Family Values

12/11/2015

Long before he became CEO of one of the Midwest’s leading convenience store chains, Don Zietlow made a promise to himself and his wife LaVonne that if they were ever fortunate enough to own or control a company, he would share the profits with all his co-workers.

Raised on a farm near La Crosse, Wis., Zietlow began his career in the food retail business as a route driver for Gateway Foods, a wholesale grocery company. He made his promise “at the end of a particularly long and grueling day in 1957,” he recalled.

Zietlow, this year’s retailer inductee into the Convenience Store News Hall of Fame, is a man of his word. Fourteen years after making that pledge, he purchased his first convenience store and took the first step toward fulfilling his promise.

During his tenure with Gateway Foods, Zietlow saw its owner Reinhart expand into the convenience channel with five c-stores. John Hanson, who would later become his business partner, ran the stores while Zietlow took the lead on retail operations.

About a week before Christmas in 1971, Zietlow was speaking to a group of 20 retailers in La Crosse and told them they had two choices: go big or become a convenience store. At the time, the competition was SuperValu, Kroger and Piggly Wiggly; there were no Walmarts.

One of the retailers stood up and said, “If you’re so smart, buy my store.”

Zietlow’s response: “You just sold it.” And so began the founding of Kwik Trip Inc.

“That night, I had to go home and tell my wife LaVonne I bought a store the week before Christmas,” he recounted. “I had no one to run the store, but didn’t have any option in front of [those] 20 retailers.”

A solution presented itself the very next day when Hanson approached Zietlow about buying half the store. A week later, the two new store owners and Gateway Foods decided to join their stores for a combined six locations and form a corporation. Zietlow, Hanson and Reinhart each became a one-third owner of Kwik Trip.

Zietlow continued as president of Gateway Foods for the next 18 years as the company grew and saw more and more success. He wore the hats of both wholesaler and retailer.

The next chapter for Kwik Trip came in 1989, when Reinhart sold Gateway Foods to Zietlow. By then, Zietlow had acquired interest in a few grocery stores. Reinhart traded its one-third interest in Kwik Trip for his interest in the grocery stores.

Now as the two-thirds owner of the convenience stores, Zietlow remembered the promise he made to his wife back in 1957. “I said, as long as we are two-thirds owners, let’s share 40 percent of our pretax profits with our co-workers,” he explained. “I told my partner, John Hanson, that if he agreed to the 40-percent profit sharing, I would sell him half of what I bought from Reinhart, making us 50/50 partners. He agreed.”

CHANGE IN THE AIR

Over the next decade, Kwik Trip continued to grow, building new stores and acquiring others.

The Zietlow family in 2000 seized the opportunity to buy the entire company and agreed to continue sharing 40 percent of the pretax profits with their co-workers.

“For the past 15 years, business has been very good. We have grown to sales of over $5 billion per year. We have more than 475 stores and 17,000 co-workers. And we still share 40 percent of the pretax profits with all the co-workers,” Zietlow said. “Life is good.”

With the newest industry Hall of Famer guiding the way, Kwik Trip has become a leader and mastered how to navigate change as the convenience channel evolved from the traditional smokes-and-gas operation to a serious contender on the fresh-food front.

Soon after buying out his first partner, Zietlow asked himself why someone should come in and shop his company’s stores. The answer led Kwik Trip on a journey, which over time has resulted in the chain emerging as a powerhouse in the c-store industry.

“Cigarettes were 50 percent of our business and 50 percent of our profit. But I could see that going away,” Zietlow observed. “[I asked myself], ‘How could we be different?’”

With his background in operating large-volume grocery stores, the executive noticed consumers were spending $200-$300 every two weeks on groceries, but in between those trips to the grocery store, they were running out of staples like milk, bread, butter, eggs, potatoes and bananas. To meet consumer need for these basic commodities, Zietlow began to explore building a Kwik Trip Support Center where the retailer could process its own milk and make its own bread, sweet goods, pizzas, soups, salads and more. The move would not only control costs, but also allow Kwik Trip to control the quality of its food.

