Kwik Trip doesn’t sacrifice values to be a market leader
If you want to get ahead in the convenience store market it’s important to have a niche. You’d better, because your competition is literally just on the next corner waiting to welcome customers whom you’ve failed to satisfy.
That’s actually sage advice for most industries, as competition for customers — and quality employees — is stiffer than ever. It’s also something John McHugh, director of corporate communications, leadership development, and training for Kwik Trip will discuss at the next IB Icons in Business breakfast on Sept. 21 at the Madison Concourse.
A former parochial school teacher, McHugh was recruited to Kwik Trip 12 years ago to assist the company with its burgeoning corporate training programs, and he says now that he plans to retire with the company.
That’s a testament to Kwik Trip’s unique corporate culture, one that in an industry where the turnover rate ranges from 100% to 180% annually, Kwik Trip experiences a fraction of that at just 30% each year.
So how do they do it?
Kwik Trip started in 1965 in Eau Claire, though it now calls La Crosse home. It’s a family owned company, but not one where the family is the focal point.
McHugh notes as owners, the Zeitlow family is particularly generous.
“Practically that means that 40% of all the company’s pre-tax profits come back to all the coworkers; 27.5% goes to Uncle Sam for taxes, another 27.5% gets reinvested in the company for new stores,” explains McHugh. “The family that owns us, they only take a total of 5% out of the company. Where that comes into play is a lot of people will talk about the Occupy Wall Street movement or they’re working to line the pockets of some rich CEO someplace. Everybody in our company knows that when you make a successful store, those profits come back to our coworkers not the family that owns us. That really makes our people run the business and stores like it’s their own.”
The company itself is also on an aggressive growth track at the moment, opening about 40 new stores each year. According to McHugh, that helps boost employee retention, too, because prospective employees see Kwik Trip as an employer with a lot of room for advancement. “That’s a huge piece. We’re able to attract younger people who want to move up in a company.”
McHugh says the company prefers to hire from within, so many of it employees at the La Crosse corporate offices got their start as coworkers in a Kwik Trip retail store.
“They understand what it’s like to be out at the stores,” McHugh notes. “You don’t get this dichotomy where corporate has just decided what happens in the real world of retail.”
McHugh says making Kwik Trip a great place to work also goes beyond benefits. “If you have an extremely generous profit-sharing plan and you get that great check once a year, but the other 364 days of the year your immediate supervisor is a creep, that’s a not a great place to work.
“One of the things that we work on very hard is to be a mission-driven organization,” he continues. “Our mission statement is the Golden Rule: ‘Treat others as you’d like to be treated.’ We hammer that mission statement home throughout the entire organization. We interview for a fit with that mission statement, we evaluate people based on fit with that mission statement, and we reward people for living that mission statement. We believe that culture of kindness internally helps us to do great customer service externally.”
McHugh says the interview portion of the equation is a rigorous one, and Kwik Trip makes a habit of being very selective in whom it hires. Last year, for 4,000 openings in the entire company — because of growth or turnover — Kwik Trip received 130,000 applications. So, the company can afford to be selective, which McHugh notes tends to mean that the people hired are ‘A’ players and A players tend to stick with around longer.
“When we interview, even for a front-line coworker, the interview process takes a minimum of an hour and a half. One of the first questions we ask in the interview process is, ‘Tell me about the last random act of kindness you did for somebody.’ We’re just looking for genuinely good people. And when people work in an environment where they feel appreciated and they share in the profits and their immediate supervisor is a decent human being, they’re much more inclined to stay. For us it’s not rocket science, it’s pretty simple stuff.”
A convenient niche
Kwik Trip wasn’t always that different from other convenience stores. McHugh says the company began changing the way it does business in 2002.
“Back then we were the traditional convenience store, which hangs its hat on two sources of income — either fuel or cigarettes,” McHugh explains. “We don’t control fuel margins, and that’s a very volatile market right now. It’s why you don’t see standalone gas stations anymore. And tobacco sales were declining substantially every year, so we knew we needed to get another component into that. So that’s when we decided to get into the food business with this specific niche.”
Kwik Trip’s corporate research showed the average family of four does its major grocery shopping every two weeks at a box box retailer or a substantially sized grocery store. But in between those two-week visits families run out of basic commodities — things you can’t keep fresh for two weeks or you just go through quickly — like milk, butter, eggs, and bananas. Kwik Trip aimed to become a fast and convenient in-between destination for those items.
“The catch came when we first got into that side of the business,” McHugh notes. “When people walk into a gas station or convenience store they tend to think, ‘Geez, how long has that milk been on the shelf.’ And our industry used to have something called insult pricing, which means you need it, we have it and we’re convenient, so you’re going to pay through the nose to get it. So we had to beat the model on price and freshness.”
To do that Kwik Trip spent the past 10 years investing heavily in its La Crosse infrastructure, on such things as a state-of-the-art dairy and commissary, along with its own distribution center.
“The reality is, the milk that was in the belly of the cow this morning at 2 a.m. is processed here in La Crosse and by 5 p.m. it’s being distributed to the stores,” says McHugh. Eighty percent of all the things we sell inside our stores actually come from Kwik Trip, at one of our facilities here in La Crosse or via our distribution. Every single store gets at least one, if not two, deliveries per day so that we can guarantee freshness.”
Because Kwik Trip is also vertically integrated, it means that it means the company isn’t paying somebody else to process the milk or make the pizza, so there’s no middleman. The company can pass those savings along to the consumer and beat places like Wal-Mart by 10%, according to McHugh.
With its aggressive expansion plans, it might seem like the company is risking its effective business model to pursue growth, but McHugh says that’s not the case.
In the next 10 years Kwik Trip is not planning to expand beyond a 300-mile radius around La Crosse. Beyond that and the company couldn’t do daily distribution.
“For example, our Glazer doughnuts. When they’re made at the bakery they’re only good for 24 hours after they come off the line, and after 24 hours they get pitched, explains McHugh. “So if we’re farther than that from La Crosse it’s not going to work. We have over 550 stores now and we believe we can do another 500 stores in our market before we start to cannibalize our sales. There are a lot of growth opportunities here in the three states yet for us. And maybe 10 years down the road we might have to decide to do another distribution center someplace, but I think we’re good for the next 10 years for sure.”
For more information and to register for the next IB Icons in Business event, visit www.ibmadison.com/Icons.
Date: Wednesday, Sept. 21
Time: 8:00 – 9:30 a.m. buffet breakfast available
Location: The Madison Concourse Hotel, 1 West Dayton Street, Madison, WI 53703
Tickets: $30 each; $160 table of eight
Last Day to Register: Sept. 15, 2016
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