In the Lead: Taking on the EV Challenge

How Kum & Go is aggressively exploring the EV landscape.

 

By Keith Reid

Kum & Go is a fourth-generation, family-owned convenience store chain that was established in Hampton, Iowa, in 1959 and is part of the Krause Group family of businesses. The company operates over 400 stores with over 5,000 associates in 11 states (with a planned expansion into an additional three states). Krause Group is dedicated to sharing 10% of all profits with the communities it serves.

Kum & Go has a diverse fuels offer that includes the typical three grades of gasoline, plus E15 and E85. It also provides a premium “Xtreme Diesel” in conjunction with the additive provider Power Service. DEF supports clean diesel technology, and commercial customers also can access compressed natural gas. Kum & Go’s branded fleet card offers up to seven cents per gallon off at Kum & Go locations.

The Krause Group also includes the fuel-hauling operation Solar Transport, which supports retail and commercial customers.

The company is also out in front exploring how to address the growing electric vehicle market. It is a member of the Fuels Institute and a voting member of the Fuel Institute’s Electric Vehicle Council. Kum & Go offers multiple types of charging stations for the growing EV market, including universal EV chargers and Tesla Supercharger stations. We spoke with Brad Petersen, Kum & Go’s director of retail fuels, on how the company is approaching the EV challenge.

 

How long has Kum & Go been pursuing a formal EV strategy?

We flirted with Level 2 chargers in the early 2000s, but we didn’t have a real plan or strategy around it. Our formal strategy started around 2018. We were planning on entering the EV space with DC fast chargers, and since then, we’ve just continued to elevate our goals and our strategy as we’ve continued to gain traction and confidence in this space.

 

Offering charging in the early 2000s was ahead of the curve. What prompted those early explorations?

It was the hybrid models that were coming out at that time. The chargers were free and low kilowatt.

 

How much “pull” is there from your existing customer base? Are the chargers occupied?

Obviously, EV adoption and usage is growing but at a relatively slow pace. We’re deploying DC fast charging, both third party as well as our own, in quite a few states. Colorado has our highest adoption, and we’re seeing growth there that is comparatively significant. That is particularly the case in the Denver area. More broadly, we feel that’s going to take a considerable amount of time before we see significant broad penetration. And a lot of that will depend on which party is in is in power and what legislation gets passed.

 

What prompted Kum & Go to pursue both an in-house and third-party approach?

Like everyone, we’ve been learning by trial and error, using both third-party and in-house solutions. We’re trying to understand not only what is the best solution that works for us but also that meets customer needs. There are pros and cons to both approaches. With third party there is little to zero capital investment, and the partner manages all aspects of the charging. However, we’re limited with branding, and we’re limited with access to customer data—the entire customer experience. The third party owns all that. We also see little to no EV revenue. We’re purely using that as a traffic driver for inside sales—capture those customers to use the chargers, and then get them in the store.

With the in-house approach it’s inverse. We own the chargers outright, so we have full control over the branding, data, customer experience, and we can gain the revenue. The challenge is the significant capital investment both with the DC fast chargers and the internal resource capacity.

 

How does charging fit in with the rest of your fuel offers?

Our main goal is we want to be inclusive for all our customers. We’re going to have traditional fuels in our space, and we’re going to continue to build sites with gas and diesel. We have no plan to pull back from traditional fuels currently.

When we’re building new sites, we are looking at whether the site is currently or likely to be a good EV location. And, since 2020, we build our sites with conduit underneath the concrete in preparation. That way, if we add EV charging, we don’t have to tear up the concrete—we already have that in place. It’s just a low-cost way we can plan for the future.

 

Do you monetize charging?

With third parties involved, it’s managed by Tesla or Electrify America, and we don’t deal with that. But with our own, we’ve been playing with it for several years and we’re continuing to learn. We do charge, and we try different scenarios. We’ve tried charging by the time spent in the parking stall, or you can charge by a certain cap of kilowatt per hour. We’ve come to realize that charging by a typical kilowatt hour is the most simplified and understandable for the customer. It’s the most comparable to how you get charged with liquid fuel.

Our rate depends on what the demand charge is. (A demand charge is an individual commercial-related fee from the electric utility based on the peak electrical demand at a site during a month.) The demand charges from these utilities can often make the investment unprofitable. We have some sites where our price is probably 25 cents per kilowatt hour. We do have a certain area where the demand charge is high, so we need to charge higher just to break even. We’re lucky that we’re in areas where we don’t see extreme demand charges, like those found in the Southeast—Florida or Georgia. Some of those are just crazy, and retailers in those areas have a hard time deploying fast charging effectively.

 

Do you market and support the program?

We haven’t done a lot, but we are working on utilizing the brand and marketing around EV. We do know that most EV customers typically preselect where they’re going to charge. That is especially the case with longer trips. It is a different segment of customers, but ultimately the overall experience is similar. They still need to use the restroom. They still need food. They still need to stop to get their drinks.

We offer free Wi-Fi at all sites, so they’re going to get that. Those amenities will entice where they want to stop. Then, just as with liquid fuels, we provide clean restrooms, safe and bright sites, fresh food offerings, etc. Customers are going to be there for longer periods of time. It’s not, fill in five minutes, use the restroom and off. We know that they’re going to be there on average 30 minutes.

 

Are they using that time to take advantage of the amenities—and profit centers—in a profitable manner?

This has been a big question for all of us. We’ve conducted several in-house studies looking at this, to better understand these customers. As I noted, our average time is right at 30 minutes, and we have seen a higher than average in-store conversion among EV customers and the opportunity to have these customers purchase more inside, as well.

 

Any final thoughts?

We’re preparing for the right infrastructure plan. We’re trying to participate in state- and federal-level programs to take advantage of these dollars coming down the pipeline. We just talked to several states last week to be ahead of the game. These are good opportunities.

I also think we’re fortunate that the utilities haven’t started to be involved yet with placing DC fast chargers. But it is a concern. If public entities are applying for these state and federal grants, that’s obviously going to be taking from c-store opportunities. We know there’s going to be grocery and Walgreens, CVS—that type of player—that’ll be fighting for these as well. And that’s going to take some share. But we’re just not sure if these utilities are going to be trying to apply as well.

 

Keith Reid is editor-in-chief and editorial director of Fuels Market News. He can be reached at kreid@fmnweb.com.