Retail Leader of the Year: Don Zietlow
A look at the man who built Kwik Trip into a $4.2 billion business with heart, soul and a purpose.
The numbers and his years as a grocer brought Zietlow to the Holy Grail of vertical integration, with the company seeming to grow at both ends of the supply chain. With acquisitions mounting through the 1980s—17 Wolters Mini Marts in Iowa in 1985 and 54 Kickapoo stores in 1988 in Wisconsin—and new builds putting meat on the chain, as it were, Kwik Trip slowly gravitated toward manufacturing.
Its first commissary was built in 1975, making sandwiches behind the Losey Boulevard store in La Crosse. A few years later, the company bought its first used straight truck. A warehouse distribution center came in 1980, and the bakery in 1985.
Today, the commissary that started out making 24,000 sandwiches a year now produces 13 million food items annually from a 60,000-square-foot facility built in May 2007. That first truck is now 62 fuel tankers, 49 grocery semis and 35 straight trucks. The warehouse gave way to a new facility in 1996, which the company expanded three times, in 2000, 2004 and 2010—ending up at 220,000 square feet. Also in 2010, the company completed an 80,000-square-foot addition to its 68,000 square-foot-bakery, upgrading with new equipment in the process.
“I’m sure they’d rather be spending money on the stores,” says Doug Ingle, who works in the Kwik Trip bakery. “But they know that to support the stores, you need to throw in money.”
Ingle says that with current improvements, “we’ll be set for what we think is 10 to 15 years, but with our growth rate, that 10 to 15 years amounts to seven or eight.”
Zietlow traces the renewed commitment to foodservice back to 2002, when the company introduced a display case of food items, called Hot Spot. He knew declining tobacco sales and growing fuel volatility was stifling the business, and that Kwik Trip would have to make a major shift to stay viable.
Over the past decade, the investment into facility expansion, manufacturing equipment , labor and expertise—including the development of an in-house food inspection and testing laboratory—moved into the seven-figure range and turned into one of the company’s biggest gambles.
Part of that investment was developing a new foodservice culture. When that shift started, Kwik Trip had a policy of hairnets and gloves for anyone handling food, says Marty Putz, food safety and quality assurance for the chain. But even after training the staff, he would see zone and district leaders not wearing them. “They’d say they were just going in to help for 5 minutes,” Putz recalls. “But we’d say, ‘Aren’t you still making food?’ ”
A stronger auditing process, as well as a move to hire individuals with a food-handling background, has changed the mindset, Putz says. And with those new hires now rising up into zone and district ranks, the issue of hairnets and gloves is a thing of the past.
Steve Zietlow, Don’s son and head of the company’s petroleum division, never doubted his father’s vision. “With regulations, people not wanting to smoke, we needed to focus where we are getting … profits from,” he says, “which led us to food and commodities, things we produce that attract the largest amount of people, that every household needs and uses.”
Closely tied to Kwik Trip’s manufacturing advantage is its delivery system. Zietlow says daily delivery is crucial to customer perception and the truth of freshness. Every night, trucks make deliveries so that everything with a short shelf life is on display by 5 a.m. Once an item sells, automated processes place a new order at the commissary for the next day.
The Achilles’ heel of the paradigm is proximity. With its manufacturing and distribution facilities in La Crosse, the chain can’t move past its 300-mile radius, which covers Wisconsin and areas of Minnesota and Iowa.
But Zietlow believes much of the company’s current market area is ripe for new builds, seeing no reason why it can’t keep its 20-store-per-year growth rate on track into the next decade.
Though outward expansion and density goals appear set, what’s offered inside the store is a shifting variable. The company has its stalwarts, including its signature bananas, Glazers doughnuts and $1 Wednesday cheeseburgers. But it also carries a wide variety of baked goods, foodservice items and dairy products.
Its bakery produces seven varieties of packaged goods and 48 bakery items. It makes 120 regular-sized doughnuts and 150 loaves of bread per minute, going through 40,000 to 55,000 pounds of flour per day. Its commissaries and kitchens produce pizzas, salads, sandwiches, subs, burritos, soups and yogurt parfait cups. The dairy makes 15 million gallons of milk, 2 million gallons of orange juice and other drinks, and 600,000 gallons of ice cream annually.
Its fruit and renowned 38-cents-per-pound bananas come from global suppliers, moving up from Texas to La Crosse. Kwik Trip has five ripening rooms with 80,000 pounds of capacity, where bananas sit before being trucked to stores.
The vertical integration ultimately means a value price. Besides good values on bananas, other basics, such as eggs, milk and bread, are competitively priced. In a faceoff with area stores from Bentonville, Ark.-based Walmart, Kwik Trip assessed its prices to be almost 50 cents cheaper on a 2% gallon milk jug, 17 cents on a half-gallon jug of orange juice and 8 cents on a pound of bananas.
While not assuming Kwik Trip will replace that grocery trip to Walmart, Zietlow believes his c-stores will be where people go to replace what they run out of during the week.
“When it comes to commodities, we should be able to buy flour as cheaply as Walmart does,” Zietlow says. “You’ve got to take costs out of the system, and you’ve got to give value to the customer.”
Walking the Walk
That value equation doesn’t stop with price. Several years ago, Zietlow suggested to his team that the stores stop charging fees at its ATMs, a stream of income in the millions that would just disappear. “It was a lot of money,” Loehr says, but doing so led to higher transaction volumes, increased store traffic and a ton of goodwill.
Internally, the Zietlow family has established how nurturing, supporting and rewarding its own people leads to the kind of customer service and store-level execution that makes a compelling case for consumers.
In 1989, Zietlow came full circle from his arduous career as a truck driver, establishing the company’s 40% profit sharing among employees—an unprecedented amount for any business, in any channel. It has led to one of the industry’s lowest turnover rates, 24%—nearly a third of rates for top-quartile companies among non-managers, 66.9%, per the NACS State of the Industry Survey of 2011 Data.
Employees with at least five years of service own Kwik Trip’s property, including any store built since 1989. On the employee’s fifth anniversary, he or she receives a unit share per year.
Appreciation for the company’s benefit packages is certainly a part of why the chain has kept turnover low and ranked high among local media for best places to work. But Kwik Trip also has a reputation for growth, stability and strategic vision. Brad Clarkin, warehouse superintendent for almost three years, says the chain is known for “hiring the right people and putting them in the right places.”
Despite success with both its business model and employee culture, Zietlow and his management team are loath to rest on their laurels. Already on the proactive front with alternative fuels, the company has begun establishing a network of compressed natural gas (CNG) and liquid natural gas (LNG) fueling sites in La Crosse.
This year, it hosted the first ever Natural Gas Tradeshow and Summit, inviting local fleet owners to its facilities. It unveiled a flagship site in La Crosse near its headquarters. The site, which also sells propane, E85, B5 and B10 biodiesel, is the first of five intended locations.
“If you look at Kwik Trip, at what makes it unique right now, it’s not only our network of stores but the ability to build a functional infrastructure,” says Chad Hollett, director of transportation and distribution for Kwik Trip. “The vehicles are here, the technology is here.”
As is the essence of a leader who pervasively instilled a value system and sense of entrepreneurialism into a company destined to support several generations to come.