Stores, Storms and Southguard—1988 149 Whether good news or bad news, keep your bankers informed.
150 Susser Holdings To be successful, you have to have your heart in your business, and your business in your heart. THOMAS WATSON SR., FORMER CEO, IBM
Banking on Convenience—Early 1990s 151 Banking on Convenience— Early 1990s Your premium brand had better be delivering something special, or it’s not going to get the business. —Warren Buffett The man who will use his skill and constructive imagination to see how much he can give for a dollar, instead of how little he can give for a dollar, is bound to succeed. —Henry Ford The acceleration of the Sussers’ convenience store enterprise began in earnest in the early 1990s. Opportunities for acquisitions came when some of their competitors needed to raise cash to pay down debt or to exit the industry. They found a willing buyer in the Sussers. To build a foundation for growth, Sam L.’s plan first focused on successfully operating their initial thirty stores in Corpus Christi (26 7-Eleven stores and five $ave-A-$ stores – one closed location). The next step in the strategy was to take on debt to acquire more stores that were available in Lawton, Altus, and Duncan, Oklahoma and Wichita Falls, Texas in 1992. The Sussers had a distinct advantage over other convenience store operators in that they understood both sides of the convenience store operation: retail merchandise and gasoline sales. The Sussers’ convenience store business relationship with Southland and 7-Eleven started in 1988 when they acquired the 7-Eleven stores in Corpus Christi and became a 7-Eleven licensee. Of course, the personal relationship went back further, to when Sam J. and Jodie Thompson were college roommates; as well, the two families’ mutually beneficial business endeavors had seen a great run already with Sam J. running the wholesale gas operations at Southland. But a new chapter had now begun, and it included convenience stores—lots of them. Southland, unfortunately, was struggling during the early 1990s, and the
152 Susser Holdings corporation continued to divest itself of stores in multiple regions. The Sussers acquired those stores that fit their acquisition strategy. Hard Times for Southland… for a While By the end of 1988, Southland had completed a series of divestitures to streamline its operations. Southland sold Chief Auto Parts, the snack foods division, the dairies group, Reddy Ice, Chemical/Food Labs, Tidel Systems, one thousand convenience stores, and related real estate properties. Proceeds from the divestitures, as well as the transfer of royalties from licensees in Japan, went to repay a portion of the $4 billion debt Southland had incurred through the leveraged buyout it underwent in 1987 by the Thompson brothers, who had been spurred, in part, to take this action by the threat of a hostile takeover bid. Southland may well have rebounded by the early 1990s were it not for competition from convenience stores operated by the major oil companies. Although these stores emphasized gasoline retailing rather than other merchandise, they did sell the primary products of convenience stores—soft drinks, cigarettes, and beer. Their sheer number and financial strength changed the nature of the convenience retailing industry. This impact was exacerbated by the decline in the U.S. economy that began in the late 1980s, as well as the world stock market crash of October 19, 1987—also known as Black Monday. On this day, the Dow Jones plunged 508 points, its largest ever single-day percentage drop, after the crash that started in Hong Kong, spread west to Europe, and then struck the United States after other markets had already seen substantial declines. Sam L. was a young financial analyst at Salomon Brothers working on the Southland LBO and remembered the debt was supposed to price that day. Of course, it didn’t, and the closing was delayed about six months and closed with extremely high interest rates that proved to be fatal. In these circumstances, Southland, along with a number of other companies operating convenience store chains, had limited capital to invest in its store base due to heavy debt loads and uncertain economic times. Under President and CEO Clark J. Matthews II, the company began to work
Banking on Convenience—Early 1990s 153 on a plan to restructure its balance sheet. During 1990, Mr. Matthews asked Sam J. to help Southland sell its remaining 50 percent stake in Citgo to Petroleos de Venezuela. In October 1990, after defaulting on $1.8 billion in publicly traded debt, Southland filed a bankruptcy plan of reorganization after securing preliminary approval from its bondholders. The company emerged from bankruptcy less than five months later. As part of the reorganization, Southland exchanged its old leveraged buyout bonds for approximately half of the principal amount of new bonds—which had substantially lower interest rates. In addition, Southland sold 70 percent of its common stock to IYG Holding Company of Japan for $430 million. Southland would, of course, rebound in a big way, and would change its name to 7-Eleven, Inc. in 1999—destined to be the world’s largest operator, franchisor, and licensor of convenience stories, with more than 70,000 stores in eighteen different countries. The biggest room in the world is the room for improvement. —Helmut Schmidt • Updating and Expanding After three years of the Sussers operating their initial Corpus Christi stores, on December 30, 1992, the opportunity to expand surfaced again when 7-Eleven pared down its portfolio and sold to the Sussers’ corporation, Southguard, twenty-seven stores in the Texoma region—the area around Wichita Falls, Texas, and Lawton, Altus, and Duncan, Oklahoma—doubling the size of Southguard store holdings. Key employees were added to the roster during this time. Rocky Dewbre joined Southland as vice president of finance and began restructuring the back office. At the time, many of the store functions were manual, and automation was badly needed.
