[Foreign Language] Good morning. I would like to welcome everyone to this web conference presenting Alimentation Couche-Tard financial results for its third quarter fiscal year 2021.

All lines will be kept on mute to prevent any background noise. [Operator Instructions] We would like to remind everyone that this webcast presentation will be available on our website for a 90-day period.

Also, please remember that some of the issues discussed during this webcast might be forward-looking statements, which are provided by the corporation with its usual caveats. These caveats or risks and uncertainties are outlined in our financial reporting.

Therefore, our future results could differ from the information discussed today. Our financial results will be presented by Mr.

Brian Hannasch, President and Chief Executive Officer; and Mr. Claude Tessier, Chief Financial Officer.

Brian, you may begin your conference.

Thank you, Jean Marc, and good morning, everyone. Thank you for joining us for this presentation of our third quarter 2021 results.

One year after the start of the COVID-19 pandemic I'm pleased to report that across our global network, we continue to have solid results. Our customers continue to utilize the convenience and proximity of our channel for their everyday needs with overall basket size remaining strong.

In our fuel business, we achieved healthy margins despite a persistent increase in product costs throughout the quarter. Fuel volumes like traffic were highly variable with areas renewed lockdown during the quarter, particularly in the urban areas.

Those areas showed very soft demand while other areas strengthened. In our strategic ambitions, we made noticeable strides as we evolve our model to become a more innovative and differentiated retailer.

This included development of our fresh food program as we prepare for the second wave of implementation as well as advancements in our innovation journey with the opening of our first frictionless store and the expansion of our data-driven localized pricing initiatives and mobility journey. During the quarter, we closed on the acquisition of our Circle K Hong Kong, and I'm excited by the collaboration with our new talented team members and the potential for growing together in Asia.

We also discussed -- had further discussions concerning operational partnerships with Carrefour, which we announced in January. Here, we're looking at areas in cooperation, including fuel, merchandise purchasing, private label development, data analytics and improving the customer journey through innovation.

I'm pleased with the preliminary discussions and how a possible collaboration with Carrefour has the potential to create value for both companies. Before I move to our results, I want to add some thoughts on the catastrophic storm that recently shutdown in the state of Texas after the end of the quarter.

With millions without power and water, I'm proud to say that our Texas team worked day at night and keep our stores open so we can provide essentials to our customers. At one point, we had over 50% of our stores closed, but we're back in full operation within days.

I've heard many stories of team members who went above and beyond the call of duty to help our customers and our communities. I'm now going to turn to the results for the second quarter.

Same-store sales growth was 2.9% in the U.S., 4.7% in Canada and 2.8% in Europe and other regions compared to the same quarter last year. In particular, in the U.S., alcohol and beverages showed strong growth as did the tobacco category, specifically in the white nicotine and vaping products.

They all benefited from increased promotional efforts that aimed at driving traffic to our locations. And no doubt, the renewed escalation of the pandemic during the quarter, including strict stay-at-home and curfew orders in some of our key markets where we operate, impact the business to our stores.

That said, we continue to work hard to drive more business to the stores through increased awareness of our loyalty initiatives, our smart value program, gamification promotions and by ensuring that we remain focused on our core value proposition and being responsive to our customers needs. We're happy with the progress of our North American food program and assortment as we prepare for a second stage of the implementation.

Having completed the first stage of opening 1,500 fresh food stores, we will now expand the program to additional 3,000 stores in the coming months. We're continuing to improve and simplify the offer.

And our focus remains on quality and the ease of the offer, both for the customer and for our store team members. Stores with fresh food fast have been performing well relative to control stores within the same markets.

Based on these results, we plan to leverage the learnings and we look forward to expanding throughout North America during our fiscal 2022. In Europe, we continue to develop the new fresh food fast concept as a platform for future growth.

We're making it easier for our customers by introducing a self-service option, adding grab-and-go elements to the freshly prepared offers that we have in all stores. Also in Europe, we have piloted a Horizon store layout in Sweden and Lithuania with a brand-new look and feel as well as additional touch-free service and payment solutions that we've developed during the pandemic.

As throughout the year, dispensed beverage sales were behind prior year during Q3, but our performance continued to outpace that of the market. In our coffee program, we've made progress in our sustainability journey during the quarter and our commitment to becoming a more environmentally responsive retailer.

In our U.S. market, we transitioned to 100% sustainably sourced coffee across our stores.

Meaning it doesn't just taste good, it actually does good. Our coffee program gives tools, training and services to coffee farmers to help build long-term sustainability.

And we're proud that across Europe, we offer Rainforest Alliance-certified coffee, and we'll be implementing the RFA-certified coffee in our Canadian sites by the end of the fiscal year. Overall package beverage remained strong during the quarter.

