Wawa's Ocean View

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When inspectors from the city of Orlando’s permit­ting services department visited Wawa Inc.’s first Florida location, they were momentarily confused.

“This is a restaurant,” one of them said. “We need some other people to come in here, because we don’t have the right people.”

The inspector’s reaction was music to the ears of Dick Wood, chairman and for­mer CEO of Wawa, who now in the twi­light of his career has seen the company’s extraordinary evolution from a conve­nience store specializing in foodservice to a casual restaurant lined with c-store fare.

“It’s very hard when you go to a new territory like that to convey the impres­sion that you’re a gasoline retailer selling restaurant-quality food,” he says during an exclusive interview with CSP. “So the design of the store has gone into that: When you walk into the front door, you won’t miss the food aspect.”

In this election season, there has been a lot of talk from pundits about the need for politicians to define themselves before others do it for them. It is a strategy that Wawa clearly embraces as it seeks to not only open up a new market in an entirely different geographic region, but also estab­lish the “fast casual to go” business model.

As Wawa gears up to build 100 sites in Florida in the next five years, includ­ing 20 to 30 in the Orlando and Tampa markets in the year to come, its senior management team constantly revisits the lessons from its last new market, Vir­ginia. Namely, consumers there were not familiar with Wawa’s food history, which began with an in-store deli and groceries and transitioned into its current made-to-order hoagie program.

“When you open up a store like Wawa, foodservice doesn’t shout to the customer who doesn’t know you,” says president and incoming CEO Chris Gheysens of the format that dominates the 600-unit chain. “We were guilty by association. We put up big fuel courts with cheaper gas prices.”

And as a result, he continues, “They were hesitant to come in and expect a good built-to-order offer.” This is despite the fact that Wawa is a relative newcomer to fuel, having introduced it in 1996.

To succeed in Virginia, Wawa discov­ered it needed to tweak the offer in its stronghold states to accommodate differ­ent taste profiles. It also needed to execute a promotion and advertising strategy to put foodservice front and center.

That is why, at its new Florida site, Wawa has placed expansive glass win­dows at the front to showcase the food, the made-to-order theater, the specialty-coffee area; it’s the reason for the in-store kitchen baking hoagie rolls fresh.

“When you walk into a Wawa in Flor­ida, there’s no mistake we’re in the foodser­vice business,” says Gheysens. (See “Wawa’s Fast-Casual-To-Go Statement,” p. 56.)

That said, Gheysens acknowledges the challenge is great: “Florida’s a big test for us of: Can you take this brand, this business model on the road and make it work?”

How would Wood put the Florida launch into perspective? “How about: It’s 1,000 miles from the closest Wawa,” he says. “When you leap 1,000 miles, you have to re-create the whole business. You need a new supply chain, you’re going to have a different set of vendors, a different set of customers.”

With all eyes on the Southeast, CSP sat down with Wawa’s executive team for an exclusive look at the chain’s planning, preparation and execution of the next leg of its growth. What’s clear is that, despite the effect of external forces—a struggling economy, local development restric­tions—Wawa is determined to position itself in calmer competitive waters that will ensure long-term growth. This explains why the company is leapfrogging over the Carolinas and other intensely competitive landscapes. And the timing coincides with a critical juncture internally, as Howard Stoeckel, CEO for the past eight years, transitions his leadership to Gheysens to carry on the game plan. (See “Last Ride of the Brand Ranger,” p. 44.)

“The new market will benefit all stake­holders,” says Stoeckel. “It will benefit the communities that we serve, it will benefit our associates, it will benefit our vendors, it will benefit our stakeholders, and the true owners, the Trust. If you don’t grow, you can’t grow value.”

Into the Great Blue Ocean

About eight years ago, Wawa’s leadership team realized that the company was run­ning out of room.

