Casey’s has been bringing a full selection of convenience store items and quick-serve food prepared onsite to towns small and smaller since 1968. With locations in 14 states, Casey’s is about to add a 15th state, Ohio, to that list with its first store in the state located in Cridersville, Ohio.
Casey’s locations are as far north as northern Minnesota, as far south as Arkansas, as far west as portions of Kansas and Nebraska and as far east as Tennessee and Kentucky. When it is completed, Ohio’s store will be the company’s easternmost location.
The first thing a customer notices about Casey’s General Store after its bright lights is probably its gasoline pumps. Every Casey’s has them, and they are an important and literal traffic-builder. Some convenience stores use gasoline as a loss leader and make their money on products sold inside the store. Other chains are so large and purchase in such bulk that they are able to obtain lower prices than smaller competitors. Some gasoline dealers may try to lock in wholesale gasoline prices when they are low.
“Our gas pricing philosophy is that we match the competition – we don’t necessarily lead the market up or down,” Senior Vice President and CFO Bill Walljasper explains. “We try to identify who we believe our competition is and price accordingly with them.”
That philosophy allows each location to price its gasoline aggressively. “There are some pockets of our market area that are a little more aggressive from a pricing standpoint on fuel than others,” Walljasper concedes. “Our gasoline prices generally are dictated by a different pricing strategy at one of our competitors in that area, not necessarily from our purchasing perspective.”
Walljasper points out that gasoline and diesel prices will vary from region to region. “If you think about a gallon of gas, our goal for this year would be a margin of 18.4 cents per gallon,” he says. “In a percentage, you’re talking about 5 to 6 percent margin. So it’s a misconception that retailers make a tremendous amount on fuel. Fuel has the lowest gross profit for our company. Our prepared food contributes more gross profit to the company than fuel.”
More in Store
To a certain extent, Casey’s prosperity is tied to the price of gasoline. “We’re in an environment not just here in the Midwest but across the nation where retail fuel prices have been generally low for the last 12 to 18 months,” Walljasper notes. “Certainly, they are lower than they have been in recent years.”
Lower fuel prices can have several effects on Casey’s. “When retail fuel prices are lower than they have been traditionally, as in the current environment,” Walljasper says. “We typically see an increase in gallons per transaction. Customers have more discretionary income. In some cases, we see an increase in volume inside the store in other products.”
When a tank of gas costs $20 instead of $40, consumers have more discretionary income to spend inside the store. Of course, the inverse also is true. “If you have a high retail fuel price, you generally see a decrease in gallons per transaction, and that can affect sales inside the store, and people may not be driving as much,” Walljasper laments.
A unique feature of Casey’s General Store’s business model is that it self-distributes most of the merchandise and gasoline it sells at its stores. “Approximately 75 percent of the fuel that goes to our stores we distribute on our own tankers,” Walljasper maintains. “We have tankers scattered throughout the 14-state area. They are centrally coordinated from our home office. We dispatch them to certain terminals to pick up fuel and deliver it to stores.” No storage facilities are used.
Walljasper estimates that nearly half of the company’s 252 semi-tractors are dedicated to transporting fuel. The rest distribute the merchandise sold in the company’s convenience stores. Each trailer can hold enough new merchandise for approximately six to seven stores, Walljasper estimates, which are replenished weekly. Because Casey’s distributes nearly all of its own products, it can replenish even a single unit of a product if it is needed. Managers can order merchandise by scanning the bar code of the item with a handheld remote when they walk the store aisles. The remote connects directly to the manager’s workstation.
“If you need one of something or you run out of product at a store and your delivery date is not coming for three or four days, we can also do inventory transfers from other stores,” Walljasper says. “All our district managers and supervisors have company vehicles so they would coordinate that. Generally speaking, our stores get shipments every week on the same day of the week at the same hour, with many of the products being automatically ordered based on the sales history of their stores.”
Automatic replenishment of products is being implemented on more products at Casey’s General Store. “A manager can still override the order if they are aware of special events in town and there is a need to stock up,” Walljasper says.
Casey’s distributes an estimated 90 percent of the products it sells in its stores on its own trucks from its two distribution centers. “We’re one of the few convenience stores in the industry that self-distributes a good share of its products,” Walljasper maintains. “The rest of the products would be direct store delivery products like pop, beer, chips, bread and milk.”
A number of advantages keep Casey’s self-distributing. “If you think about our business model, we locate most of our stores in small rural Midwestern communities with populations as low as 400 to 500 people,” Walljasper points out. “Over 50 percent of our locations are in towns of 3,500 population or less. With that type of demographic dispersal, we want to make sure we get to the stores in a timely manner. So having our own distribution center ensures that it is set up specifically for the needs of our company and not for a wide variety of other companies.”