Introduction of new products, along with a variety of scaled national and global promotional initiatives propelled the energy drink share of the market. Sports drinks also continued impressive momentum versus prior year with new offers and increased focus on take-home packages.

Alcohol sales also continued strong improvement versus prior year with imports and hard seltzers being the brightest spots in the category. Assortment enhancements and the expansion of larger packages have also provided a lift to sales during the pandemic.

During the quarter, we expanded our Q Line program to initial 600 stores, creating a clear path to purchase and the ability to place high-impulse items in front of the customers immediately before checkout. We're very pleased with the results and plans to expand this concept across North America and Europe in the coming months.

In other age-restricted products, nicotine once again showed solid performance to prior year, especially in Europe. Other tobacco products continued sales growth due to expanded selection of modern white and vapor products, in line with changing consumer trends, while promotional activities in the cigarette category were also noticeable traffic driver for the quarter.

We remain excited by the impact of our data-centric localized merchandising pricing efforts. At this point, about 60% of our network is now live with new pricing capabilities, and we're seeing results that meet or exceed internal projections.

As a result, we're looking at a rollout plan in the remainder of the company in the upcoming fiscal year. We're also piloting the use of store-specific data, enhanced product assortment and promotional activity.

We continue to believe there's a very large price to optimize locally assortment and promotion along with pricing. Moving to our fuel business.

Same-store fuel volume growth during the quarter remained negative due to the impact of the worsening pandemic on miles driven in many areas as they were impacted by significant lockdowns, again, particularly in our larger metropolitan markets. For the quarter, same-store fuel volumes decreased 15.7% in the U.S.

and 10.3% in Europe and 19.9% in Canada compared to last year. Despite these declines, the increasing product costs during the quarter, we continue to realize healthy fuel margins across the network, benefiting from irrational dynamics in many regions as well as solid execution at retail.

During the quarter, we converted more locations to our Circle K fuel brand, bringing the total now to over 2,700 sites in North America, and results continue to be encouraging. It's exceeding our projections.

In over 850 sites, we're currently piloting various strategies to build Circle K fuel brand awareness and grow premium sales, and we're pleased with the initial results of these pilots as we invest in the Circle K brand. In addition to growing the Circle K brand, we continue to further our capabilities in fuel procurement and transportation.

We've now fully launched a trading operation out of Houston, Texas and a rapidly growing our proprietary fleet to maximize sourcing flexibility. We have a newly formed partnership with Supply and Trading Arm Musket that creates a very unique entity in the industry with tremendous scale both on gasoline and diesel that we believe will continue to improve our competitiveness and margins over time.

In the fall, we opened Circle K logistics in Riga, which is a centralized 24/7 operations and controls -- sorry, call center, responsible for much of the network fuel-related logistics. It plans all of our in-house truck fleet for North America and terminal operations for our terminals in Europe.

This has improved our operational performance and obviously reduced our operational costs with great talent and a lower cost in Riga. Over the quarter, we also saw much attention to the advancements in mobility, including GM's Clever Super Bowl campaign to challenge Norway, the world leader in EV development.

We see set opportunities show our pride in our Norway lab, which has made us a leading EV charger in that country. We've also expanded our home and workplace solutions to 4,500 charging points in Norway.

In North America, we continue preparations for Circle K and partner charges at our sites and key markets this year, beginning in Québec and California. This quarter, we advanced our innovation journey with the opening of our first frictionless store, Couche-Tard Connect in Magill Campus.

The store is a unique retail laboratory in partnership with Magill University in Montreal. It opened in January on the Magill Campus and is receiving very positive feedback from our customers.

We're impressed by the technology and how we're delivering our fully frictionless experience in a timely manner and with great accuracy. Store team members have been outstanding ambassadors and playing a key role in successful location.

This store not only helps us on the technology and research front, but also supports sustainability efforts in many ways. It will clearly provide important insights and information as we expand our frictionless capabilities.

We will be piling many technologies in the coming months, both inside the store and in the forecourt and feel we can differentiate our offer and truly making -- make the shopping experience a Circle K easy in the future. I also want to mention our efforts to expand our network through new store builds.

We continue to believe this is a great investment, and we're investing in this organic growth lever and plan to ramp up further our capacity, considering it a solid return on investment. This goes hand-in-hand with our network optimization initiatives to upgrade the size and scale of our locations, allowing for the best utilization of our food programs, improve store layouts and also identifying stores that no longer fit our strategic objectives and being proactive and getting them out.

So with that, I'm going to pause here and let Claude take you through more of the second quarter financial results. Claude?

Thank you, Brian. Ladies and gentlemen, good morning.