154 Susser Holdings Prior to upgrading the stores and back office, every store had a close-out process, and paperwork was sent by courier to headquarters where it was keyed into a computer system rental from 7-Eleven. Five days later, the report would be available. This tedious, expensive system and the time delay were not acceptable, and Dewbre dove in to automate the process. Store level accounting was implemented with computers and scanning technology to enable real-time purchase data. New computers at headquarters with new PDI software enabled store reports to be available in twenty-four hours. By April 1993, the system was up and running, gaining the advantage to understand daily the status of the stores’ activity. Kevin Mahany joined the ranks in 1989 and remembers his conversation with the Sussers, who told him, “This is a great opportunity. You’re getting in on the ground floor. We have a vision for growth, and you can be part of a fast-growing company. Join us to blaze a trail.” It was hard for Mahany to see that vision when he looked around the office— crowded spaces, rented desks, understaffed and overworked personnel. All of it seemingly hectic and disorganized. But he saw the passion in the people. They were on a mission… and they had a plan, and he too wanted to be part of that journey. Mahany jumped in and headed up marketing and merchandizing. His experience in his previous job, in which he oversaw merchandizing for one hundred convenience stores from a competitor, was a perfect fit for Southguard. He visited stores, managed product selection, dealt with vendors, and planned promotions. He shared the Sussers’ business philosophy: Focus on what customers want and then deliver that efficiently and cost effectively. Meanwhile, Sam L.’s time was spent in dedication to his three key missions: 1. Improve existing stores by driving business performance, growing same store sales, and creating value in the business through technology, 2. Focus on the wellbeing of the team, especially those who serve customers, and 3. Expand through acquisitions. The lessons he had learned while working at Salomon
Banking on Convenience—Early 1990s 155 Brothers in New York City lent themselves beautifully to the Sussers’ expansion strategy. Rob Darville, an early employee, recounts Sam L.’s focus and business acumen: Sam L. used his knowledge and gut to make decisions. It was not all numbers. Numbers were a tool for analysis, but at the end of the day, he counted on his experience and instincts which were guided by the mentorship from Jerry and Sam J. Another strategic move by Sam L. was keeping the banks informed of the company’s progress, what still needed to be done. This instilled confidence in their banks, and they continued to partner with the Sussers during this work around period. Opportunities continued to be found and seized. In 1994, Southguard acquired seven Ice Box convenience stores in Port Aransas, Texas, and converted these to their licensed 7-Eleven brand. With the plan to continue their aggressive acquisition spree and expand their footprint in South Texas, the Sussers faced a need to refinance the company’s debt. Sam L. worried that assumption of additional debt might be too risky for the shareholders who had already been investors for nearly nine years and would extend their investment horizon for many additional years. Therefore Sam L.’s plan was to provide the original investors an extraordinary 8 to 1 return on their investment, thus minimizing their risk. So, in 1998, Sam L. decided to buy out all investors. Additionally, this would allow the opportunity for future institutional equity partners to invest in the company. In that same year, Susser Petroleum was acquired by Southguard to consolidate the wholesale gas operations and simplify operations into a single entity. Everything was coming together. Now the entire company was on Sam L.’s shoulders. He never blinked. Full speed ahead.
156 Susser Holdings We don’t just sell cokes and beer. We save time. That’s what we do for folks. SAM L. SUSSER
Convenience Stores—An Overview 157 Convenience Stores— An Overview Most people agree that the invention of the automobile forever changed the landscape of America. Besides the development of a network of highways and interstates, gas stations, drive-ins and motor courts, another byproduct that emerged was the development of convenience stores. What is a Convenience Store? Before examining the development of convenience stores, it is perhaps appropriate to define exactly what makes a business a convenience store. A convenience store is a small retail business that stocks a range of everyday items such as groceries, snack foods, confectionery, soft drinks, tobacco products, over-the-counter drugs, toiletries, newspapers and magazines. Some may even sell a variety of hot fast-food items. They are different from general stores or retail shops because they are often in urban settings and are used as a convenient alternative to larger stores. Some are licensed to sell alcohol, or just beer and wine, depending on local laws and location. Some may offer financial or clerical services, such as selling money orders, making wire transfers, sending faxes or making photocopies. Some may have an ATM available for getting cash. Many now offer gasoline or diesel fuel and are located alongside a busy road or intersection. They tend to have longer hours of operation and may even be open 24 hours. Typically, convenience stores charge higher prices than conventional grocery stores or supermarkets because they deal in smaller quantities and specialize in fast, convenient service, which drives up the cost of delivery.
