C S P September 2012 55

WAWA’S OCEAN VIEWChain seeks clearer competitive waters with a new format in Florida

By Samantha Oller and Melissa Vonder Haar || soller@cspnet.com and mvonderhaar@cspnet.com

When inspectors from the

city of Orlando’s permit-

ting services department

visited Wawa Inc.’s first Florida location,

they were momentarily confused.

“This is a restaurant,” one of them

said. “We need some other people to

come in here, because we don’t have the

right people.”

The inspector’s reaction was music to

the ears of Dick Wood, chairman and for-

mer CEO of Wawa, who now in the twi-

light of his career has seen the company’s

extraordinary evolution from a conve-

nience store specializing in foodservice to

a casual restaurant lined with c-store fare.

“It’s very hard when you go to a new

territory like that to convey the impres-

sion that you’re a gasoline retailer selling

restaurant-quality food,” he says during

an exclusive interview with CSP. “So the

design of the store has gone into that:

When you walk into the front door, you

won’t miss the food aspect.”

In this election season, there has been

a lot of talk from pundits about the need

for politicians to define themselves before

others do it for them. It is a strategy that

Wawa clearly embraces as it seeks to not

only open up a new market in an entirely

different geographic region, but also estab-

lish the “fast casual to go” business model.

As Wawa gears up to build 100 sites

in Florida in the next five years, includ-

ing 20 to 30 in the Orlando and Tampa

markets in the year to come, its senior

management team constantly revisits

the lessons from its last new market, Vir-

ginia. Namely, consumers there were not

familiar with Wawa’s food history, which

began with an in-store deli and groceries

and transitioned into its current made-

to-order hoagie program.

“When you open up a store like Wawa,

foodservice doesn’t shout to the customer

who doesn’t know you,” says president

and incoming CEO Chris Gheysens of the

format that dominates the 600-unit chain.

“We were guilty by association. We put up

big fuel courts with cheaper gas prices.”

And as a result, he continues, “They

were hesitant to come in and expect a

good built-to-order offer.” This is despite

the fact that Wawa is a relative newcomer

to fuel, having introduced it in 1996.

To succeed in Virginia, Wawa discov-

ered it needed to tweak the offer in its

stronghold states to accommodate differ-

ent taste profiles. It also needed to execute

a promotion and advertising strategy to

put foodservice front and center.

That is why, at its new Florida site,

Wawa has placed expansive glass win-

dows at the front to showcase the food,

the made-to-order theater, the specialty-

coffee area; it’s the reason for the in-store

kitchen baking hoagie rolls fresh.

“When you walk into a Wawa in Flor-

ida, there’s no mistake we’re in the foodser-

vice business,” says Gheysens. (See “Wawa’s

Fast-Casual-To-Go Statement,” p. 56.)

That said, Gheysens acknowledges the

challenge is great: “Florida’s a big test for us

of: Can you take this brand, this business

model on the road and make it work?”

How would Wood put the Florida

launch into perspective? “How about:

It’s 1,000 miles from the closest Wawa,”

he says. “When you leap 1,000 miles, you

have to re-create the whole business. You

need a new supply chain, you’re going to

have a different set of vendors, a different

Pho

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C S P September 201256

Wawa’s Fast-Casual-to-Go StatementIn July, Wawa opened the first of its Florida sites, a count it plans to grow to 100 within five years. The company is entering Florida with its newest

format, which emphasizes a food-first offering, complete with built-to-order hoagies, a full-service espresso bar and expansive frozen-beverage lineup.

As CEO Howard Stoeckel says, “The bar’s higher on foodservice, the competition is keener, everyone around you is rebranding, improving, taking their

business to a higher level, so you can’t stand still. We in the c-store industry have to work that much harder to establish our foodservice reputation.”

Glass Act: Large glass windows show-

case the grand foodservice statement inside

the newest Wawa store, and give this site a

decidedly “Floridian” feel.

Check It Out: To bring a greater level of

convenience, Wawa designed dedicated

checkouts in its newest format. The latest POS

from Radiant Systems is more intutive and

allows customers to swipe their card while the

order is being rung up.

Fountain of Youth: Frozen bever-

ages, fountain and prepared food all underline

Wawa’s commitment to fast-casual-to-go.

