LA CROSSE — In its stores, Kwik Trip customers may see baskets filled with muffins, a cooler with white and chocolate milk and a case that holds a few salads, cups of parfait and fresh turkey sandwiches on cranberry wheat bread.
But on a 120-acre corporate campus in La Crosse, food production is measured in the millions — a strategy that is helping to fuel Kwik Trip’s rapid growth as it approaches having 700 stores in three states.
Unlike other convenience store operators such as Kelley’s Market, Stop-N-Go, BP and Casey’s, which use outside vendors for most of the food sold in their stores, Kwik Trip’s extensive fresh food operation is largely self-sufficient. It saves costs by using its own massive baking, dairy and food production facilities, as well as an in-house trucking operation to get the food to the stores.
Combined, Kwik Trip serves 8 million customers a week, employs more than 24,000 people and has annual sales of more than $5 billion. The company expects to add 42 stores this year, in addition to tearing down and rebuilding a handful of other existing Kwik Trip stores. Considering the acquisition of other convenience stores and $2.5 billion in capital investments, over the next five years, Kwik Trip will be on pace to add 250 to 260 locations.
“We have a lot of room to grow,” said Carl Rick, leadership development specialist for Kwik Trip. “We’re not in some of the biggest cities in Wisconsin, we’re not in some of the biggest cities in the state of Minnesota, and we’re not in some of the biggest cities in the state of Iowa. So we have room to grow in the states we operate.”
Kwik Trip, with 400 stores in Wisconsin, jumped into the Madison market and Milwaukee suburbs in late 2017 in a big way with the purchase of 34 stores from Middleton-based PDQ. However, Kwik Trip is still without a store in the cities of Milwaukee and Racine. In Iowa, where the stores are branded as Kwik Stars, the company has just begun circling Des Moines. In Minnesota, Kwik Trip has not yet entered Minneapolis or St. Paul.
“The challenge for them is of growth, and many, many good companies have been felled by the challenge of growth,” said Hart Posen, who studies corporate strategy and strategic decision-making at the UW-Madison School of Business. “The key is understanding how to grow, but in the last 15 to 20 years, they’ve made a lot of very smart decisions.”
Posen said challenges for the company include staffing, finding real estate to build stores and being limited geographically since most of the food in its stores is shipped almost daily from the campus in La Crosse. Kwik Trip also needs to balance the demand at its stores with being able to keep up its production schedules and capital improvements in La Crosse.
“It’s a chicken-and-egg thing,” Rick said. “Do you invest capital in the stores, or do you invest capital in production facilities in La Crosse? Because you’re going to be inefficient in one area or the other. So we’re always playing that game of how big is too big. That really is our toughest growth challenge. From there, it’s finding the real estate.”
Food on a grand scale
Kwik Trip’s corporate campus is a juggernaut of production.
It includes a full-scale dairy, which bottled 26 million gallons of milk last year, sourced from farms within a 250- to 300-mile radius. There’s a 212,000-square-foot sweets bakery, which cranks out millions of cookies, doughnuts and muffins a year. A 60,000-square-foot commissary whipped up 6.1 million sandwiches and 1.9 million salads last year and has a pizza line that can churn out 50,000 pizzas a day. Soups are made 1,000 gallons at a time.
But the company’s rapid growth is forcing a $300 million investment that includes expansion at the corporate campus, including the recent launch of a $112 million, largely automated bakery dedicated for bread and buns and a plan to expand its sweets bakery next year. Ground is being broken this month on an engineering building that will serve as a distribution center for equipment needed in stores. The campus also includes a training facility and 360,000-square-foot distribution center.
The commissary kitchen is also in line for expansion. Plans have not been finalized, but the company is considering a dedicated pizza room and a section for prepping a take-home meal program that would combine chicken fried in stores with side dishes produced in La Crosse. The program is currently being tested at a few stores, including those in Delafield, Holmen and West Salem.
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“As we continue to grow, what we talk about six months ago is not what we talk about today,” said Brad Clarkin, director of production operations. “You’re always trying to stay ahead of it on that end. Forecasting what we’re going to be producing, and then (asking) what are the associated units and how do we execute that for retail? It’s just one of the many things we try and stay ahead of.”
Expansion on the corporate campus drew $21 million in state income tax credits awarded to Kwik Trip in November 2017 by the Wisconsin Economic Development Corp. Kwik Trip and WEDC said the project was expected to create more than 300 jobs in the La Crosse area over the next five years. It had already created 171 jobs by the end of September 2018, according to a project performance report the company filed with the state agency.
Underpinning the operation is a profit-sharing program that last year rewarded every full- and part-time employee in the company a 10% cash bonus and another 3.1% contribution to individual 401(k) retirement accounts. The company also has its own self-insured health clinics for employees in La Crosse and Appleton and has converted the former PDQ headquarters in Middleton to a health clinic scheduled to open next month.
“They’re fascinating,” said UW’s Posen. “Most mom-and-pop convenience stores and gas stations simply do not have the scale to be sufficiently profitable to enable any of that. The difference in scale allows them to be more profitable, which then allows them to recruit better people because they can provide better salaries and better benefits, and that then translates back to higher-quality customer service.”
‘You have to change’
Kwik Trip was founded in 1965 when John and Donna Hansen opened a small corner grocery store on Eau Claire’s east side. The first La Crosse store was added in 1970, with Don Zietlow buying into the company in 1972. The company was ultimately owned by three families, but Zietlow eventually bought out both families — one in 1989 and the other in 2000.
The independence of a single owner ushered in a new era for Kwik Trip.
Zietlow, who was born in nearby Chaseburg and graduated from La Crosse Central High School in 1952, introduced Glazers doughnuts and hot food in 2003. Foods such as salads and cold sandwiches were added in 2005. The company began selling fresh meats such as chicken, steak and pork in 2014.
In the last six years, nearly 300 stores have been added, while many other Kwik Trip properties have been remodeled and expanded. All will be around 7,000 square feet, compared to the average convenience store, which is about 3,200 square feet, according to the National Association of Convenience Stores.
These days, more than 2,300 of Kwik Trip’s employees are tucked largely out of sight on La Crosse’s north side, making nearly all of the food people buy in the ubiquitous red-and-white stores spread across three states. The company’s truck drivers log 29 million miles a year getting the food to its stores.
There is very little Kwik Trip buys elsewhere. Their employees even make the milk jugs they fill because it’s cheaper than buying from another vendor.
All of the changes over the years — the additions of larger stores, hot foods and other fresh grocery items — were in direct response to declining sales of tobacco and smaller margins on gas sales.
“The writing was on the wall 20 years ago,” Rick said. “How do you replace that income or do you just die? You have to change.”