158 Susser Holdings First U.S. Convenience Stores The first documented convenience store opened in 1927 when Southland Ice Company employee John “Uncle Johnny” Jefferson Green began selling eggs, milk and bread from one of 16 icehouse storefronts in Dallas. Uncle Johnny came upon this idea by happenstance. Southland Ice was selling ice to the upper-income residence that lived up on a hill. Uncle Johnny thought the lower income people living down the hill could benefit from this store having a few goods to buy––eggs, bread and the like. So, Uncle Johnny approached Joe C. Thompson, the Southland Ice founder, and received approval for this endeavor. Six months later, Uncle Johnny brought to Joe Thompson a cigar box and laid it on his desk. When Joe opened it, it was filled with stacks of cash. “What’s this?” Uncle Johnny explained, “Well, since you allowed me to sell groceries in the icehouse, here is your half of the profits.” With that, the precursor to 7-Eleven was conceived. Although small grocery stores and general merchandisers were available, Thompson theorized that selling products such as bread and milk in convenience stores would reduce the need for customers to travel long distances for basic items. The Southland Corporation In 1927, an employee of The Southland Ice Company answered requests of his customers by selling bread, milk and eggs from the steps of his ice dock. With that simple idea—giving customers what they want, when they want it—“Uncle” Johnny Green began a 60-year tradition of customer service and innovation that remains the driving force of Southland’s 8,700 7-Eleven stores and other retail units. Southland has never been content to do things “because that’s the way things have always been done.” Instead, as the founder of the convenience store industry, it has led in the development of hundreds of new products and services— around-the-clock operating hours, self-serve gasoline, dairy products and sandwiches from its own subsidiaries, automatic teller machines, and of course “Slurpees,” just
Convenience Stores—An Overview 159 Akron, Ohio, who started a store, Lawson’s Milk Company, in 1939 at his dairy Another early entry into the industry was J.J. Lawson, a dairy owner in • plant. This eventually grew into a chain of stores, mostly in Ohio. Lawson was bought out by Consolidated Foods in 1959, but the Lawson Food stores were common in Ohio from the 1960s through the mid-1980s, selling milk, bread, eggs, orange juice, and specialty items such as deli counter “chipped” style ham and sour cream potato chip dips. When Consolidated was renamed Sara Lee in 1985, the Lawson stores were sold to Dairy Mart, a smaller chain of convenience stores located in Enfield, Connecticut. Dairy Mart renamed the stores and moved its headquarters to Cuyahoga Falls. In 2002, a Canadian convenience store company bought the assets and name of Dairy Mart. Most of the U.S. former Dairy Marts were converted to Circle K brand. It would seem that Texas and convenience stores go hand-in-hand. Maybe it’s because of the great expanse of the state and the number of roads that crisscross to name a few. These innovations and millions of satisfied customers have allowed Southland to build one of the strongest and most geographically diverse store bases in the history of retailing. Soon after that, a random purchase of a totem pole souvenir from Alaska and the placement of it at the front of one of these convenience stores led to the stores operating under the name “U Tote’m Stores” for a few years. The company also began to experiment with installing gas stations at some of the locations. Southland Corporation went bankrupt during the Depression, but was eventually reorganized and put under the control of a board of directors. It became the first chain convenience store in the U.S. and would eventually become 7-Eleven, the largest convenience store chain in the world. In 1946, the franchise was renamed 7-Eleven to reflect the stores’ new hours of operation, 7 a.m. to 11 p.m., which was unprecedented at that time. In another 20 years, some of the stores would begin staying open 24 hours a day. Today 7-Eleven has approximately 70,000 locations worldwide, making it the largest retail store chain in the world.
