Wawa's Ocean View
Chain seeks clearer competitive waters with a new format in Florida.
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.”