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Saturday, February 9, 2013

Convenience Store Chain's Success Comes and Stays

Kum & Go builds 43 stores and hires 800 new employees in 2012
Source: Des Moines Register
By Patt Johnson

The line of cars waiting for free gas at a new Kum & Go convenience store in Colorado Springs last fall did more to advertise the West Des Moines-based chain's debut in the area than billboards and other ads.

Kum & Go entered the new market with a gift for new customers, a very Iowa-nice thing to do and one reason for its continuing success.

The 54-year-old company is coming off a banner year of growth. Kum & Go built 43 stores in seven states last year, doubling its old record of 21 stores in 2009. Employment grew by 800 workers. Revenue topped $2.8 billion, up 367 percent from 2003, when Kyle Krause, the company's chief executive, took over the homegrown business from his father, company co-founder W.A. Krause.

The growth has come from the fuel pumps, which offer diesel, ethanol blends and unleaded choices, and from inside the store, where fountain drinks, cold beer, fresh sandwiches and pizza by the pie and slice have helped boost sales.

The company also forged into new markets, such as Colorado Springs and Little Rock, Ark., building 16 stores total.

"We'll continue to go into new markets," said Kyle Krause, 50. "But we also want to be strong in the markets we're in."

The end goal is not necessarily to be the biggest convenience store chain. "We want to be the best," he said.

The convenience store industry is a $680 billion-per-year business in the United States, with more than 149,000 stores nationwide in 2012, according to industry reports. The largest company is 7-Eleven, which has almost 19 percent of the market share.

Standing out

Companies such as Kum & Go and local competitors Casey's General Stores and Quik Trip stand out among an industry that is mostly made up of small mom-and-pop stores.

Kum & Go has differentiated itself from the pack of smaller convenience stores with its racks of chips and snacks and coolers with canned and bottled drinks, as well as a plan to go big.

Two years ago, the company began constructing spacious 5,000-square-foot stores that are twice the size of its old ones. It also increased the number of fuel pumps from four to 10. The extra space inside the stores allowed the company to ramp up fresh food offerings by adding full kitchens and to expand beer, wine and other beverage options. Stores now have a growing selection of craft beers, for instance.

"We've really made huge strides in what we do in food in our new format store," Krause said.