One would think that Don Zietlow, at 80 years old, should be fly-fishing in a river along the rolling countryside of western Wisconsin. It’s been 50 years since he opened his first Kwik Trip convenience store in Eau Claire, Wis. In the past half-century, he has seen the business grow to $4.5 billion in annual sales and more than 450 stores in Wisconsin, Minnesota and Iowa.
Meanwhile, the family’s second and third generations are actively engaged in the company’s vertically driven retail model. Zietlow’s three children have all of the voting shares, while the third generation now owns the company. Zietlow officially owns none of it.
That said, he remains immersed as if he has a financial stake, keeping two offices in La Crosse and still being actively involved in the business. He was juggling two meetings the same morning CSP visited. He describes himself as “the happiest I’ve ever been.”
Click here to view the infographic: QuikTrip Vs. Kwik Trip.
“The involvement of the family, the growth of our company and knowing that the third generation wants to continue to share with our coworkers—that gets me excited,” says Zietlow.
Counting What Counts
Customer count and sales per customer are important metrics for the famously numbers-obsessed Zietlow—and he likes the direction in which they’re moving. Kwik Trip’s customer count has grown more than 10% per week at new and same stores combined. Considering that Kwik Trip sites have about 6 million customers per week, that means 500,000 more guests per week.
Meanwhile, Kwik Trip is seeing promising growth from one of its newest offers, a fresh-meat program launched in 2014, featuring packaged pork chops, ground beef, steaks, brats and more, merchandised in freestanding, open-air coolers. The results from the first year are impressive: Kwik Trip sold 4 million bratwurst in 2014 alone and has been selling three to four truckloads of Cargill-sourced packaged meat per week.
The program is a natural fit for Kwik Trip’s commodities-driven strategy, which pushes value on items such as bananas, bread, milk and eggs, and further fulfills its mission to be customers’ best fill-in grocery option. This model puts Kwik Trip in direct competition with a channel most c-stores stay away from: the big box.
Yet the company relishes the chance to butt heads with the hypermarkets on food.
“I like to build my store in front of Costco, Walmart,” says Zietlow. “We have a better value and better quality food, so that’s the growth.”
The next big food project for Kwik Trip is prepared meals: take-home, heat-and-eat entrèes such as meatloaf, lasagna, chicken or salmon. Zietlow describes the effort as “a huge undertaking,” partly because of the challenge of dealing with the product’s short shelf life, but also delivering a quality offer at a $5-to-$8 ring that is still rare in c-stores. It is hoping to apply the same lessons learned when it rolled out its foodservice program more than a dozen years ago.
“We were able to digest how we want to sell food—make it in our commissary, take the labor out of the store—and I think we’ve been really successful,” Zietlow says. As proof, foodservice sales are growing faster than any other category, up 23% in 2014. He expects the same level of growth over the next few years as KT builds 35 to 40 new sites annually.
“You’ve got to get the right product the consumer wants to buy,” he says of the prepared meals. “How many different items do you have and still be fresh and good? That was a challenge when we rolled out food too, but it’s easier now that we have more volume.”
And Kwik Trip is seeing success with its Karuba Gold self-serve espresso beverage program, which rolled out to all stores in 2014. The chain installed espresso machines from Franke Coffee Systems that allow customers to make their own coffeehouse-quality hot and cold beverages. During CSP’s visit to a La Crosse Kwik Trip, customers kept making a beeline to the machine, despite several powdered-cappuccino machines available nearby.
Since its launch, the program has helped boost Kwik Trip’s overall hot-beverage category profits by more than 30%.
Another area in which Kwik Trip has blazed a trail but is fully prepared for a longer-term return: alternative fuels. It is on track to have 40 sites selling compressed natural gas (CNG) by year’s end. By 2016, it expects to have its 400-truck fleet converted to CNG or liquefied natural gas (LNG).
Zietlow acknowledges that CNG and LNG are a big investment; average installation costs for a CNG fueling site run about $1.5 million. But at the same time, Kwik Trip is counting its savings. Despite relatively lower diesel prices over the past year, the company is still seeing a 20-cent-per-mile savings for running its trucks on CNG. Considering that its fleet racked up 20 million miles in 2014, this equates to an annual cost savings of $4 million.