For the third quarter of fiscal 2021, we are happy to report net earnings attributable to shareholders under corporation of $607.5 million or $0.55 per share on a diluted basis. Excluding certain items for both comparable periods, adjusted net earnings for the third quarter of fiscal 2021 were approximately $622 million or $0.56 per share on a diluted basis compared with $0.52 per share for the third quarter of fiscal 2020, which represents an increase of 7.7%.

We maintained solid momentum during the quarter in the face of challenging environment. Our business continued to generate strong cash flows as we stay true to our usual cost discipline and focus on operating efficiency.

We also returned further cash to our shareholders by way of higher dividend payments year-over-year as well as our share repurchase program through, which we have opportunistically bought back nearly 16 million of our Class B shares for more than $513 million during the third quarter and a further 12.4 million shares from the end of the quarter until March 12 for a total spend of nearly $900 million since renewing the program last November. We'll now go over key figures for the quarter.

For more details, please refer to our MD&A available on our website. During this most recent quarter, excluding the net impact from foreign currency translation, merchandise and service revenues for the third quarter of fiscal 2021 increased by approximately $192 million or 4.5%.

This increase is primarily attributable to the growth in basket size, which more than offset continued softness in traffic as well as the contribution from acquisitions, which amounted to approximately $83 million. Several categories continue to perform well across all regions, including tobacco, packaged beverages, alcohol and grocery products.

For the third quarter of fiscal 2021 on the same basis, merchandise and service gross profit increased by approximately $13 million or 0.9%. The contribution from acquisition amounted to approximately $24 million.

Our gross margin decreased by 1% in the United States to 33% and by 0.7% in Canada to 32.2%, mainly due to various COVID-related impacts, such as shift toward larger package sizes within the tobacco and beverage categories, a provision from -- for bringing personal protective equipment products to the lower of their cost and net realizable value, promotional activities to drive traffic to our store as well as a lower margin on prepared food given volatile traffic patterns. Our gross margin decreased by 3.8% in Europe and other regions to 38.5% due to the change in product mix towards lower-margin categories as well as the integration of Circle K Hong Kong, which has a different product mix than our European operations.

Excluding Circle K Hong Kong, our gross margin in Europe would have been 40%. We now move on to the fuel side of our business.

In the third quarter of fiscal 2021, our road transportation show gross margins was $0.3186 per gallon in the U.S., an increase of nearly $0.05 per gallon. In Europe and other regions, the road transportation fuel gross margin was or USD 0.1136 per liter, an increase of nearly USD 0.03 per liter.

And in Canada, it was CAD 0.1036 per liter, an increase of more than CAD 0.02 per liter. Healthy road transportation fuel gross margins were driven by the competitive landscape and by a flexible sourcing strategy that allow us to benefit from favorable supply opportunities.

For the third quarter of fiscal 2021, normalized operating expenses decreased by 0.1%, driven by cost and labor efficiencies as well as the rigorous work and activity initiated to streamline and minimize our controllable expenses. These positive items were also entirely offset by COVID-19-related expenses, normal inflation, higher labor costs in certain regions and incremental investments to support our strategy.

More specifically on COVID-19-related expenses, these included, thank you for serving bonuses, additional cleaning and sanitizing supplies as well as masks and gloves for our employees. Excluding specific items described in our -- in more details in our MD&A, the adjusted EBITDA for the third quarter of fiscal 2021 increased by $59.6 million or 4.9% compared with the third quarter of fiscal 2020, mainly due to higher road transportation fuel gross margins, good cost control as well as from the net positive impact from foreign currency translation, representing approximately $18 million, partly offset by the negative impact of COVID-19 on [indiscernible] Also excluding specific items, the adjusted income tax rate for the third quarter of fiscal 2021 was 17.6% compared with 19.6% for the third quarter of fiscal 2020.

The decrease for the third quarter is mainly stemming from the impact of different mix in our earnings across the various jurisdictions in which we operate. As of January 31, 2021, our return on equity remained strong at 24.6%, and our return on capital employed stood at 16.4%.

During the quarter, we once again generated solid free cash flows and ended the period with a leverage ratio of 1.36:1, well below our comfort level of 2.25:1. As of January 31, 2021, we have ample balance sheet flexibility with $2.7 billion in cash and an additional $2.5 billion available to our revolving credit facility.

Finally, on March 17, 2021, the Board of Directors declared a dividend quarterly of CAD 0.0875 per share and approved its payment for April 9, 2021. To close, I would like to highlight the work our teams have accomplished throughout the last year, ensuring that we emerged from the pandemic in a strong financial position and ready to accelerate capital deployments toward our strategic initiatives while always remaining focused on driving value creation for our employees, customers and shareholders.

With that, I thank you all for your attention. I turn the call back to you, Brian.

