial, residential, and individual customers across its three operating segments. The Company’s customers can be arranged into three principal categories:

• Individual, including individual consumers that purchase products and service through the Company’s network of convenience retail outlets;
• Residential, including individual residential customers and families to which the Company sells heating oil; and
• Commercial, principally including the Company’s wholesale customers, such as trucking and transport companies, fleet operators, and other commercial operators; and
• Distributors, including the Company’s network of affiliated and independent dealers, and commission agents. The majority of CST Brands’s retail sites are located in metropolitan areas where there are high concentrations of consumers, with daily commuters comprising a significant portion of the Company’s individual retail customers.

CST Brands principally serves customers in its domestic market of the US. It also serves a significant number of customers in Canada.

Value Propositions

CST Brands provides value to its customers in the following ways:

• Its broad range of services, with the Company providing a broad range of products and services to variety of customers, including food and convenience merchandise sold to consumers, and fuel products sold to residential and commercial customers;
• Its extensive service network, with the Company operating an extensive network of retail outlets across the US and Canada that serve metropolitan populations, as well as dedicated wholesale sales teams;
• Its brand recognition, with the Company controlling several well-known brands in its operating markets, including stores under the Nice n Easy, Flash Foods, and Corner Store brands, and services under the CrossAmerica name; and
• Its commitment to innovation, with the Company committed to finding innovative processes and creative approaches to providing products and services to its customers across its three core operating segments. ### Channels

CST Brands operates a website at www.cstbrands.com, through which it provides information on its various brands, operating units, and corporate activities. The Company also operates separate websites for its various brands, including www.flashfoods.com and www.cornerstore.com, which provide ,ore detailed information on the operations of its individual operating units. The Company does not appear to operate any online sales channels. Both its Fresh Foods and Corner Store brands do, however, provide mobile apps for iOS, Android, and Blackberry devices that provide store location services, deals, and contact tools.

CST Brands operates an extensive network of retail outlets across the US and Canada, through which it serves customers directly. This includes 1,049 convenience stores located in Arkansas, Arizona, California, Colorado, Louisiana, New Mexico, New York, Oklahoma, Texas and Wyoming, as well as 303 convenience stores across Canada. The Company also operates through 115 CrossAmerica retail sites, and a number of cardlocks, and commission agents in Canada.

CST Brands additionally operates dedicated wholesale teas for its fuel business, primarily in the US. These wholesale teams work directly with customers, operating out of the Company’s network of offices across the US and Canada.

Customer Relationships

CST Brands provides a selection of services and tools to its customers that can be accessed on a self-service basis through the Company’s various branded websites and mobile applications. These channels enable customers to locate stores, access tools and resources, and access deals without interacting directly with members of the Company’s sales and service personnel.

CST Brands’s in-store sales staff are able to provide personalised assistance to customers, handling queries and complaints, and advising customers on products and services. The Company’s business model is designed to encourage repeat business from its retail customers. CST Brands operates separate dedicated sales teams for its fuel businesses. These sales personnel consult directly with customers in order to establish the details of each individual sales and distribution contract, often making long-term agreements.

CST Brands provides support to its customers through its various websites, with customers able to contact the Company directly over the phone or online in order to receive personalised responses to enquiries and queries. The Company and its brands additionally operate a number of social media accounts – including with Facebook, Twitter, and Instagram – through which it is able to interact with customers directly.

Key Activities

CST Brands operates as a holding company. The Company is an independent retailer of motor fuel and operator of various convenience merchandise retailers across the US and eastern Canada.

The Company aligns its operations into three reportable business segments: US Retail, which is engaged in the sale of motor fuel, food and convenience merchandise, and the provision of related services; Canadian Retail, which includes the Company’s operation of convenience stores, commission agents, cardlocks and heating oil operations across Canada; and CrossAmerica, which distributes motor fuel to lessee dealers, independent dealers, affiliated dealers, and sub-wholesalers. The Company provides services to individual consumers, residential customers, commercial operators, and industrial businesses.

Key Partners

CST Brands works in collaboration with a broad network of partners companies that provide services in support of the Company’s various retail and distribution activities. These partners can be organised broadly into the following categories:

• Supplier and Vendor Partners, including suppliers of convenience merchandise, fuel, and other goods that are sold by the Company to its customers, as well as suppliers of services, equipment, and technologies that support the Company’s more broadly across its operating segments;
• Distribution and Channel Partners, including various independent third parties that are involved in the Company’s retail and distribution operations, including operators at its various commission agent locations in Canada;
• Strategic and Alliance Partners, including various leading companies across multiple business segments, with which the Company collaborates in joint marketing and branding projects, and other corporate ventures. CST Brands has an agreement in place with grocery distributor Core-Mark International to provide merchandising expertise, purchasing power and efficient distribution services to the Company’s US Retail segment.

Key Resources

CST Brands’s key resources are its brands and intellectual properties, its merchandise and supply chain, its network of retail outlets, its IT and communications infrastructure, its sales and distribution channels, its partnerships, and its personnel.

CST Brands owns a number of trademarks and service marks that it considers material to its ongoing operations. This notably includes the various brands owned by the Company or its subsidiaries, or licensed from third parties, under which the Company sells goods and services in its US Retail and Canadian Retail segments, such as CST, Cibolo Mountain, Corner Store, Fresh Choices, Flavors2Go, U Force, Ultramart, and Dépanneur du Coin.

CST Brands also owns and or leases a number of physical properties across the US and Canada. This notably includes the Company’s extensive network of retail site, including 1,036 outlets in the US and 869 outlets in Canada.

Cost Structure

CST Brands incurs costs in relation to the procurement of supplies and professional services, the operation of its retail network, the development and maintenance of its IT and communications infrastructure, the operation of its sales and distribution channels, the management of its partnerships, the implementation of marketing and promotional campaigns, and the retention of its personnel.

In 2015 CST Brands recorded total cost of sales in the amount of $10.06 billion and total operating costs of $1.13 billion. These operating costs included general and administrative expense totalling $175 million, and general operating expenses totalling $741 million.

Revenue Streams

CST Brands generates revenue through the operation of an extensive network of convenience stores across the US and Canada, as well as the operation go a dedicated motor fuel wholesale business. The Company derives revenue primarily in the form of retail and wholesale sales to individual, commercial, and industrial customers.

In 2015 CST Brands generated total operating revenue in the amount of $11.44 billion, down on the 12.75 billion recorded by the Company in 2014. This decrease in revenue was attributed in part to a general decrease in the retail price per gallon of motor fuel. The majority of the Company’s revenue was generated by its US Retail segment, which alone recorded operating revenue for the year of $5.98 billion. The Canadian Retail segment generated $3.39 billion.