'Banner Year' for Kum & Go Expansion
CMO Miller talks about chain's record year for organic growth
WEST DES MOINES, Iowa -- After a year of unprecedented organic growth with 43 new locations--double its previous record for new-builds--Kum & Go looks to 2013 with even greater optimism, albeit shying away from committing to yet another year of record expansion.
David Miller, chief marketing officer for the West Des Moines, Iowa-based retailer, spoke with CSP Daily News about the growth spurt that brings the chain to 430 stores in 11 states, pinpointing targeted markets and discussing the thinking behind its organic strategy.
Q: All of these sites were new-builds, either ground up or closing a site and opening up again nearby. Can you tell us how this effort compares to year's past?
A: Yes, they are all new builds with some remodels as you've said--a relocation with a raze-and-rebuild, moving the store to another corner; 43 was a record year. Our previous record was 21 stores in 2009.
Q: What were some of the drivers behind this rapid expansion?
A: For us, we felt that the timing was right. Our competitors are contracting. The economy in the c-store space and in markets we want to enter was solid. The timing was right to do it in 2012. We've had a banner year. It's not to say we'll build another 43 this year, but we're going to be just as aggressive.
Q: One might think you're taking advantage of the recession, with lower real-estate and construction costs. Is that part of it?
A: Someone might make the conclusion that it's cheaper to get a store built in 2012, but there's many months of preplanning. Sometimes it takes years to the day a store is built and opened. For us, 2012 was the culmination of a market-by-market approach driven by real estate, construction, finding the best [circumstances], the best price … to build stores in favorable locations.
Q: What markets are you developing? And what do these markets share in terms of demographics? Economics? Rural, urban or suburban?
A: Two areas in particular stand out. We just entered at the end of 2011 and into 2012 northwest Arkansas in Benton County where Walmart's [Bentonville, Ark.] ecosystem is and Colorado Springs, [Colo.]. These are brand new markets that we're in for a reason. They fit our criteria. They've got a healthy population, good demographics and a welcoming business environment. Market sizes vary, but we tend to find the best locations for Kum & Go. For instance, one of the new stores is in Muscatine, Iowa, a smaller market, but we opened a number of new stores in Colorado Springs.
Q: Can you talk about why new-builds seem to be your go-to strategy vs. acquisitions?
A: In the past, we've focused on a combination of new-builds and acquisition, but going forward, new-builds is our main priority. It allows us to build our store prototype and create the footprint we want to build. It adds to brand consistency and creates a standard that we want to achieve across all company stores.
Q: Tell us about your new stores.
A: We are building a different type of c-store, one with a footprint of 5,000 square feet vs. our legacy stores of 3,400. It's quite a dramatic difference, with a whole host of fresh foods, made-to-order pizza, deli sandwiches, breakfast pizza and other fresh foods you couldn't get in our older stores. Add our Java Ridge coffee, cold fountain, pastries, doughnuts and muffins baked daily … all hopefully making Kum & Go the destination for our demographic to meet their food needs.
Q: From your perspective, where do you see the industry headed in terms of new builds in general? Acquisitions? What thoughts do you have on the industry's evolution overall?
A: When you look at formidable competitors like Circle K and 7-Eleven, we're always aware of what they're doing and how acquisition seems to be a growth strategy for them. But for other chains, whether it's Kwik Trip or Wawa or Sheetz, with more of a new-build strategy, that seems to serve them well. So you're seeing that all c-store retailers--the ones who are surviving--are using different growth strategies and all are OK. In the end, if 7-Eleven's growth through acquisition gets them further into the state of Texas overnight, that fits their strategy. For Kum & Go, we want to have a methodical, organic approach. It's serving us well. There are tradeoffs. We're not going to buy hundreds of stores, but we've made a conscious decision to build new stores and that it's our best path moving forward.
(See Related Content below for previous CSP Daily News coverage of Kum & Go's recent expansion.)
As part of a press statement discussing the 43 new stores built in 2012, Kum & Go officials said each new store cost more than $4 million to build, for a total of more than $170 million spent in 2012 alone. The development has led to 800 new jobs at Kum & Go, as well supporting jobs in construction including electricians, plumbers and more.
Kum & Go officials also noted the environmental features of its newest stores. All new store prototypes since 2011 were submitted for Leadership in Energy & Environmental Design (LEED) certification, with 17 stores currently LEED certified. Another 19 have been submitted for certification and 28 are registered. Officials said that eco-friendly store features include sustainable materials, reflective concrete, high-efficiency equipment, alternative fuels, LED lighting and water-saving fixtures.
Kum & Go is the fifth largest privately held, company-operated c-store chain in the United States, officials said. The family-owned company began in 1959, in Hampton, Iowa, and has grown to 430 stores in 11 states (Iowa, Arkansas, Colorado, Minnesota, Missouri, Montana, Nebraska, North Dakota, Oklahoma, South Dakota and Wyoming). In addition to a wide selection of name-brand products, Kum & Go provides customers a proprietary mix of products under the "Hiland" brand name. Other proprietary product offerings include Java Ridge Premium Coffee, Napa Creek and Sea Ridge wines, Go Fresh Market sandwiches and Nuclear energy drinks.