Thank you, Claude. I want to reaffirm that despite COVID, we remain laser-focused on our strategy, and I'm pleased with the progress we've made while navigating the pandemic.

A lot of work over the last two years across our customer offer are starting to come alive in our stores. In closing, I'd like to talk about what we're doing as a company in terms of the COVID-19 vaccinations.

We've made it clear to our team members that we believe in the promise of the vaccine and help to move our communities and businesses on the other side of this pandemic. While the availability and administration of vaccines differ substantially across our network, we're working hard to make it easy for all of our team members to get vaccinated, and we're prioritizing our frontline essential workers.

We're strongly encouraging vaccinations, incentivizing where appropriate and providing information on how they can be obtained in each market at no cost to our employees. No one wants to lose another family member, friend or colleague to this virus.

We've also had frequent reminders across business to not let our COVID guard down by wearing masks, continuing to wash hands and maintain social distancing. I'm optimistic that we're seeing a light at the end of the tunnel and that our lives and operations will return to a new normal in the coming months.

We're staying committed to our long-term strategy and evolving retail model. As Claude said, our balance sheet is very healthy, putting us in a strong position for future opportunities as they may arise.

And finally, and most importantly, on the one year anniversary of the pandemic, I want to thank all of our team members, especially those in our stores for their incredible resilience during these challenging times and for their continued commitment to the business and to making our customers' lives a little easier every day. And now we'll answer questions that we've received from analysts.

Thank you, Brian. The first question comes from Graeme Kreindler at Eight Capital.

How does Couche-Tard view its ability to generate customer loyalty and stickiness as reopenings begin? As the trend of basket consolidation appear to be durable, how has the merchandise mix changed in the states that have begun to open up to reflect changes in consumer preferences?

As I just said, during the pandemic, we've taken a long-term view and remain laser-focused on our strategy. And the core of that strategy is really a multi-pronged approach to creating loyalty.

That includes the customer journey. It includes more piloting several initiatives, both at the forecourt, as I said, at the store that we think can significantly change the shopping experience.

We want to ensure that we've got the right pricing, the right assortment and the right promotional activities in a very, very localized basis using big data. We want to make sure we've got the right value propositions.

Examples would include our smart value program, our lift tool, our AI fuel pricing tool. We want to keep our customers engaged with us.

So gamified promotions is a great example of us doing that to drive traffic. We're working on innovative ways to train our staff to ensure that they're able to provide high-quality and customer -- high-quality and consistent customer service.

We've rolled out during the pandemic a food offer that we believe is resonating with our customers, and we're investing in our fuel brand. So with regard to what we're seeing in reopenings, I believe it's a bit early to draw conclusions.

But certainly, alcohol, as Claude mentioned, and beverages continue to be strong. And as traffic improves with, particularly the morning day part, we're seeing slow improvement in our key food and dispensed beverage categories.

Second question from Graeme. Can you provide an update on your customer loyalty initiatives, including digital?

Yes, I'd be happy to touch on that. A lot of activity in the space, some of it just very foundational about how the brand appears as communicated online.

But more tangibly, Lift, which we've talked about, we've now got that complete in North America for a year, and we're piloting in Europe. And the analytics talent that we've developed both in North America and now in India has done some post audits.

And we feel that there's at least a 4% incremental sales growth utilizing lift. And we know we've got opportunities to use that tool even smarter.

Today, about 14% of all transactions, we're able to drive an incremental item and we know there's upside to that as well. Circle K Extra Easy Rewards continue to grow.

But candidly, we don't think our industry or us have cracked the code. And we have -- and that has something that truly engages with customers.

So in parallel, with the rebranding efforts on the fuel, which opens up the technological path, it opens the door to a more comprehensive and innovative approach to loyalty and the other consumer offers that can be incorporated, like mobile payment, Click & Collect, subscription. So the focus of the new program that we're developing in parallel with the rebranding efforts is really going to focus on ease, connection and value versus a traditional club earn-and-burn approach.

We plan to have pilots up in the next few months and followed by a rollout, assuming we get the customer response we expect. So again, a lot of activity in the digital space.

The next question comes from John Royall at JPMorgan Securities. Same-store fuel gallons in Canada had a significant acceleration in the pace of decline from Q2.

Is there anything you can call out a particular source of weakness? And how did that decline progress through the quarter and into the February, March period?

Yes. First and foremost, I think we've done a good job at retail, providing a consistent value and price position to customers.

Canada was a challenging environment in Q3 because of tightening restrictions around the pandemic. Our two main markets, Toronto, Montreal, where we have high concentration of sites, both put in place tougher measures, which dramatically restricted travel and thus kilometers driven.