Today, the Support Center is an advanced, multifaceted operation. The chain makes its own products in the Kwik Trip Bakery, Kwik Trip Dairy and Kwik Trip Kitchen.

Of course, change has not come without some hiccups, Zietlow acknowledges.

“By 2002, I thought it would be a good idea to increase our focus on selling ready-to-eat food. What a disaster. We lost millions,” he said. But Kwik Trip did not give up. It kept working at it and today, food is about 28 percent of its sales and 45 percent of its gross profit.

While Kwik Trip sells a lot of food, the sales wouldn’t be where they are now were customers not shopping the stores, and commodities help bring them in the door.

“We have about 6.5 million customers visit our stores every week. Many of these customers are driven by values on eggs and butter, milk and bread, and bananas, potatoes and onions. We sell 50 million pounds of bananas a year. We also sell a lot of apples, oranges and potatoes. We sell 800,000 pounds of milk a day,” Zietlow explained.

And though well-known for its bananas, it’s not all about the fruit.

“We also sell a lot of doughnuts. We sell 2.5 million doughnuts a week. Not everybody eats bananas; some people eat doughnuts,” he added.

In conjunction with this emphasis on fresh food, food safety is of critical importance to the chain. Realizing how a food-related illness could hurt the company, Kwik Trip invested heavily in creating its own Food Safety and Quality Assurance Lab. It also has an independent, third-party testing provider that works in the lab, conducting 3,000 to 4,000 tests per week.

“We test all the product coming in and all the product going out,” Zietlow noted.

Coupled with the lab and the production facilities on 90 acres in La Crosse is also Kwik Trip’s own Distribution Center and Convenience Transportation. Every single store gets a delivery every day, whether it is three miles from the center or 300 miles away.

CHALLENGES & REWARDS

Getting food right has been a big challenge for Kwik Trip. Changing from an “easy life” of selling mainly cigarettes and soda to a “tough life” of doing food right — having both great-tasting food and offering a value — did not happen overnight.

“For us to digest food was hard. It was really a bloodbath the first two or three years, until we learned how to do it,” Zietlow said. “Today, it’s relatively easy for us and it’s a big part of our program.”

Also on the subject of challenges, the chief executive points to credit cards, government regulations and keeping Kwik Trip’s culture right with growth as additional trials.

But with challenges comes rewards. “Providing a future for our co-workers to grow and prosper and share in the profits of our company is rewarding,” said Zietlow.

Knowing his family — his children and grandchildren — also believe in a culture of sharing is, by far, his “greatest personal reward,” he added.

“Our co-workers are the greatest asset we have. They truly are,” Zietlow emphasized. “The 40-percent profit sharing makes them part of the company. Good customer service, clean stores and clean bathrooms don’t happen without our co-workers taking pride in their company.”

The CEO encourages his co-workers to run the business like they own it.

“I always say we have to take care of two people: As owners, we have to take care of our co-workers as family; and our co-workers have to take care of the customers. If we take care of those two people, everything is good,” he said.

Today, Kwik Trip is owned by the third generation of the Zietlow family. All of the grandchildren share ownership. Zietlow serves as CEO, but doesn’t own the company. The voting shares are held by the second generation, daughter Vicky and sons Scott and Steve.

They are all actively involved in the company. Steve is a vice president and has been head of the petroleum department for several years. Scott is chairman of the board, while working as a trauma surgeon at the Mayo Clinic in Rochester, Minn. Vicky is responsible for educating the family on owning a business and upholding the family’s responsibility to its co-workers. She and her husband oversee the family’s charitable foundations as well.

Zietlow has the pleasure of seeing his grandchildren join the family business, too. Currently, three grandchildren work for the company full-time: one for approximately four years, another for about one year, and the third grandchild, for roughly six months.

“That’s good,” he said. “They are getting involved in the operations.”

“I always say we have to take care of two people: As owners, we have to take care of our co-workers as family; and our co-workers have to take care of the customers. If we take care of those two people, everything is good.”

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