160 Susser Holdings it. Circle K, another early large company-owned convenience store chain was founded in 1951 when entrepreneur Fred Hervey purchased three Kay’s Food Stores in El Paso, Texas, and renamed them Circle K Food Stores, Inc. He grew the chain into neighboring New Mexico and Arizona, which has been the company’s home base since 1957. By 1975, there were 1,000 Circle K stores across the U.S., and in 1979, the brand went international, setting up stores in Japan. Fortunes declined in the 1980s, and Circle K filed for Chapter 11 bankruptcy protection in 1990. In 1993, the company was purchased by Investcorp, but in 1996, it was acquired by Tosco Corporation, an independent petroleum refiner and marketer. Tosco, in turn, was purchased in 2001 by Phillips Petroleum which merged with Conoco in 2002. As part of the industry consolidation, Circle K was purchased by Alimentation Couche-Tard, a Canadian convenience store owner. The Sussers invested nearly a year trying to buy Circle K in partnership with Blackstone. Sam L. worked with David Foley and was interviewed by Steve Schwartzman, Tony James, and Tom O’Mally prior to gaining their backing. At the end of the day, Couche-Tard offered a higher price, captured Circle K and went on to create another colossal international enterprise with over $25 billion in revenue. Development of the Convenience Store Industry The convenience store concept began grow in popularity in the 1940s. As more families acquired their own set of wheels in the 1950s, a whole new set of businesses developed to meet the needs of these travelers of the open road. With the creation of suburban living, the adoption of the family car and the idea of the American Dream, convenience stores became a necessity because shopping centers and grocery stores were either too far away or weren’t open when people realized they needed to pick up basic necessities like milk and bread. Convenience stores tended to be located near major roadways and thoroughfares, offering passersby the convenience of being able to stop in and get just about anything they needed—quickly—so they could get back on the road toward
Convenience Stores—An Overview 161 their destinations. Most convenience stores were located in warmer climates and had open fronts. The first cold weather convenience store opened in Denver in 1957. By 1961, members of the industry began to feel the need to have an association that would focus on the needs of their particular niche in the food industry. They gathered in Kansas City, Missouri, on August 14, 1961 and formed the National Association of Convenience Stores (NACS). Henry Boney, president of Speedee Mart, was a founding member and the first president of the organization. By 1963, suburban growth had expanded the number of stores, and NACS began to consider branding options. 7-Eleven, by this time, had locations in 250 cities and towns across the U.S. and had opened the first 24-hour location in Las Vegas. The next year, self-serve fueling was introduced for the first time at convenience stores. In 1966, the U.S. convenience store industry first recorded $1 billion sales, and by the end of the decade, the industry had recorded $3.5 billion a year in sales. NACS began releasing industry reports showing sales and net profit data in the 1970s. In the midst of the OPEC oil embargo of 1973, convenience stores also began to experiment with pay-at-the-pump technology. Industry research was done, resulting in advances to assist stores. An example of this was the robbery prevention program developed by 7-Eleven that was implemented in approximately 6,500 stores nationwide.10 By 1984, there were 85,300 convenience stores; ten years later the number had risen to 98,200. In 1987, Business Week did a cover story entitled “Presto! The Convenience Industry,” examining the importance of convenience stores. In 1994, 10 First 50 Years of NACS, www.nacs50.com
162 Susser Holdings NACS began the “Ideas 2 Go” program, featuring industry best practices and retail solutions from convenience store formats. By 2004, the number of convenience stores in the U.S. was documented at 138,205. By 2015, the number had risen to 152,794 stores. The total sales that year was $204 billion. The majority of the stores, 63%, were single-store operators. Texas had the most locations with 15,437.11 Today there are three times as many convenience locations as supermarkets in the U.S.—with the store count doubling in the last 30 years and continuing to grow annually.12 According to a June 2017 issue of Today’s Dietitian, 160 million people—one half of the U.S. population—visit a convenience store in a single day, primarily to purchase gas, food or beverages. Four out of five convenience stores are selling motor fuels. And no matter what the hour, you can feed your nicotine habit, satisfy that craving, gamble away your hard-earned dollar or buy beer to forget your troubles. Ah, life has never been so easy! The Susser family has been intimately involved in both 7-Eleven, Circle K and Stripes. So now, here is their story. 11 A Brief History of Convenience Stores, https://www.readingeagle.com/business-weekly/ article/a-brief-history-of-convenience-stores 12 Barbara Ruhs, “The Retail RD: How Convenience Stores Have Evolved—Nutrition is Good for Business,” Today’s Dietitian, June 2017.