In Québec, we had stayed home order -- stay-at-home orders in place in October and November where all nonessential stores were closed for periods during that time. And then after that, we had a curfew put in place starting at 8 p.m.

In Ontario, while there was no curfew, we had closures of businesses and entertainment that impacted travel. And that progression did worsen through the quarter, improving slightly quarter-to-date from the exit rate, but it remains very challenged.

The other piece, I think, that's just a reality, Canada has lagged in vaccinations. The good news is it's ramping up rapidly now, and we expect the trends of both our traffic and our fuel volume to follow those as the society reopens.

Second question from John Royall. You're executing on your share buyback quickly relative to the full year on the authorization.

Did we read this as opportunistic given the move price? Or do we expect a relatively ratable pace going forward and perhaps an early completion on the authorization?

So thank you, John, for your question. Last November, when we put the buyback in place, we said that we would act on it on an opportunistic basis.

We continue to have a strong cash flow generation. Our leverage is low, and that creates the setup to act on drop in share prices.

So we got more aggressive with the recent pullback on our share price despite the strong earnings. The opportunity presented itself.

So furthermore, also, we believe in our strategy and the execution of it by our team. We also see value in our stock right now.

And nonetheless, we are still very active on the acquisition front. But as you know, we have not been successful in finding the right match at the right price.

So finally, we see today, our valuation has a very solid way for us to return value to our shareholders. I cannot speak to the completion of the authorization, but we already spent close to $900 million from the renewal date of November to March 12, so we are almost there already.

So confident [indiscernible]

The next question comes from Patricia Baker at Scotia Bank. Have there been any further discussions with CAP4 around partnering on a number of initiatives to drive value to both parties?

If so, have you made any decisions on where you might start and when?

Yes. Patricia, I'd say the project is very active.

We've got teams formed. There's 5 or 6 areas that we think have meaningful opportunities.

But just to stay focused, we challenge the teams to start with three: that being around fuel, both procurement and operations; merchandising; procurement and private label. We don't have outcomes yet.

And I think I anticipate it's going to be several months or more before we see definitive opportunities. But I'm optimistic given the scale of organizations in these key areas that we can add value to each other.

The next question from Patricia. You noted higher promotional activity to drive traffic to the stores in Q3.

And you discussed how effective these promotions might have been. Are there any differences in effectiveness in Canada versus the United States?

And do you envision higher promotional activity through the coming quarters as traffic remains impacted by COVID-19?

Yes. I'd say promotional investments were made during the quarter, primarily in the tobacco categories.

We self-invested in the category with two goals, really: one is to grow membership in our tobacco club, particularly in the premium segment; and the second was to drive traffic. While margin percent come down, it did help drive traffic and basket.

So when we look at the postmortem, we see a net gain in gross margin dollars versus areas where we did not make that same investment. So we think there's a good return there.

Well, top line, we generally didn't like the results. When I look at our peer group, particularly in the U.S., we're generally pleased with how we performed during the quarter.

Again, given some of our core markets, we're just experiencing significant lockdowns during the quarter. In the U.S., traffic was challenged in the first half of the quarter.

It got worse in P8 and P9. I would say it stabilized in the second half of the quarter as the promotions managed to steady the decline.

Recent weeks have been encouraging. And barring any changes in COVID, we're cautiously optimistic that as vaccinations continue to ramp up that we'll see traffic improve.

In Canada, traffic did worsen throughout the quarter, as I mentioned earlier, with the curfews and restrictions largely explaining our results, both on the fuel side and in the merchant side.

The next question comes from Derek Dley at Canaccord Genuity. Can you comment on the drivers of the merchandise same-store sales?

Are alcohol and consumer goods still the key drivers?

Yes. I'd say in general, merchant sales were strong in the alcohol category.

I think we're still seeing bars and large social gatherings impaired. So I think our channel continues to play a role in meeting demands, and larger packages have certainly been a part of that.

Packaged beverage has also been strong. Alternative nicotine, including white nicotine, has shown really tremendous growth.

Well, cigarettes were weak for the quarter and actually held back same-store sales. But we injected some deflation as we invested in price in the quarter.

But we're pleased with the underlying unit performance. And then in the other merch, really, candy, saltine snacks continue to perform well as people really, I think, still consolidated shopping trips and we saw a strong basket.

Food is obviously the weak spot across the board due to trips. We just need to see society open, and particularly that morning commute is just so important to us.

And in terms of geographies, we think that we saw trends very similar in the U.S. and Canada and Europe during the quarter, with Europe having a bit stronger performance in food, being down just a couple of percent, and that's really a testament to our strong B2B business, which has really shown a lot of resilience during the pandemic.

