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Which midwestern c-store chain, with its own dairy and ice plant, and great name recognition, is headed by industry pioneer John Hansen?
Not long ago, the answer would have been La Crosse, Wis.-based Kwik Trip Inc., the company Hansen founded almost 40 years ago. Today, three years after selling Kwik Trip and forming Nesnah Ventures LLC with family members and coworkers, Hansen is working his magic on Sterling Milk Co. (now Sterling Stores LLC), which operates 26 stores in Toledo and northwest Ohio.
"Sterling had the dynamics we'd hope to have in a new company — stores, dairy, ice plant," Hansen said "It was in a well-populated area, in the kind of environment we were used to working. It was outside our non-compete area [with Kwik Trip] and we saw a lot of upside potential."
Nesnah Ventures' formula — a potion of high standards, aggressive growth plans and employee empowerment, mixed with a hefty emphasis on integrity and honesty — has already had a rejuvenating effect on the 70-year-old dairy and retail company, acquired just over a year ago after an 18-month, 11-chain, seven-state search for a c-store business. Under the direction of President Brian Koenig, whose 17 years of industry experience includes time at Copps, Shopco and Kwik Trip, sales have grown "significantly."
"We are creating a Sterling experience, for our customers, our coworkers, our distributors and our other vendors," Koenig said. "We want people to take a look at Sterling as an overall experience, not just as a convenience store to shop at."
Soon, there will be many more places to have that experience. For the next several years, Sterling plans to open eight to 10 stores and rebuild three or four more annually.
"Within four years, we intend to have more than 100 stores. We believe we can accomplish this through acquiring good existing stores," said Garry Hayes, president of Nesnah Ventures, based in Holmen, Wis. "This has been a challenging industry for the last few years, but we are committed to growing Sterling."
Analysts who see an industry oversaturated and suffering from competition outside the channel don't concern Hansen and company. "I think the market is underserved — in service, in cleanliness, in value," he said. "There are many stores in our line of business, but not many offer what the customer wants.
"We don't worry about what everyone else is doing. We only control our stores, our people, our mission and our values. That's it."
Koenig calls the growth strategy "a lofty goal, an aggressive goal," but said the chain is a strong base from which to spread.
"The bigger we get, the better off we will be," Koenig said, noting the Wauseon, Ohio-based company is targeting Northwest Ohio and possibly Indiana for expansion. "Our overhead or structure won't really change. We'll make better use of the people we have in place. We count on automation and technology to support our growth."
In the last year, the small chain has implemented a new point-of-sale and backroom solution, and has verticallty integrated by opening a distribution center, which handles all of the chain's groceries, health and beauty products, salty snacks, automotive items, film, batteries and candy. A new foodservice commissary produces sandwiches and cookies, which the chain distributes to its stores, along with ice and dairy products.
"We've always believed it was important to be self-sufficient," said Hayes, who has worked with Hansen for 29 years. "We are better able to control our presentation and quality to retail customers."
Inside and outside, stores were repainted and lighting upgraded to create a "CBC" — crisp, bright and clean — environment. "We wanted the stores to be more inviting," Koenig said. "This was not a huge investment, but we noticed right away more female customers."
Those ladies may also be drawn to Sterling's new merchandising strategy. The chain has repositioned itself as a "value alternative" to other c-stores. "We have Sterling Staples — bread, milk, orange juice, bananas and sandwiches," Koenig explained. "In a nutshell, we offer grocery items, but we carry them at grocery-store prices every day."
Bananas, for instance, are tagged at 29 cents a pound. (The stores also offer a limited supply of apples.)
The Nesnah team also zeroed in on Sterling's well-regarded dairy products. Milk has been moved from the back of the stores to the front, in the cooler's first position, and priced as the best deal in town. "In the past, Sterling focused on the wholesale side of the dairy business," Koenig said. "While we appreciate the wholesale customers, we want to focus on our own products in the stores."
To strengthen its ability to offer high-quality values, the chain is looking to expand its line of proprietary products beyond the current milk, juice, ice tea and sandwiches. "We are looking at bread, nuts, chips," Koenig said. "With 26 stores, that is not feasible. At 100 stores, it's something to take a look at."
The chain is considering the benefits of having its own bakery, too. "It's a long-term goal, but so long-term, we aren't focusing on it now," Koenig explained. "We are focusing on relationships with suppliers and vendors to see what they can do for us."
Another priority has been upgrading the coffee presentation. New coffee islands at some locations feature a broader variety of hot drinks, including cappuccino and steamers. "In the past, if a customer wanted a cup of decaf, he was given hot water and a pack of Sanka," Hansen recalled. "Under the old scenario, female customers, in particular, never came in for coffee."
Outside the stores, Sterling executives prefer an unbranded gasoline presentation. The Sterling name is found on 15 of the 16 gas operations. (The gasoline business at one location, which is branded, is not operated by Sterling.)
"Not to pick on branded, they are very successful," Koenig said, "but we know the Sterling name will be here all the time. That offers consistency we can count on."
People, Needing People
As important as the new product mix, though, is Sterling's take on the role of store and field personnel. Store leaders and district leaders have been given more much responsibility. In the past, for instance, these employees were not allowed to hire or discipline their staffs.
"I'm not at every story 24 hours a day," Koenig said. "Hopefully the store leaders aren't either, but the store is their responsibility 24 hours a day."
Added Hansen: "We are looking for enthusiastic people with honesty and integrity — self-starters willing to try new things. We are passionate about treating our customers how they want to be treated. To accomplish that, you have to empower people, coach them, let them know it's okay to make things happen. If someone loves their work and wants to make the customer happy, they will.
"If employees do make a decision outside the realm of what you think they should have done, you talk to them, but don't crucify them. They made a judgment that is the best judgment at that moment. It's like raising a family, a little step at a time."
While most of the merchandise mix is set at corporate headquarters, based in part on scanning data, managers provide input on products offered. "If there is a local product the manager says is selling well, we'll carry it," Koenig said. "But our scanning will tell us what we are selling and the time of day we are selling it. We're taking that and working with suppliers and vendors on new marketing ideas."
As Sterling employees, dressed in new uniforms, armed with new tools and working under a new set of expectations, began working in the revamped stores, potential employees began inquiring about jobs. "(See "Combining Cultures," below.)
"With our new presentation to the customer — people get excited," Hansen said. "We want to work with people who care and get excited, who share that with the customer. Customers like to do business with people on the move, who are doing something different than the same ol', same ol'."
Sterling's revamped offer is communicated to the buying public in a few ways. "It's all about positioning in the store," Koenig said, "and we focus on our reader boards outside. We also run weekly newspaper ads and have billboards throughout Northwest Ohio."
Now, the Sterling plan calls for delivering on promises and continuous improvement. "People see through lip service very fast," Koenig said. "We know we are only as good as our weakest link. We have to do what we say we are going to do, and let our coworkers, customers and suppliers judge whether or not we are doing it."