Going Strong

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Going Strong

By Linda Lisanti, Convenience Store News - 09/28/2009
"Just a big mess."

That's how Kum & Go L.C. Co-founder W.A. "Bill" Krause describes the first service station he and father-in-law, T.S. "Tony" Gentle, opened Sept. 1, 1959. The 16- by 24-foot block building in Hampton, Iowa, with a gravel drive and three tall gas pumps in front of a junkyard, was stark -- nothing like what Kum & Go models its stores after today.

"Quite frankly, when my mother-in-law first saw it she blurted out, 'You mean we spent X for this?'" recalled Krause. "I was sitting in the back of the car at the time and thought to myself, 'I hope I can force you to take back those words one day.'"

Fifty years later, he has accomplished that and much more.

Kum & Go has come a long way since Krause and Gentle purchased that first station and two tank wagons for $40,000. The chain is now the 23rd largest convenience store operator in the United States, generating in excess of $2 billion in annual sales. The retailer serves more than 360,000 customers on any given day at its 430 locations in 12 states.

"Little did I know when I went into business that I would be celebrating 50 years. They went by so quickly, and yet unplanned," Krause told Convenience Store News in an exclusive interview at the company's headquarters in West Des Moines, Iowa. "Anybody who says he has the foresight to know he's going to be in business 50 years has a different makeup than I had."

Looking back now, though, it's not hard to see how Kum & Go lasted five decades and counting, given the combination of Krause's entrepreneurial spirit and insatiable desire to be successful, and the late Gentle's retailing and merchandising expertise.

Sure, in the beginning, fears of bankruptcy and failure would creep into Krause's mind every day, but he always looked ahead. "I was so excited and passionate about the business, and the success we were having, there was no going back," he said.

Passionate People
Like many successful leaders, Krause's ambition and drive started at an early age. He left home when he was 16 to work as a hired hand on a farm, paid his way through schooling and was the first in his family to graduate from college. "I remember being a senior in college and saying to myself, "Krause, you've had all the experience you need being poor. Now, you just have to go and outwork anybody who gets in your way.'"

That mantra remains instilled in him, and is backed up by his belief that "for every hour you're up and your competitor is still in bed, that's the equivalent of two hours."

The same get-up-and-go attitude has been adopted by his children, all of whom began working for Kum & Go while in elementary school and continued on and off in various roles while pursuing higher education. Today, three generations of the Krause family are leading Kum & Go into a future that is challenging, but ripe with opportunities.

Krause, now chairman of the company, is still very involved in the day-to-day operations. Youngest son Kyle, who joined the business full-time after college, serves as president and CEO, while older brother Kevin returned to Kum & Go in December 2007 as senior vice president of marketing, after 10 years managing a minor league baseball team in the Quad Cities area. (Krause's daughter Kate owns a boutique in Chicago.)

CSNews recently had the opportunity to sit down for exclusive interviews with all three generations to learn the secrets behind Kum & Go's success and longevity. While much has changed over the last 50 years, one thing that hasn't is the importance the chain's leaders place on hiring and retaining "good people" who possess the same passion they do.

"The marketplace continues to get more competitive. You have to find a differentiator, and for us, it's our people. We've got associates and managers who are truly passionate about the business," Kyle said. Kum & Go's retail strategy boils down to having better people than the competition and delivering better customer service.

For this reason, the company uses a more rigorous screening and hiring process than most other convenience retailers, and its procedures are the focus of continuous improvement.

"Everybody who applies for a job doesn't want to deliver the level of customer service we do. It may not be in their DNA to want to go above and beyond," said Kyle. "You can try and create an environment in which they want to, where they have a passion for the customer and the business we're in, but [that desire] has to be within them."

Since its founding, Kum & Go has always been adamant about customer service, and still preaches that emphatically, Kevin noted. With every transaction, the retailer strives to deliver the "Ideal Customer Experience," referred to internally as I.C.E.

"We focus on developing that relationship between the consumer and our associates. We want the customer to think of us as 'their Kum & Go,'" Kevin explained.

Recently, Kum & Go brought in an ethnographer, conducted store intercepts and an online survey that found it is achieving that connection. "All three concluded that we are viewed as friendly and a place [customers] feel comfortable coming to," Kevin said. "We found our consumer tends to look for that rapport with the associates. They like that interaction more than having just a quick in-and-out transaction."

To maintain a constant loop of customer feedback, the company six months ago rolled out a net promoter score (NPS), whereby customers can grade Kum & Go on every transaction. A message on the bottom of each receipt invites shoppers to go online, and provides them with a code. Hundreds of thousands of responses have been received to date.

