Fewer cigarettes, more fruits, veggies at tobacco stores

A Wisconsin-based convenience store chain is de-emphasizing cigarette sales and instead focusing on fresh and prepared foods at its tobacco shops in the Des Moines metro and across Iowa.

Kwik Trip Inc. has started transforming its Tobacco Outlet Plus stores into Kwik Star Express markets that will feature fresh fruits and vegetables, baked goods, fresh meat, sandwiches and entrees. The transition will take a couple of years, as the company looks for new locations for its express markets, with room to add fuel pumps.

The Tobacco Outlet at 3019 SE 14th St. in Des Moines has added some of the new products — bread, milk, bananas, potatoes, eggs and onions — grocery basics, said Robert Nichols, store manager. The store still sells tobacco and offers cigars in the walk-in humidor, but the cigarettes are behind the counter, making the store accessible to under-18 customers, he said.

Kwik Trip is joining the convenience store industry trend of relying less on cigarette sales, once a top seller. Locally based chains such as Casey’s General Stores Inc. and Kum & Go are building bigger stores and carving out more space for pizza, sandwiches, doughnuts, breakfast sandwiches, salads, fresh fruit and more.

Kwik Trip — which goes by Kwik Star in Iowa so it isn't confused with convenience store chain QuikTrip — is finding success with groceries.

“Tobacco products are not part of the future,” said Hans Zietlow, director of real estate for the family owned business based in La Crosse. “Beer, tobacco, potato chips, that’s the old concept of convenience stores. We’ve become more of a fresh market.”

Following 11 years of declines, overall cigarette sales in the United States were static in 2015, according to Euromonitor International, a global market research firm. At convenience stores, cigarette and tobacco sales account for about 36 percent of sales, excluding fuel, industry associations report.

Kwik Trip operates 18 Tobacco Outlet Plus stores in Iowa, including five in the metro that will be converted to Kwik Star Express markets in the next four years, he said. Most will be moved from strip malls to stand-alone buildings that will each include a handful of gas pumps.

Zietlow said the company also is planning to build full-sized convenience stores in the metro and is close to sealing a deal on an existing convenience store near U.S. Interstate 35/80 that it will convert to a Kwik Star.

The larger, newer Kwik Trip/Star stores top 7,000-square feet, at least 2,000-square feet larger than the most spacious Kum & Go or Casey’s. The grocery and prepared food sections have more expanded offerings than the express markets.

The company is looking to bring about six full-size convenience stores to the Des Moines area, in addition to the converted tobacco stores.

Kwik Trip's aggressive growth plan is to open 50 stores in the next five years, adding to its stable of 532 stores, Zietlow said. That will be a combination of convenience stores and market express stores.

Kwik Trip is looking to tap into a customer base that is seeking food staples, prepared foods and quick in-and-out service to accommodate their busy lives. Bananas, potatoes and onions each cost 38 cents a pound, all 20 cents a pound or more below grocery store prices.

The company can keep prices low because it bottles, bakes and ships products daily from its 120,000-acre campus in west-central Wisconsin, Zietlow said.

Kwik Trip processes its own milk and other dairy products like yogurt, ice cream and orange juice in 150,000-square-foot dairy under the brand name Nature’s Touch. Bread, doughnuts, cookies, muffins and bagels are made in 212,000 bakery under the Kwikery Bake Shop brand.

And all of the Kwik Trip/Star Kitchen Cravings sandwiches, salads, wraps, pizza and other prepared foods are made fresh daily in the company’s 65,000-square-foot commissary. The warehouse covers about 360,000 square feet, which includes a temperature-controlled room that ripens bananas and other fruits before being sent to stores.

“We sell tons of bananas. They come in green, and we put them in the ripening room so they can go out to the stores just at the right ripeness,” he said.

Zietlow, 56, said plans are in the works to build a $120 million bakery to expand offerings and accommodate new stores. Kwik Trip uses a fleet of about 300 semis to make daily deliveries to all of its stores in Wisconsin, Iowa and Minnesota, he said.

Having its own production facilities also allows Kwik Trip to sell groceries and prepared foods at cheaper prices, eliminating the middle man, Zietlow said. "Milk for example, we say goes from cow to store in 24 hours."

Casey's General Store executives came to see the Kwik Trip operation, which has been in place for decades, Zietlow said. The vertical integration system is a key to the company's success, he said.

“Kwik Trip is extremely competitive,” said David Livingston, a Waukesha, Wis.-based grocery store analyst. “They sell bananas for 38 cents a pound, potatoes for 38 cents a pound, onions for 38 cents a pound. They also are getting into high quality meats, not a lot of them, but a good selection.”

The company also offers promotions for gas discounts and other coupons to lure customers to the store, Livingston said. “They are knocking the crap out of the competition,” he said.

Company president Don Zietlow, who is Hans Zietlow’s uncle, said employee benefits include 40 percent pretax profit-sharing, and employees who work 20 years with Kwik Trip get four weeks off with pay, on top of their normal vacation, Don Zietlow said.

“Either part-time or full-time, clerk or store leader, they deserve the time off,” he said.