Its core markets in the five-state swath of Pennsylvania, Delaware, Maryland, New Jersey and Virginia certainly had growth opportunities; in fact, the com­pany has plans to open 15 to 20 sites in the mid-Atlantic each year, for several years, to its current base of nearly 600 sites, and is constantly updating existing locations. But there was not much room for the company to really stretch its legs.

Growth north—into Connecticut or New York, from which Wawa withdrew in the 1980s—was too difficult from a zon­ing and permitting perspective. Plus, real estate was expensive. To the south, heavy­weights QuikTrip and Sheetz had already landed in the Carolinas and Georgia.

“We looked east of the Mississippi,” says Stoeckel, “and found Florida to be an attractive market that we thought was underserved, and there wasn’t quite any­one there like Wawa.”

Then the economy tanked. But Stoeckel considered the stall a blessing in disguise; it gave Wawa an opportunity to take stock of its preparedness for Florida, along with the state of its brand identity and balance sheet.

It let Wawa “fine-tune what we will do eventually,” says Stoeckel. “You can do this as a privately held company.”

He describes private ownership as one tenet of Wawa’s “moral compass,” enabling the company to be more auton­omous and control its own destiny. “From a long-term perspective, being private allows us to look ahead and plan in decades, not every quarter, which is exactly what we never want to do,” says Gheysens. “As we look at Florida as an opportunity, we’re thinking about what it’s going to look like in 2020.”

Not allowing Wall Street analysts to control its direction and growth was one decision for Wawa; not allowing the com­petition that privilege was another. It is why Wawa leadership came to embrace the concept of blue ocean strategy (BOS), a business methodology that guides com­panies to create their own market space, or blue ocean, and make the competition irrelevant by creating a “leap in value” for customers.

“You can go berserk if you look at all of your competitors, and let your competitors drive your own decisions,” Stoeckel says. “So I’ve always admired in the blue ocean companies those that create their own identity, occupy their own space in a marketplace, and lay their own path.”

He cites Southwest Airlines, one of the few airlines to consistently turn a profit. The company created its own blue ocean by staying true to its brand, allowing bags to fly for free even as other airlines piled on fees. “Just because another airline does something, it doesn’t mean [Southwest does] it,” he says. “That I admire, and I think that’s the strength of a blue ocean company.”

The Simplification Tables

Wawa seeks clear waters in “fast casual to go,” which enables it to combine the best of food, convenience and fuel and truly simplify customers’ lives.

“That’s really the essence of blue ocean: It’s being able to have a Panera-type quality product, Wawa-type experi­ence with that speed and the breadth of our offer,” says Gheysens. “That’s some­thing really worth striving for.”

At the new Florida sites, you can see the material framework of Wawa’s BOS. Within the 5,500 to 5,600 square feet of retail space, Wawa provides:

• Built-to-order hoagies complete with touch screens and supplied by an in-house kitchen area dedicated to baking fresh hoagie rolls daily.
• A full-service specialty-beverage area where customers can order 20 hand­made varieties of hot beverages, espresso, chai tea and lattes, as well as 24 varieties of smoothies and frozen beverages via touch screen.
• Dedicated checkout lanes that aim to get customers in and out of the site as quickly as possible, while preserving valuable “face time” with associates.

In the area of coffee, Wawa is making one of its greatest leaps in value by adding baristas to all of its sites. “Getting into those espresso-based specialty beverages is a big opportunity for us. It’ll add cred­ibility and, frankly, we’re just scratching the surface,” says Gheysens.

If this sounds a little familiar, it’s because about 20 years ago, Wawa had introduced full-service baristas at a dozen sites, and even had a freestanding cof­fee kiosk. It pulled them out after only a short time.

“At that point, we were ahead of our time, and we had not reached the level of consumer perception in foodservice and beverages we needed to have to aggres­sively compete in that business,” says Stoeckel. “Now that we’ve repositioned coffee with the new offer and branding, we’ve come to a new level in foodservice. Now we’re ready to enter that business.”