And in 2015, Kwik Trip hit another financial milestone for natural gas: It finally made a profit after three years in the business.
People Matters
Food and fuel are the two biggest offers at Kwik Trip, but what drives the company are its employees. “The success of Kwik Trip is our people,” says Zietlow. “We can have the best stores, we can have the best of everything, but if our people don’t execute, we fail.”
Evidence of this execution is Kwik Trip’s 98.6% CSP/Service Intelligence Mystery Shop score for exterior cleanliness, placing it well above the 94.8% average, and a 98.0% first-place finish for clean restrooms, vs. a 93.9% average.
The success of the company’s business model hinges on its ability to keep its employees happy so they will keep customers happy. There’s a process for hitting what Zietlow says are the industry’s lowest shrink and turnover levels. The first step is to hire right. Kwik Trip hires for attitude, with the belief that associates can be trained to learn everything else.
“I want our people to be nice,” says Zietlow.
The second step is to lead by example. Kwik Trip focuses heavily on leadership training for its managers and conducts yearly 360-degree evaluations on all of them.
And then there are the benefits, beginning with a profit-sharing program that returns 40% of the profits Kwik Trip earns each year back to its 15,000 employees. The company’s reputation as a great employer—the Milwaukee Journal Sentinel ranked Kwik Trip first among its Top Workplaces 2015 for large companies—has allowed it to be incredibly choosy. In 2014, it hired only 6,000 of the 113,000 people who applied, or 5.3%.
CONTINUED: Employee Challenges & Building Customer Counts
Interestingly, one of Kwik Trip’s biggest challenges today is employee-related. It is not minimum-wage regulations; the company already pays well above the industry average. But Zietlow calls out the Affordable Care Act (ACA) for its effect on Kwik Trip’s health-insurance costs and those of its employees. Since ACA has been implemented, the annual deductible for a family on Kwik Trip’s health insurance plan has ballooned from $2,000 to nearly $8,000.
“The normal worker’s paying for this,” says Zietlow. “This is wrong. They’ve got to make more money just to pay their health insurance.”
The chain appreciates the link between employees’ health and their happiness. In 2013 it opened the Kwik Trip Center for Health, which offers services from checkups and acute care to lifestyle coaching. Employees who meet certain goals—losing weight or quitting smoking, for example—earn discounts on their health-insurance premium.
“It comes at a cost,” Zietlow says. “But I think it’s a savings because we’ll spend less money on our workforce health care five to 10 years from now because they’ll be healthier.”
Customers Count
Kwik Trip takes a broad approach as it pushes to attract various demographics and boost customer counts.
“I want them all,” Zietlow says with relish. “But you reach everybody in a different way.” For example, Kwik Trip targets millennials via social media and offers such as the Karuba Gold program, which lets them customize their coffee.
It aims for soccer moms with the value of its commodities—Kwik Trip strives to be competitive on the prices for fill-in staples such as milk, eggs and bread—as well as its fresh food cases, stocked with fruit, yogurts, salads and sandwiches.
There are still instances when Kwik Trip cannot meet customer demands. The company is unable to move organic produce fast enough to ensure it can offer a consistently fresh selection. But it has considered gluten-free breads, and it phased out trans fats well ahead of the recently announced federal ban.
In many ways, Kwik Trip paces a few steps ahead of the market, government, competition and industry. Even when Zietlow describes what he admires about QuikTrip, it seems as if he is speaking about an earlier stage of his own company.
“They take care of their people,” Zietlow says. “They used to have a lot of cigarettes, and now they are focusing more on food: warehouses, commissaries, bakeries.”
Zietlow tries to visit QT stores two to three times a year, and he greatly admires the Cadieux family. And the chains share a common purpose.
“Whether it’s QuikTrip, Wawa, RaceTrac, Sheetz or whoever it may be—we’ve all got the same message,” says Zietlow. “Either we’re the best, or we’re going to fail.”
NEXT: Complete 2015 Mystery Shop Data
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