The next question comes from Michael Van Aelst at TD Securities. While still far better than same-store volumes, merchandise same-store sales in all geographies slowed from the past few quarters and have basically returned to more normal levels.

Can you describe the changes you're seeing in consumer behavior in terms of traffic, basket size and category mix as compared to the past two quarters that explain the slowing trend? Where are the food -- fresh food sales today as compared to pre-COVID levels?

And have you seen a substantial pickup from the rollout of the holiday food program across North America?

I'd say, Michael, in the U.S., while highly variable, overall traffic was flat compared to Q2. And we did see a slight decline in basket that largely show explains the difference quarter-over-quarter.

In Canada, as we mentioned several times now, traffic was challenged because of curfews. Basket was flat, so a little different dynamic there.

In Europe, traffic has strengthened actually during the quarter. But we did have a second wave, particularly Ireland, which was locked down very tight that made it difficult to compare versus Q2.

And basket continued to be strong in Europe. In terms of category mix, what I described earlier for the U.S.

has been fairly consistent across the network. In the U.S., prepared food, as I mentioned, has been the primary challenge, off double digits and that linked strongly to traffic.

Canada, cigarettes remain higher than normal, but have come down from the time where the Indian reservations were closed. But again, that explains a lot of the basket strength there.

And then food, in general, again, impacted by traffic. But when we look at our new program in isolation, it continues to perform very well compared to sites that are not in the program.

We continue to work and refine the operational side. Stores with the program are comparing favorably to those without in the same markets.

We're seeing lifts in sandwich units. And we did some minor communication in the quarter really to pilot what we're been unable to do during the pandemic, which is communicate the offer and sample.

So we did that on a very, very small pilot basis. And very pleased not only with the spike in demand for the food program, but also the tail as we quit promoting and we continue to see sales be very strong in that pilot.

So optimistic that when the time is right, we're going to be able to start talking to consumers about that offer.

Michael's second question. Prior to COVID, OPIS was a relatively good indicator for U.S.

fuel margins multiple quarters. But over the past four quarters, your U.S.

fuel margins have been radically different than data recorded by OPIS. Once volumes rebound to 2019 levels, is it reasonable to assume that Couche-Tard will continue to outperform OPIS data and therefore, the industry in general by at least $0.05 per gallon and that some factors that you mentioned in past quarters will play a role?

Deep question there. I'd first start by saying that OPIS is a good indicator, but not a perfect indicator of fuel margin given just mixes geographic differences of different competitors that you look at in the industry.

But there's other factors. When we look at ourselves, we think we bring unique scale to the equation.

We think different companies have different levels of operational execution. I think we've done a good job balancing margin and full volumes.

We're not chasing something that may not be there in certain markets. We're benefiting on the margin side from the rollout of the Circle K fuel brand.

We're investing in our fleets and building more optionality in our procurement with our partnership with Musket, which is the supplier arm of Loves. And that relationship, we think, has the opportunity to dramatically accelerate our supply and trading capabilities, again further differentiating how we deal with fuel from other competitors in the industry.

The next question comes from Mark Petrie at CIBC World Markets. With regards to M&A, can you help us understand your criteria with regards to deal structure?

Is a minority interest something you would be interested in? What steps can you take to achieve meaningful value creation or synergy realization without integration and control?

Yes. Mark, we've always had a controlling interest in our main acquisitions.

And that, to your point, primarily to ensure we can drive results. I think it's a core skill set of Couche-Tard over the years.

We did recently make a minority investment in Fire & Flower. We now own 19.9% of that company.

And there is a path to control. But that said, we would be open to minority interest.

But it would really be a case where we'd really be comfortable that we're aligned with the partner, their capabilities and their vision for the business. And then secondly, and equally important, it'd be a business opportunity that we really have to love and believe deliver significant shareholder value.

Second question from Mark. You highlighted that store-by-store pricing is 60% of the network, but there is still significant opportunity.

What are the key steps from here? How far along are you in terms of realizing benefits?

And can you help shape expectations for how material that benefit could be?

I think it's important right off the top to state that we're committed to being a more data-centric company and working hard to develop our capabilities. We built out the team, starting in Tempe.

But then a second team, doing more of the core work in India, and that team is currently being built out now. But we think we've brought some great talent on over the last 18 months.

At a high level, I'd call this a top five initiative in our strategy. We launched the first piece, which was localized pricing in our Sweden and Grand Cayman, Arizona business.

Pleased with results. The improvement in gross margin dollars is exceeding our projections.

So we're rolling this out to nine more BUs this year. That's not 100% of the SKUs.

And again, as we cycle it's a test and learn, test and learn model. But we think it's going to continue to get better and better.

Again, we started with a limit number of stores, a limited number of SKUs to make sure we're doing it right, benchmarking constantly. And we'll gradually increase the SKUs and number of stores.