Encouraging Wawa that its timing is finally right is the success of its smoothie program. Introduced three years ago and today encompassing 24 varieties, smooth­ies have signaled to Wawa that customers accept it as a source for quality food.

In addition to its impressive food statement, Wawa’s BOS emphasizes sim­plifying customers’ lives. It’s a purpose that guides its policies across all catego­ries. For example, in New Jersey, where some retailers promote a per-gallon discount for customers who pay for fuel with cash—to discourage them from pay­ing with credit, which carries transaction fees—Wawa promoted its lack of a cash-only discount.

“Our core purpose is to simplify the customer’s daily life,” says Gheysens. “When you pull up to a gas station and pull out a card, and say, ‘Oh, it’s 8 cents more a gallon now?’ That’s not simplifying anyone’s life, and you certainly don’t feel like they’re on your side as a customer.”

Consider loyalty, in which Wawa is conducting a small pilot. Here, too, simplifying the customer’s life has deter­mined the pace and form of the offer. “It really is about being clean, fast, friendly, great quality food and experience, to drive that 100% of the time for every customer and visit,” says Gheysens. “Any card, any loyalty program—they’re a little bit clunky in our estimation, so we’ve waited for technology to catch up a bit. I think we’re almost there.”

The eventual loyalty offer will likely not be a discount program designed to boost fuel volumes or store sales, Ghey­sens says. Instead, its core purpose is to help Wawa better know its customers: what they are buying, when, their prefer­ences and how the company can adjust its strategies to better serve them. “That’s the value we see,” he says. “But we’re being cautious on this. We do not want to mess with the brand, and we don’t want to mess with the experience.”

“Once you begin down that path, you can’t retrench,” agrees Stoeckel. He cites the business book “Firms of Endearment,” which profiles companies that have won share of heart, which became share of wal­let. (See sidebar on p. 59.) “So much of our brand is winning the share of heart of our stakeholders: our customers, associates, vendors, communities we serve. And that’s really what we stay focused on. And we do it one customer at a time, one store at a time.”

While Wawa has made foodservice a driving element in its BOS, this doesn’t mean it has given up the center of the store. “The key to success will be to continue to grow market share and key convenience categories,” says Stoeckel. “We’re not going to give that business away.” Wawa dominates its competition in number of ATM transactions and embraces tobacco and gasoline as traffic drivers, he says.

Stoeckel acknowledges that competi­tion from c-store retailers and other chan­nels is especially fierce, and that it is tough to differentiate in that part of the store. “We think we can best differentiate our­selves with the overall brand experience, through our culture and people,” he says. “But beyond that, where we can create our own blue ocean is really in the foodservice side of the business, and that’s been our legacy, that’s been our history.”

Ready, Set, Go

So much of the story about Wawa’s growth in the past two decades has been about getting the timing right. From introducing a full-service espresso offer to entering a new market, the company has accepted misfires and delays—as frus­trating as they can be at the time—as a long-term positive. This is especially true of its delayed entry into Florida.

“We’ve crystallized our vision in terms of what we want to be longer term, and we used the opportunity to really look at the future, look at where we were headed, and developed a much more motivational and solid game plan than what we had before,” says Stoeckel, who points out that had Wawa built the new stores a couple of years ago as it originally intended, they would not look like the fast-casual-to-go concept of today.

Ned Bowman, executive director of The Florida Petroleum Marketers & Convenience Store Association (FPMA), Tal­lahassee, Fla., attended Wawa’s Orlando grand opening and was impressed by the crowds, the cleanliness of the site, its “Floridian” feel and its food offer. He says the appeal of the state to retailers such as Wawa (an FPMA member) is obvious.

“There’s a reason people want to come to Florida: It’s the third-largest gasoline market,” he says, citing that the degree of competi­tion has encouraged retailers to up their retail game. Beyond major and mid-tier oil, key c-store retailers in the Orlando and Tampa markets include RaceTrac, 7-Eleven, The Pantry and, soon, Thorntons, which announced plans to open 15 to 20 stores in the Tampa-St. Petersburg-Clearwater area in the next three years.