Coffee Talk: With its success selling drip cof-

fee firmly established, the chain is launching a

full-service espresso-based beverage program.

“It’s amazing the number of people who come

in on a Saturday or Sunday and have nowhere

to go, other than they want their daily routine

and daily fix,” says CEO Howard Stoeckel,

“not in terms of coffee, but the experience.”

At the coffee island, Wawa is constantly rede-

signing the fixture to maximize its efficiency,

examining it and every area of the store from

the perspective of work cells. “We have an

operations engineering group that looks at

it from a customer’s work cell, an associate’s

work cell, arm reach, motion … to make sure

we’re as efficient as possible,” says president

Chris Gheysens.

Hot Bread: Encouraged partly by customer

demand and partly by the appeal of Jimmy

John’s and Firehouse Subs, Wawa included

in-house kitchens in its latest format to bake

hoagie rolls fresh.

Smoothie Moves: The success of

its smoothie program—now including 24

varieties—convinced Wawa that it should give

full-service espresso a second look.

Fueling Up: While food is the focus

inside the store, the new format’s expansive

forecourt shows fuel is an equally powerful

strength. OPIS calls the chain “the efficiency

king” for its ability to command greater

market share with fewer sites. While Wawa

is “watching patiently on the sidelines” to

see which alternative fuel wins out, it has

engineered some flexibility into its new

sites—for example, installing a conduit to

accommodate dryers, compressors and other

equipment required for a compressed-natural-

gas (CNG) setup. On the conventional-fuel

side, it is retrofitting sites for diesel, with plans

to increase installations in the next few years.

An Art and a Science: A Wawa asso-

ciate shows Orlando mayor Buddy Dyer and

a crowd of admirers the technique behind

building a quality hoagie at a special media

open house of the chain’s first Florida site.

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For more photos of Wawa’s first Florida site, as well as pictures from a remodeled urban Wawa, visit www.cspnet.com/wawapics12

C S P September 2012 57

set of customers.”

With all eyes on the Southeast, CSP

sat down with Wawa’s executive team for

an exclusive look at the chain’s planning,

preparation and execution of the next leg

of its growth. What’s clear is that, despite

the effect of external forces—a struggling

economy, local development restric-

tions—Wawa is determined to position

itself in calmer competitive waters that will

ensure long-term growth. This explains

why the company is leapfrogging over the

Carolinas and other intensely competitive

landscapes. And the timing coincides with

a critical juncture internally, as Howard

Stoeckel, CEO for the past eight years,

transitions his leadership to Gheysens to

carry on the game plan. (See “Last Ride of

the Brand Ranger,” p. 44.)

“The new market will benefit all stake-

holders,” says Stoeckel. “It will benefit the

communities that we serve, it will benefit

our associates, it will benefit our vendors,

it will benefit our stakeholders, and the

true owners, the Trust. If you don’t grow,

you can’t grow value.”

Into the Great Blue OceanAbout eight years ago, Wawa’s leadership

team realized that the company was run-

ning out of room.

Its core markets in the five-state swath

of Pennsylvania, Delaware, Maryland,

New Jersey and Virginia certainly had

growth opportunities; in fact, the com-

pany has plans to open 15 to 20 sites in

the mid-Atlantic each year, for several

years, to its current base of nearly 600

sites, and is constantly updating existing

locations. But there was not much room

for the company to really stretch its legs.

Growth north—into Connecticut or

New York, from which Wawa withdrew in

the 1980s—was too difficult from a zon-

ing and permitting perspective. Plus, real

estate was expensive. To the south, heavy-

weights QuikTrip and Sheetz had already

landed in the Carolinas and Georgia.

“We looked east of the Mississippi,”

says Stoeckel, “and found Florida to be

an attractive market that we thought was

underserved, and there wasn’t quite any-

one there like Wawa.”

Then the economy tanked. But

Stoeckel considered the stall a blessing in

disguise; it gave Wawa an opportunity to

take stock of its preparedness for Florida,

along with the state of its brand identity

and balance sheet.

It let Wawa “fine-tune what we will

do eventually,” says Stoeckel. “You can do

this as a privately held company.”

He describes private ownership as

one tenet of Wawa’s “moral compass,”

enabling the company to be more auton-

omous and control its own destiny.