And then equally excited about localized assortment and promotion, bringing big data to really tailor our assortments and promotional activity to what the local site and local customer needs. So excited, committed, and we'll be able to communicate more in the coming quarters.

The next question comes from Karen Short at Barclays Capital. How are you thinking about the industry broadly regarding EV penetration in the U.S.

given the new administration and new policy initiatives that have come out? And as it seems like more mandates will be forthcoming, whether the infrastructure is there or not?

So Karen, electrification is the reality. I'm not sure everybody in the industry, our industry, generally believes that yet.

But we do. And we're preparing to face it head on.

Disruption can create opportunities for those that are prepared. Norway shows us that convenience and fuel sites have a role to play in the build-out of the infrastructure and that there is a business model.

Still too early to discuss the economics of that model, but important to see how we can continue to make our customers' lives easier and be part of that. Electric cars have to be washed.

The majority of our trips are still convenience only. But it does change the model.

So we've got many successful ingredients in place in Norway, but also recognize Norway and the pace at which it developed, like some other countries in Europe, it had cheap renewable hydropower. And the government is fairly wealthy and have the ability to aggressively subsidize the purchase of vehicles and build out of the infrastructure.

Not every market is the same, and we're learning about the U.S. and seeing how we can apply our experience in Norway to make sure we participate at the right level in North America.

We'll also begin to do work to strengthen our B2B position in the U.S. as we see in Europe that has just been very, very resilient in the face of EV.

And finally, and I think most important, we're building out capabilities that will give us the ability to consolidate what's just tremendous demand in a very fragmented industry for years to come. Our focus is building out a top-tier network with top-tier capabilities and being a part of our customers' lives for years and years to come.

Second question from Karen. You called out the merchandise gross margin pressure in Europe and other regions of nearly 400 basis points due to a change in product mix towards lower-margin categories related to the integration of Circle K Hong Kong.

Should we anticipate pressure of this magnitude to persist in the following quarters until you cycle the acquisition? How does the timing of the acquisition play into the pressure?

Or asked differently, should we expect greater pressure when taking into account a full quarter impact of Circle K Hong Kong?

So Karen, gross margin in Europe and other region was 38.5%, but 40% in Europe if you don't factor in Hong Kong units, our business unit over there. So Hong Kong had an impact of 150 basis points for six weeks up to 16 weeks in the quarter, so you should expect a proportional impact for fourth quarter.

To give you more colors, Hong Kong stores have a higher cigarette mix in the high [indiscernible] area they operate in. And you know that cigarettes have a lower margin than the average store margin.

There was also a higher cigarette mix during pandemic caused by growing cigarette sales and lower full product penetration, similar to what we see in other regions. Furthermore, Circle K Hong Kong incurred start-up expenses with the opening of a new automated center, a brand-new automated center that we just launched late fall.

So these logistics expenses hit the margins during the quarter and should not be recurring in the future. So excluding Hong Kong, Europe was impacted also by mix for the remaining decline.

The decline was coming mostly because of the -- and the margins peak lower with the lower sales in prepared food and a higher cigarette mix also, but the margin was mostly in line with previous quarter trends.

The next question comes from Bobby Griffin at Raymond James. Can you talk about the outlook for operating expenses in calendar year 2021, especially in the context of potential U.S.

wage inflation? Do you see a portion of the $2.50 an hour of emergency appreciation pay becoming permanent on an ongoing basis?

Well, as you know, we are not giving any outlooks. But clearly, if the minimum wage were to rise, it would impact also all the other retailers.

We have the necessary scale and resources to invest in our business and drive productivity. And we have in place a broad program of cost optimization that's driving significant cost reduction throughout the business.

This program helps offset higher cost inflation generated in the business. It also focuses on the store to reduce as much as possible any administrative burden on their stores.

We also are staying disciplined on cost, and we continue to leverage our labor models. So our labor models, all but tools was around labor or scheduling, training, also optimization of our labor.

So and finally, as far as the emergency appreciation, it was timely in nature. So we consistently evaluate the needs of our business and benchmark with the market and we'll react accordingly.

So we have to put some back, and we'll put some back, but we're going to go with the markets.

The next question from Bobby. Your leverage ratio continues to trend below the comfort level of 2.25:1.

Without a meaningful acquisition in calendar year 2021, do you expect leverage to stay below the 2.25:1 target?

Well, it's important for us to maintain a strong balance sheet and to optimize our capital allocation. To the extent that we continue to generate robust cash flows, and there's no reason not to believe, we will examine all the tools available to us.

Stock buyback remains an important way to return cash to shareholders and to support our stock opportunistically. But that said, we are active also on the -- on many M&A files at any given time.

