Convenience store company retains Wisconsin roots
In La Crosse, the Kwik Trip company is something of a city within a city – with it’s own dairy plant, trucking company, bakery, kitchen and food safety lab.
Members of the citizen policy board for the Department of Agriculture, Trade and Consumer Protection (DATCP) had a chance to see inside that smaller city during a tour last week. They also held their monthly meeting in the company’s board room.
Don Zietlow, owner and chief operating officer of the company, told board members that he and his co-workers strive to make Kwik Trip more than a convenience store.
Zietlow, who is committed to keeping the company family-owned, said he was born and raised on a farm and farmed until he was 22, milking cows by hand. He then worked for Gateway Foods for many years, delivering food to grocery stores.
That association got him interested in the convenience store business, which has evolved a great deal in the ensuing decades, transitioning from sales of lots of tobacco products to more ready-to-eat food items, along with dairy products sourced and processed by the company.
Through several transitions and partners, Zietlow said he never forgot what it was like to milk cows and deliver meat to stores, which leads him to share generously with those who work at Kwik Trip – rather than calling them employees, he calls them co-workers.
His profit-sharing plan for these 10,500 co-workers includes 40 percent of the company’s pre-tax profits and a bonus based on real estate holdings of the company.
He told ag board members that he’s proud his company has the lowest employee turnover of any convenience store business and also the lowest shrink.
“If they make a dollar, 40 percent of it is theirs and they understand that,” he said, during a presentation to the board.
In the late 1980s, Zietlow said he began to notice there “weren’t a lot of healthy options” in his stores. The business was driven by tobacco sales from 1995-2005, but he could envision a future where those sales would disappear.
Kwik Trip bought a dairy in Caledonia and went seriously into the food business in 2002, even though he says they “didn’t know what they were doing.”
Zietlow said the company is committed to the best service it can provide with clean stores and clean bathrooms and has positioned itself as a place that consumers can find certain foods – milk and butter, eggs, bread, onions and bananas.
The company has its own banana warehouse and ripening rooms.
When they began to get into bananas, he said, they threw away more than they sold.
“Everybody wanted to quit selling bananas, except me,” Zietlow said.
He won that argument and last year the company sold 40 million pounds of bananas as well as 10 million pounds of potatoes. On a normal day, the stores sell 700,000 pounds of milk or more.
Each day the convenience stores, which are all company owned rather than franchised out, also sell 3 million gallons of fuel.
“When Krispy Kreme donuts came to town, we looked at that and we though we could make a better donut,” he said.
Ag board members and several reporters got a chance to tour the company’s donut facility, which cranks out the yeasty glazed donuts, packages them and sends them out by the thousands to all the Kwik Trip stores in Wisconsin, Minnesota and Iowa (where the company’s stores are known as Kwik Star.)
Though they had the chance to sample the donuts, photography was prohibited inside all the company facilities to protect proprietary information.
Zietlow said food doesn’t drive the business, but it will get customers in the door and that food business is growing.
“What makes the business grow is our people,” he said. “We keep our co-workers happy and they keep our customers happy.”
The company has 385 stores and nearly all of their supplies come from La Crosse, trucked in by a wholly owned subsidiary trucking company.
Every donut and bun and banana in the stores is trucked out of the facilities in La Crosse.
Zietlow said it’s company policy that none of their drivers have to spend a night away from home.
Every store gets deliveries every day and the company’s trucking business drives 18 million miles per year.
IN HOUSE DAIRY BUSINESS
Board members also walked through a bakery area that was cranking out hamburger buns, and visited the adjacent dairy that bottles a variety of milk in jugs and bags.
Milk is procured through Plainview Cooperative, Foremost Farms and Land O’Lakes, and comes from farms in southeast Minnesota and southwest Wisconsin.
As much as 700,000 to 800,000 pounds per day comes into the La Crosse plant (sometimes as much a million pounds) and is bottled immediately, said Jon Laschenski, dairy operations director.
All of the milk is required to be from farms where bovine growth hormone (BGH) is not used and company officials said they actually go to farms to check that. Milk cannot be unloaded without affidavits that it is rBGH-free.
The Zietlow family decided they wanted the milk they sold to be BGH-free and that has been company policy ever since. The company maintains a software program for compliance of every farm that ships milk to Kwik Trip.
The milk is moved out of the processing facility directly to stores and officials said it’s very likely that milk can go from the cow to the consumer in 36 hours.
Additional plans for the dairy include the possibility of blow-molding their own milk jugs by next year, rather than purchasing them from another company. They are already planning to move into a new ice cream plant in April.
Bob Thorud, vice president of operations at the company, said nearly everything they do is built with growth in mind.
“As a private, family-owned company we can do things others can’t do or wouldn’t even attempt to do,” he said. “Others probably couldn’t justify blow-molding their own milk jugs, but we can, knowing that we’ll grow into it.”
The company devotes about $150 million per year on capital investments. It costs about $5 million to build a new store.
They could build 1,000 new stores in their current area and not reach a saturation point, Thorud added.
The company plans to continue developing its food business with prepared meals and even fresh meat. Coffee has become one of the big profit centers in the business.
Thorud said business at Kwik Trip stores years ago tended to be 70 percent male – “we were Bubba.”
With the addition of the food items, now about half their customers are female.
VISION FOR FUEL
Zietlow’s vision process is now moving forward in the fuel business. He wonders if gasoline is going to go the way of tobacco sales in his stores and wonders what is going to be the fuel of the future.
He sees 25 percent of Europe’s cars being fueled by natural gas and thinks there are opportunities there.
“I think it’s an alternative to gas and it’s an alternative to importing oil,” he said.
Board members toured a large fuel station that will soon be open to the public, even though it’s in the heart of Kwik Trip’s compound in northeast La Crosse. It will dispense compressed natural gas (CNG) and liquid natural gas (LNG) as well as more easily recognizable liquid fuels, including ethanol.
The company has invested $6 million in the pilot facility that will sell the natural gas fuels. There has already been a lot of interest among businesses like garbage haulers who put on a lot of miles each day, said Chad Hollett, the company’s transportation director.
“We are the first retailer in the country to put in its own money into the investment in natural gas fuels,” he told ag board members.
By the end of this summer the company plans to have three retail locations for the new fuel in town, and by 2013 it plans to have 10-12 locations at its other stores.
“Natural gas is a chicken-and-the-egg kind of thing between fueling stations and vehicles to use them,” Hollett said. “The payback is good, but the infrastructure isn’t there yet.”