Another advantage to self-distributing is eliminating the margin of warehouse brokers. “We deal directly with the manufacturers, so in many cases we cut out that middleman,” Walljasper emphasizes. “Because of that, we buy differently than most of our competition. That’s one of the reasons why margins inside our store are higher than the industry average. Our managers have the ability to order singles of products. If they need one can of soup or one box of cereal, they can order that. If we went though a larger warehouse, we may be forced to buy a larger quantity.”
New Distribution Center
Casey’s General Store relies on its two distribution centers, one at its headquarters in Ankeny, Iowa, a suburb of Des Moines, and a new second one in Terre Haute, Ind., that opened in February 2016. “We built outward from our distribution facilities so we’re very efficient in that regard,” Walljasper notes.
The company has been using voice-picking technology for approximately the past five years in its distribution centers. Both distribution centers have a new warehouse management program. The Terre Haute location has an advanced picking system.
Both distribution centers measure approximately 300,000 square feet and have sizable refrigerated sections for the company’s prepared foods, a trend that has been growing substantially in the convenience store industry since the mid-1980s.
“All our stores have kitchens,” Walljasper notes. “We make our pizzas and donuts from scratch. We have competition from fast-food or quick-serve restaurants for certain products.”
Casey’s also offers its customers made-to-order subs and sandwiches at approximately 930 locations on bread baked in the store. Other freshly prepared food offerings include chicken tenders, popcorn chicken, breakfast pizzas and breakfast sandwiches, along with cookies and muffins. Many of the company’s stores are open 24 hours and offer food around-the-clock.
The stores average 2,800 square feet in size, although approximately eight years ago, Casey’s started building stores measuring 4,200 square feet. Some of the chain’s older stores cannot be rebuilt or replaced, but the company is engaged in an aggressive remodeling program of about 100 stores annually in which 600 square feet is added to the existing building.
The additional space usually is allocated for a submarine sandwich bar, an expanded coffee bar and the addition of five more cooler doors and a beer cave. Casey’s also plans to completely rebuild 35 stores this year. “So we’re always trying to get more out of the store base,” Walljasper emphasizes.
Not only does Casey’s seek new products to meet changing customer demands, but the company also experiments with different delivery methods. “Roughly about five years ago, in some of our stores we started delivering pizza,” Walljasper recalls. “Right now, we have about 450 locations that deliver pizza.” Pizza accounts for nearly half of Casey’s prepared food revenues.
The company plans to add 100 more pizza delivery locations this fiscal year, and this past January it launched a new mobile app to order food online and pick it up or have it delivered. “We want to make sure we have an additional avenue for customers to try our business,” Walljasper says.
Walljasper has been with Casey’s for 26 years and has seen the product mix change over time as a function of customer demand and new product innovation. “We have category managers at the home office,” Walljasper relates. “Each has a different area of the store. They are always out looking for new opportunities and products to bring in to the store that might be beneficial and customers may want.” Casey’s also has a kitchen at its home office to test and evaluate prepared foods the company might want to introduce to its stores.
Casey’s plans its future with a rolling five-year plan that is moved ahead one year annually. The new Terre Haute distribution center is bringing additional geographic opportunities to the company. “We now have the ability to expand into Tennessee, Kentucky, Ohio and Michigan,” Walljasper announces. “So we’re very excited about what that will bring in the future.”
Casey’s General Store Awards
Casey’s General Store’s reputation extends far beyond the small communities it serves. Its national and regional honors include:
- This past July, WKDZ-WHVO named Casey’s the best convenience store in western Kentucky.
- Casey’s Chairman and recently retired CEO Robert Myers will be honored as CSP Magazine’s Retailer of the Year in October of this year.
- Casey’s was recently named to the 2016 list of the top 100 most trustworthy companies by Forbes.com.
First in Des Moines
Casey’s General Stores was founded when co-founder Don Lamberti leased a store from his father in Des Moines, Iowa. Nine years later, at the suggestion of his friend and Casey’s co-founder, Kurvin C. Fish, Lamberti purchased the Square Deal Oil Co., which operated a service station and three-bay garage in Boone, Iowa.
After remodeling the location into a convenience store, Lamberti named the store “Casey’s,” after Fish’s initials. When the company enjoyed success, Casey’s built a third store in Waukee, Iowa, which at the time had a population of only 1,500.
The success of that third store made Lamberti and Fish realize that the stores could be successful in communities with a population of 5,000 or less. Today, Casey’s has more than 1,930 corporate-owned locations, and it plans to open many more.
The new Casey’s App is available for customers to order pizza, made-to-order sub sandwiches and appetizers. Casey’s recently completed the implementation of online ordering in all of its stores company-wide. The app is designed to make online ordering more convenient for customers using their mobile devices.
Customers who download the app will have access to special offers and promotions, be able to check gas prices at nearby locations and to play games for prizes. The app also has a feature that enables a customer to easily see the locations of all Casey’s stores between destinations along a planned travel route. To download the app, visit www.caseys.com/caseys_app and follow the instructions posted.