And it's important for us to preserve the flexibility, like I said earlier, to be able to execute on acquisition that we feel are a good strategic fit for us.

The next question comes from Chris Li at Desjardins Securities. Last quarter, you mentioned that the B2B fuel market is a big opportunity in the U.S.

How far is Couche-Tard away from expanding into that market? Is the industry structured similar to the consumer market with a high degree of fragmentation and consolidation opportunities?

Yes, I'll take that. So we love our B2B business in Europe, and we've consistently grown it the nine years we've been there.

An added benefit, it showed great resilience during COVID. And specifically in Norway, where we're seeing EV penetration, the B2B business has held up very, very well.

The opportunity in the U.S. really opens up as we convert our fuel of the Circle K brand and deliver a clear value proposition to these important customers.

Now this year, we'll complete close to another 500 conversions with another 700 planned next year. So as you see entire markets or largely entire markets with the Circle K brand, you'll see us invest against B2B and grow this customer base.

We think that's a strong opportunity for us in the coming years.

The second question from Chris. Can you please update us on the opportunities in the retail cannabis space over the next few years?

Would this be another adjacent retail channel that fits your M&A criteria?

Yes. I'd say this is certainly an interesting adjacent channel as we've got great expertise in the retailing of age-restricted products, alcohol and tobacco being the two obvious ones.

When we took our position in Fire & Flower, it was with a clear goal that we identified a management team that was capable of developing a differentiated and winning customer value proposition. And I guess two years in, approximately, I'm pleased with the results to date.

They've got a very unique operating model and also a very unique platform that uses data to both engage customers, but to help the operators understand their business very deeply. If we look at the bigger opportunity, certainly, we're not yet legal in some of our big markets like the U.S., but to the extent that they become fully open and to the extent that we believe we have a better mousetrap, we'll certainly look, consider it a good adjacency and look to expand either by consolidating existing businesses, organic growth or building out our properties.

The next question comes from Irene Nattel at RBC Capital Markets. Recognizing it's early days, what are you seeing with Circle K Hong Kong and maybe some insights into elements of their business model that could have an impact on the rest of the network?

As we said when we acquired that business, Irene, we see it as a great platform to be in the conversation and grow in Asia. We entered the U.S.

with a 200 store acquisition, 21 years ago, I guess. And that gave us the ability to grow multiple times over the next two decades.

We now have some of the same recipe in place. We've got a management team that's got a strong track record and a solid reputation in the region.

We've got credibility, whereas we didn't before, to approach potential targets. And we've got some conversations in different countries underway at this time.

In terms of what it does for us on top of that, we know that convenience only is an area that we will invest in and their capabilities in small formats, high urban traffic footprints in merchandising and literally interesting merchandising. If you've been to Hong Kong, all are applicable.

They've got some advanced DC capabilities with a highly automated facility that enables them to have daily inventory deliveries, which are necessary for these small formats. And then I think they've got one of the best omnichannel loyalty programs out there in the industry today.

And certainly, that's going to play a role in helping us develop the program that I mentioned earlier.

The last question comes from Bonnie Herzog, Goldman Sachs. It's been a few months now since the Carrefour transaction was first proposed.

Now that some time has passed, do you have any updated thoughts on your M&A strategy, especially as it relates to possibly moving into other retail channels? Also, can you update us on which geographies you think are most important for you from an M&A standpoint?

Yes. Bonnie, I'd say that we continue to prioritize the U.S.

and Asia. The U.S., it's because we've got scale.

We understand the market, and we have a lot of synergy potential in almost any deal we do. So we'll continue to look while remaining disciplined.

We've engaged in a number of opportunities over the last couple of years, but we just don't believe the valuations are rational. But that will change in time.

And then Asia, because the majority of the global GDP in the next couple of decades will come from that region as well as Africa. And we've taken that initial step with Hong Kong and hope to have meaningful engagement with other opportunities in the coming months and years.

Europe, Europe is very different country-by-country with different dynamics. And so as I've said in the past, that's going to be a more opportunistic approach.

In terms of adjacent channels, we spent several years looking at grocery and the omnichannel opportunities, we think, it provides with convenience and e-commerce. We'll continue to be disciplined and look for opportunities that we believe create synergies with our core business, whether that be in grocery or another adjacent channel.

But we're active. And as Claude said earlier, the balance sheet is ready.

It's just finding the right opportunities that we think are scalable and can provide value for our shareholders.

Great. That was the last question.

Thanks, Brian and Claude. That covers everything for today.

Thanks, everybody, for joining us. We wish you a great day and look forward to discussing our fourth quarter and annual 2021 results next June.

Thanks, everyone. Have a great day.

Thank you, everyone. Bye.