Krause compares Kum & Go's approach to customer service to a doctor's approach to medicine. "Doctors constantly look for new and better ways to save patients. We constantly look for ways to improve how we treat people, how we please customers and maintain the level of service they've come to expect from Kum & Go. I.C.E. is us saying 'We're going to treat every customer like royalty every time,'" he said.

Evolving With the Times
Ideal Customer Experience doesn't only apply to the way customers are treated, but also entails having the right products at the right prices with the right promotions.

"We recognize that we have to be different things to different consumers," Kevin said. And to do this, the retailer is targeting several areas to meet consumers' varying needs:

Kum & Go strives to be "first on the street" with new product introductions;

The company hired a product development manager specifically for the role of private label; new additions to its already successful proprietary assortment include its own battery, soda line and new sunflower seed varieties;

In response to the recession, stores debuted an everyday value line in the fourth quarter of last year; among the included items are a case of private label Hiland water priced at $3.99, and two regular candy bars for $2;

The focus is on foodservice more than ever before, and the chain wants to gain consistency across its stores by developing a core foodservice set. Stores are being placed on a food pyramid according to the space they have available and their customer base, and menu items are being assigned to the various tiers; and,

Going after its core 18- to 34-year-old demographic, the retailer is utilizing viral media such as Twitter and Facebook to connect with consumers and build customer count; an electronic component is built into every promotion.

These initiatives are just a few of the changes underway at Kum & Go, where constant fine-tuning is an integral part of the culture. Company leaders say the 50th anniversary milestone is a testament to the organization's ability to evolve with the times.

"Just as there are no two snowflakes alike, there are probably no two identical Kum & Go stores because we're always looking for ways to improve," Kevin explained. "We believe there is always an opportunity to ask 'How can we make this better?'"

The company is so serious about change that a pyramid -- the mathematical symbol for change -- sits on the desk of every senior manager. It was a gift from Kyle, whose management style is more analytical and process-driven compared to his father's style.

He is a firm believer in Six Sigma, a business management strategy whereby each project carried out by the organization follows a defined sequence of steps and has quantifiable financial targets, such as cost reduction or profit increase. Kum & Go has a Quality Process Improvement (QPI) department responsible for upholding these principles.

Before, the company tested many different things, but found it difficult to quantify the impact. Now, the chain still conducts tests, but with a better process behind them.

"We approach opportunities differently than we did before, with a lot more data. We study them in a better way. You can go out and test something, and the weather might change, gas prices change or roads may be under construction. There's a lot of noise you have to shift through to get to the root of what caused the change," Kyle said. "Now, we're able to sort through that noise better. We've always been good at tracking our numbers and performance, but our QPI mentality goes beyond that."

QPI touches every facet of the business, from the way credit cards are processed internally to how the store's restrooms are cleaned. Opportunities are brought forth by grassroots teams in the chain's markets, as well as teams at the corporate level.

Is there such a thing as too much change?

According to Kyle, not as long as one has a manageable model for change. "You have to select which changes are most important, and then stay focused on those," he said.

For Kum & Go, growth is one of those major focuses. Under Kyle's leadership, the company's store count continues to climb, as the chain aggressively pursues acquisitions and new builds. Holding true to its vision statement -- "To profitably grow Kum & Go, creating opportunities for associates and shareholders to realize their personal and professional goals" -- the retailer is building between 20 to 25 new stores a year, and most recently, completed the purchase of 37-unit Cody's Convenience Stores.

"Prior to me becoming CEO, we tended to be more opportunistic in our growth. If an opportunity popped up, we would do it. But now, we've created a more concrete strategy and growth plan," Kyle said. "The marketplace is getting more competitive, and you have to grow your business to create value. People want to work for growing companies, so they know there will be opportunities for them to advance."

Stay the Course
Looking ahead to the next 50 years, the Krause family doesn't foresee Kum & Go veering too much off the path that's taken the business this far. They believe the basic foundation of having great people in the stores and on the corporate side will continue to make the company successful and viable for many years to come.

"We will continue to take care of our people and make sure they know we value them. We'll continue to grow, be privately owned, be multi-generational and we will continue to change, not knowing what we'll look like in the next 50 years," Kyle said.

Kum & Go has always been managed from a long-term view, and that will not change. Private ownership allows the company to make decisions from a multi-year perspective since it's not trying to hit quarterly numbers or ramp up the business to sell.

"We do things that may not have a great immediate return-on-investment, but make sense for the long-term growth of the business," Kyle explained.

After all, his desire is to keep growing Kum & Go so that his children, who range in age from 24 to 13, can one day follow in his footsteps as he did in his father's.

"I hope out of five, some decide this is for them," he said.