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C S P September 2012 59

“From a long-term perspective, being

private allows us to look ahead and plan

in decades, not every quarter, which is

exactly what we never want to do,” says

Gheysens. “As we look at Florida as an

opportunity, we’re thinking about what

it’s going to look like in 2020.”

Not allowing Wall Street analysts to

control its direction and growth was one

decision for Wawa; not allowing the com-

petition that privilege was another. It is

why Wawa leadership came to embrace

the concept of blue ocean strategy (BOS),

a business methodology that guides com-

panies to create their own market space,

or blue ocean, and make the competition

irrelevant by creating a “leap in value” for

customers.

“You can go berserk if you look at

all of your competitors, and let your

competitors drive your own decisions,”

Stoeckel says. “So I’ve always admired

in the blue ocean companies those that

create their own identity, occupy their

own space in a marketplace, and lay their

own path.”

He cites Southwest Airlines, one of the

few airlines to consistently turn a profit.

The company created its own blue ocean

by staying true to its brand, allowing bags

to fly for free even as other airlines piled

on fees. “Just because another airline does

something, it doesn’t mean [Southwest

does] it,” he says. “That I admire, and I

think that’s the strength of a blue ocean

company.”

The Simplification TablesWawa seeks clear waters in “fast casual to

go,” which enables it to combine the best

of food, convenience and fuel and truly

simplify customers’ lives.

“That’s really the essence of blue

ocean: It’s being able to have a Panera-

type quality product, Wawa-type experi-

ence with that speed and the breadth of

our offer,” says Gheysens. “That’s some-

thing really worth striving for.”

At the new Florida sites, you can see

the material framework of Wawa’s BOS.

Within the 5,500 to 5,600 square feet of

retail space, Wawa provides:

▶ Built-to-order hoagies complete

with touch screens and supplied by an

in-house kitchen area dedicated to baking

fresh hoagie rolls daily.

▶ A full-service specialty-beverage

The Wawa Business Bookshelf“Blue Ocean Strategy: How to Create Uncontested Market Space and Make

Competition Irrelevant,” by W. Chan Kim and Renée Mauborgne (2005).

Advocates for businesses to create their own uncontested markets with maximum growth

potential, or “blue oceans.” The strategy is based on a study of 150 strategic moves—or

“value innovations”—that have taken place in 30 industries over the past 100 years. It is

built on three propositions:

1. Value: how compelling an offer is to customers in terms of its purpose and price.

2. Profit: increasing profits by eliminating or trimming factors that the industry has taken

for granted or on which it has overdelivered.

3. People. How ready and willing employees are to fully execute the new strategy.

“We said we wanted to distance ourselves if we can from our competition and

truly be different from those. Part of the blue ocean strategy is to combine the best

of food, convenience and fuel and really simplify our customers’ lives and help

them have a better day.”

—Howard Stoeckel

“Firms of Endearment: How World-Class Companies Profit from Passion and

Purpose,” by Rajendra S. Sisodia, David B. Wolfe, Jagdish N. Sheth (2007)

Examines how leading companies such as Costco, Whole Foods Market and Wegmans are

delivering “share of heart” to their stakeholders, and in return earning loyalty and endearment.

“So much of our brand is winning the share of heart of our stakeholders: our

customers, associates, vendors, communities we serve. And that’s really what we

stay focused on: winning share of heart. And we do it one customer at a time, one

store at a time.”

—Stoeckel

“Good to Great: Why Some Companies Make the Leap … And Others Don’t” (2001) and “Built to Last: Successful Habits of Visionary Companies” (2004) by Jim Collins

In these well-loved business tomes, Collins examines how good companies became truly

great, and discovers common themes in leadership style, culture and discipline. Introduces

the concepts of the humble, visionary “Level 5 Leader,” finding and placing the right people

on a company’s “bus,” and investing in employees.

“Jim Collins talks about ‘Built to Last’ companies, where you grow your own

people. We’ve always taken great pride in growing our own people.”

—Stoeckel

C S P September 201260

area where customers can order 20 hand-

made varieties of hot beverages, espresso,

chai tea and lattes, as well as 24 varieties

of smoothies and frozen beverages via

touch screen.

▶ Dedicated checkout lanes that aim

to get customers in and out of the site

as quickly as possible, while preserving

valuable “face time” with associates.