While the state’s unemployment rate (8.6% as of press time) is slightly higher than the national average, it is on a downward trend. In addition, population growth is on an upward track, allowing the state to pick up two congressional districts in the last reapportionment.

“The Florida market is a very competitive gasoline market, and shoppers today, with the way the economy is, are looking for convenience and value,” says Bowman. “Our convenience marketers offer a very competitive gasoline market, and a lot of them offer pretty good foodservice quality.” He believes Wawa’s fresh and made-to-order hoagie offer will be its key competitive differentiator.

“Ninety-eight percent of competition is self-created,” says Jim Fisher, CEO of Houston-based IMST Corp., a site selection and development firm. Fisher says Orlando and Tampa may have several sizable retailers, but he likes Wawa’s edge on the operational side. “[Wawa] sees the potential of where they can operate very successfully based on the competitive environment. If there were strong operational companies in those markets, no one would go.”

Fisher ponders if and how Wawa would backfill its core markets, but to succeed in Florida, he says, the company must bring “numbers”—in terms of a full executive team, as well as volume. “And they will get them,” he predicts.

On the restaurant side, Wawa has already tussled with Panera Bread, Dunkin’ Donuts and Starbucks in its core markets. It expects more of the same in Florida, in the wake of those com­panies announcing southern expansions. Competition from Firehouse Subs and Jimmy John’s, also with sizable Florida footprints, were part of the reason Wawa introduced bread baking in the stores. Indeed, as much as the fast-casual-to-go model offers Wawa a chance to ultimately make the competi­tion irrelevant, it needs to respond in the meantime.

“We have to compete against a lot of different competitors—gas, food, tradi­tional c-store—and you have to be on the top of your game to differentiate your­self in each one,” says Gheysens. “[Aside from] the consumer perspective, there’s also the real-estate perspective: We’re all fighting for the same corner.” Wawa is banking on its fortified balance sheet to provide flexibility and fuel its offense as competition heats up.

“When the company gets into a busi­ness, it gets in it to win,” says Kim Lop­drup, a Wawa board member and senior vice president of business development for Darden Restaurants, whose brands include Red Lobster and Olive Garden.

He points out that one of the com­pany’s six key values is “passion for win­ning.” This is obvious with fuel, in which Wawa has earned a reputation not only for its aggressive pricing but also its mar­ket efficiency; it owned 1.7% of all the motor gasoline sold in the United States in the first quarter of 2012, for example, despite having an outlet share of only 0.28%, according to figures from the Oil Price Information Service (OPIS). The organization continually ranks Wawa as No. 1 in its efficiency rating for gasoline, defined as gallons by location.

Consider coffee: Wawa ranks as the eighth-largest coffee retailer in the United States based on units sold, despite the fact that it has stores in only six states, and it averages more cups of coffee per site than Starbucks or Dunkin’ Donuts. Also, its merchan­dise sales are about 10 times the c-store industry average.

“Like our advertising says, ‘There’s no place like Wawa,’ ” says Lopdrup. “As long as we execute our concept well in the new market, we have great confi­dence that we’ll be highly successful.”

Wawa’s Fast-Casual-to-Go Statement

In July, Wawa opened the first of its Florida sites, a count it plans to grow to 100 within five years. The company is entering Florida with its newest format, which emphasizes a food-first offering, complete with built-to-order hoagies, a full-service espresso bar and expansive frozen-beverage lineup. As CEO Howard Stoeckel says, “The bar’s higher on foodservice, the competition is keener, everyone around you is rebranding, improving, taking their business to a higher level, so you can’t stand still. We in the c-store industry have to work that much harder to establish our foodservice reputation.”

Glass Act: Large glass windows show­case the grand foodservice statement inside the newest Wawa store, and give this site a decidedly “Floridian” feel.