In the area of coffee, Wawa is making

one of its greatest leaps in value by adding

baristas to all of its sites. “Getting into

those espresso-based specialty beverages

is a big opportunity for us. It’ll add cred-

ibility and, frankly, we’re just scratching

the surface,” says Gheysens.

If this sounds a little familiar, it’s

because about 20 years ago, Wawa had

introduced full-service baristas at a dozen

sites, and even had a freestanding cof-

fee kiosk. It pulled them out after only a

short time.

“At that point, we were ahead of our

time, and we had not reached the level of

consumer perception in foodservice and

beverages we needed to have to aggres-

sively compete in that business,” says

Stoeckel. “Now that we’ve repositioned

coffee with the new offer and branding,

we’ve come to a new level in foodservice.

Now we’re ready to enter that business.”

Encouraging Wawa that its timing is

finally right is the success of its smoothie

program. Introduced three years ago and

today encompassing 24 varieties, smooth-

ies have signaled to Wawa that customers

accept it as a source for quality food.

In addition to its impressive food

statement, Wawa’s BOS emphasizes sim-

plifying customers’ lives. It’s a purpose

that guides its policies across all catego-

ries. For example, in New Jersey, where

some retailers promote a per-gallon

discount for customers who pay for fuel

with cash—to discourage them from pay-

ing with credit, which carries transaction

fees—Wawa promoted its lack of a cash-

only discount.

“Our core purpose is to simplify the

customer’s daily life,” says Gheysens.

“When you pull up to a gas station and

pull out a card, and say, ‘Oh, it’s 8 cents

more a gallon now?’ That’s not simplifying

anyone’s life, and you certainly don’t feel

like they’re on your side as a customer.”

Consider loyalty, in which Wawa is

conducting a small pilot. Here, too,

simplifying the customer’s life has deter-

mined the pace and form of the offer. “It

really is about being clean, fast, friendly,

great quality food and experience, to

drive that 100% of the time for every

customer and visit,” says Gheysens. “Any

card, any loyalty program—they’re a little

bit clunky in our estimation, so we’ve

waited for technology to catch up a bit. I

think we’re almost there.”

The eventual loyalty offer will likely

not be a discount program designed to

boost fuel volumes or store sales, Ghey-

sens says. Instead, its core purpose is to

help Wawa better know its customers:

what they are buying, when, their prefer-

ences and how the company can adjust

its strategies to better serve them. “That’s

the value we see,” he says. “But we’re being

cautious on this. We do not want to mess

with the brand, and we don’t want to

mess with the experience.”

“Once you begin down that path, you

can’t retrench,” agrees Stoeckel. He cites

the business book “Firms of Endearment,”

which profiles companies that have won

share of heart, which became share of wal-

let. (See sidebar on p. 59.) “So much of our

brand is winning the share of heart of our

stakeholders: our customers, associates,

vendors, communities we serve. And that’s

really what we stay focused on. And we

do it one customer at a time, one store at

a time.”

While Wawa has made foodservice a

driving element in its BOS, this doesn’t

mean it has given up the center of the

store. “The key to success will be to

continue to grow market share and key

convenience categories,” says Stoeckel.

“We’re not going to give that business

away.” Wawa dominates its competition

in number of ATM transactions and

embraces tobacco and gasoline as traffic

drivers, he says.

Stoeckel acknowledges that competi-

tion from c-store retailers and other chan-

nels is especially fierce, and that it is tough

to differentiate in that part of the store.

“We think we can best differentiate our-

selves with the overall brand experience,

through our culture and people,” he says.

“But beyond that, where we can create our

own blue ocean is really in the foodservice

side of the business, and that’s been our

legacy, that’s been our history.”

Ready, Set, GoSo much of the story about Wawa’s

growth in the past two decades has been

about getting the timing right. From

introducing a full-service espresso offer

to entering a new market, the company

has accepted misfires and delays—as frus-

trating as they can be at the time—as a

long-term positive. This is especially true

of its delayed entry into Florida.

“We’ve crystallized our vision in terms

of what we want to be longer term, and

we used the opportunity to really look

at the future, look at where we were

headed, and developed a much more

“Our core purpose is to simplify the customer’s daily life.”

C S P September 201262

motivational and solid game plan than what we had before,”

says Stoeckel, who points out that had Wawa built the new stores

a couple of years ago as it originally intended, they would not

look like the fast-casual-to-go concept of today.

Ned Bowman, executive director of The Florida Petroleum

Marketers & Convenience Store Association (FPMA), Tal-

lahassee, Fla., attended Wawa’s Orlando grand opening and

was impressed by the crowds, the cleanliness of the site, its

“Floridian” feel and its food offer. He says the appeal of the state

to retailers such as Wawa (an FPMA member) is obvious.

“There’s a reason people want to come to Florida: It’s the third-

largest gasoline market,” he says, citing that the degree of competi-

tion has encouraged retailers to up their retail game. Beyond

major and mid-tier oil, key c-store retailers in the Orlando and

Tampa markets include RaceTrac, 7-Eleven, The Pantry and, soon,

Thorntons, which announced plans to open 15 to 20 stores in the

Tampa-St. Petersburg-Clearwater area in the next three years.

While the state’s unemployment rate (8.6% as of press time)

is slightly higher than the national average, it is on a downward

trend. In addition, population growth is on an upward track,

allowing the state to pick up two congressional districts in the

last reapportionment.

“The Florida market is a very competitive gasoline market,

and shoppers today, with the way the economy is, are looking

for convenience and value,” says Bowman. “Our convenience

marketers offer a very competitive gasoline market, and a lot of

them offer pretty good foodservice quality.” He believes Wawa’s

fresh and made-to-order hoagie offer will be its key competitive

differentiator.

“Ninety-eight percent of competition is self-created,” says

Jim Fisher, CEO of Houston-based IMST Corp., a site selection

and development firm. Fisher says Orlando and Tampa may

have several sizable retailers, but he likes Wawa’s edge on the

operational side. “[Wawa] sees the potential of where they can

operate very successfully based on the competitive environment.

If there were strong operational companies in those markets, no

one would go.”

Fisher ponders if and how Wawa would backfill its core

markets, but to succeed in Florida, he says, the company must

bring “numbers”—in terms of a full executive team, as well as

volume. “And they will get them,” he predicts.

On the restaurant side, Wawa has already tussled with Panera

Bread, Dunkin’ Donuts and Starbucks in its core markets. It

expects more of the same in Florida, in the wake of those com-

panies announcing southern expansions. Competition from

“When you leap 1,000 miles, you have to re-create the whole business.”

C S P September 201264

Firehouse Subs and Jimmy John’s, also

with sizable Florida footprints, were part

of the reason Wawa introduced bread

baking in the stores. Indeed, as much as

the fast-casual-to-go model offers Wawa

a chance to ultimately make the competi-

tion irrelevant, it needs to respond in the

meantime.

“We have to compete against a lot of

different competitors—gas, food, tradi-

tional c-store—and you have to be on the

top of your game to differentiate your-

self in each one,” says Gheysens. “[Aside

from] the consumer perspective, there’s

also the real-estate perspective: We’re all

fighting for the same corner.” Wawa is

banking on its fortified balance sheet to

provide flexibility and fuel its offense as

competition heats up.

“When the company gets into a busi-

ness, it gets in it to win,” says Kim Lop-

drup, a Wawa board member and senior

vice president of business development

for Darden Restaurants, whose brands

include Red Lobster and Olive Garden.

He points out that one of the com-

pany’s six key values is “passion for win-

ning.” This is obvious with fuel, in which

Wawa has earned a reputation not only

for its aggressive pricing but also its mar-

ket efficiency; it owned 1.7% of all the

motor gasoline sold in the United States

in the first quarter of 2012, for example,

despite having an outlet share of only

0.28%, according to figures from the Oil

Price Information Service (OPIS). The

organization continually ranks Wawa as

No. 1 in its efficiency rating for gasoline,

defined as gallons by location.

Consider coffee: Wawa ranks as

the eighth-largest coffee retailer in

the United States based on units sold,

despite the fact that it has stores in

only six states, and it averages more

cups of coffee per site than Starbucks

or Dunkin’ Donuts. Also, its merchan-

dise sales are about 10 times the c-store

industry average.

“Like our advertising says, ‘There’s

no place like Wawa,’ ” says Lopdrup. “As

long as we execute our concept well in

the new market, we have great confi-

dence that we’ll be highly successful.” n

“Where we can create our own blue ocean is really in the foodservice side of the business, and that’s been our legacy.”