Check It Out: To bring a greater level of convenience, Wawa designed dedicated checkouts in its newest format. The latest POS from Radiant Systems is more intutive and allows customers to swipe their card while the order is being rung up.

Fountain of Youth: Frozen bever­ages, fountain and prepared food all underline Wawa’s commitment to fast-casual-to-go.

Coffee Talk: With its success selling drip cof­fee firmly established, the chain is launching a full-service espresso-based beverage program. “It’s amazing the number of people who come in on a Saturday or Sunday and have nowhere to go, other than they want their daily routine and daily fix,” says CEO Howard Stoeckel, “not in terms of coffee, but the experience.”

At the coffee island, Wawa is constantly rede­signing the fixture to maximize its efficiency, examining it and every area of the store from the perspective of work cells. “We have an operations engineering group that looks at it from a customer’s work cell, an associate’s work cell, arm reach, motion … to make sure we’re as efficient as possible,” says president Chris Gheysens.

Hot Bread: Encouraged partly by customer demand and partly by the appeal of Jimmy John’s and Firehouse Subs, Wawa included in-house kitchens in its latest format to bake hoagie rolls fresh.

Smoothie Moves: The success of its smoothie program—now including 24 varieties—convinced Wawa that it should give full-service espresso a second look.

Fueling Up: While food is the focus inside the store, the new format’s expansive forecourt shows fuel is an equally powerful strength. OPIS calls the chain “the efficiency king” for its ability to command greater market share with fewer sites. While Wawa is “watching patiently on the sidelines” to see which alternative fuel wins out, it has engineered some flexibility into its new sites—for example, installing a conduit to accommodate dryers, compressors and other equipment required for a compressed-natural-gas (CNG) setup. On the conventional-fuel side, it is retrofitting sites for diesel, with plans to increase installations in the next few years.

An Art and a Science: A Wawa asso­ciate shows Orlando mayor Buddy Dyer and a crowd of admirers the technique behind building a quality hoagie at a special media open house of the chain’s first Florida site.

The Wawa Business Bookshelf

“Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant,” by W. Chan Kim and Renée Mauborgne (2005).

Advocates for businesses to create their own uncontested markets with maximum growth potential, or “blue oceans.” The strategy is based on a study of 150 strategic moves—or “value innovations”—that have taken place in 30 industries over the past 100 years. It is built on three propositions:

1. Value: how compelling an offer is to customers in terms of its purpose and price.
2. Profit: increasing profits by eliminating or trimming factors that the industry has taken for granted or on which it has overdelivered.
3. People. How ready and willing employees are to fully execute the new strategy.

“We said we wanted to distance ourselves if we can from our competition and truly be different from those. Part of the blue ocean strategy is to combine the best of food, convenience and fuel and really simplify our customers’ lives and help them have a better day.”

—Howard Stoeckel

“Firms of Endearment: How World-Class Companies Profit from Passion and Purpose,” by Rajendra S. Sisodia, David B. Wolfe, Jagdish N. Sheth (2007)

Examines how leading companies such as Costco, Whole Foods Market and Wegmans are delivering “share of heart” to their stakeholders, and in return earning loyalty and endearment.

“So much of our brand is winning the share of heart of our stakeholders: our customers, associates, vendors, communities we serve. And that’s really what we stay focused on: winning share of heart. And we do it one customer at a time, one store at a time.”

—Stoeckel

“Good to Great: Why Some Companies Make the Leap … And Others Don’t” (2001) and “Built to Last: Successful Habits of Visionary Companies” (2004) by Jim Collins

In these well-loved business tomes, Collins examines how good companies became truly great, and discovers common themes in leadership style, culture and discipline. Introduces the concepts of the humble, visionary “Level 5 Leader,” finding and placing the right people on a company’s “bus,” and investing in employees.

“Jim Collins talks about ‘Built to Last’ companies, where you grow your own people. We’ve always taken great pride in growing our own people.”

—Stoeckel

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