Convenience Stores—An Overview 163 Half of the U.S. population —160 million people— visit a convenience store in a single day. TODAY’S DIETITIAN, JUNE 2017
164 Susser Holdings Leadership is the capacity to translate vision into reality. WARREN G. BENNIS
Changing, Growing, Succeeding—Mid-1990s 165 Changing, Growing, Succeeding—Mid-1990s The journey of a thousand miles begins with a single step. —Lao Tzu I f there is one thing that stays constant in business, it’s that nothing stays constant. And by the middle of the 1990s, the competitive landscape was changing in South Texas. The Sussers knew that they would once again need to adapt if they wished to continue their upward climb. For one thing, in 1994 big-box grocery stores were starting to add gasoline pumps to their locations. The first chain in America to do it was HEB, starting in Corpus Christi and Victoria. Wal-Mart followed shortly thereafter, triggering intense price wars and margin compression. This disrupted an industry that had allowed gas stations to primarily dominate the market, and no one yet knew how much of an impact the big box stores would have on fuel sales. Secondly, some convenience store operators faced ongoing financial problems that generally stemmed both from competitive pressures and poorly run operations, and as such, they struggled to stay operational. As the South Texas business landscape shifted, it was the ideal time to seize opportunities, and the Sussers did just that. propelled the Sussers to move forward and execute their acquisition plans. But Rocky Dewbre recalls how the evolving industry and circumstances in 1995 • before that, they had to evaluate a major threat and the possibility of upcoming losses. “When HEB added their first grocery stores in South Texas, we were worried. Our competitive environment was about to get very tough. If HEB had fuel at every grocery store, we would take a big hit.” HEB was owned by the Butt Family, long-time friends and tennis rivals of “Senator” Sam Susser, Jerry, and Sam J. The elder Sussers warned Sam L. what
166 Susser Holdings fierce and ruthless competitors the Butts were and to “buckle up” and get ready, prepared for a much tough competitor in the fuel business. The Sussers were at a proverbial fork in the road: either be consolidated or be a consolidator. They chose to continue down the acquisition path. Be the big fish, or get eaten by the big fish. —Anonymous First, though, the Sussers began to add fuel stations to their convenience stores. With Susser Petroleum having that skillset and ability already in place, this step was implemented without issue. The company also invested in improving its facilities overall, which meant tearing down and rebuilding some stores and buying land to expand other facilities. In the process, the Sussers had to learn how to compete with lower margins and higher volume against the big-box stores. In the face of competition, the Susser game was to acquire underappreciated convenience stores, build them up with their operational expertise, and grow their success and brand. There’s nothing like a good competitive threat to thrust one into action. And the timing was spot on, especially when it came to Circle K. Circle K—A Brief History I n 1951, a Texan entrepreneur named Fred Hervey purchased three Kay’s Food Stores in El Paso. Rather than keeping the “Kay” moniker, he renamed the stores “Circle K,” which is how Circle K Food Stores got its start. He grew the chain in the southwestern United States, spreading into New Mexico and Arizona first. Hervey later went on to serve two terms as the mayor of El Paso. By the company’s twentieth anniversary, the five hundredth Circle K store had opened, this one in Deer Valley, Arizona, and the Foodservice Division was introduced. Sandwiches were made in the company’s fast-food kitchen. Through the 1970s, Circle K grew its retail network through a series of acquisitions, and by 1975, there were one thousand Circle K stores across the nation. Then in
Changing, Growing, Succeeding—Mid-1990s 167 1979, Circle K entered the international market when a licensing agreement established the first Circle K stores in Japan. The company continued to grow, and by 1984, sales had reached $1 billion. Fortunes declined in the late 1980s, however, as Circle K had grown too fast and had grossly overpaid for acquisitions, as the U.S. economy started to slow down, and Circle K filed for Chapter 11 bankruptcy protection in 1990. Underperforming locations were sold or closed. In 1993, the company was purchased by Investcorp, an international investment group that successfully brought it through the bankruptcy. Circle K still had a respected, popular brand and valuable assets, but they were eager to streamline operations, and they were looking for a partner to help them do this. with over 120 stores was up for sale. They were a long-time fuel customer of the In South Texas, Maverick Markets, a South Texas convenience store chain • Sussers and important to the business. Circle K had 105 South Texas stores, no debt, and now aggressive management hired from 7-Eleven. The Sussers had 30 South Texas stores. Now the Sussers had to consider all the options in front of the company. • Option 1: Acquire Maverick Markets outright. • Option 2: Run the risk that Circle K (or Diamond Shamrock or some other player) buy the stores. • Option 3: Create a joint venture with Circle K to bid on Maverick Markets and eliminate what the Sussers thought would be their toughest competitor. The Sussers’ ace in the hole was the well-earned reputation they had developed as a work-around management and operational company. So Option 3 was the plan selected, and Sam L. began conversations with both Circle K and Maverick Markets. After many months of difficult negotiations, SSP Partners was formed as a 50/50 partnership to acquire the South Texas Circle Ks and the Sussers’ 7-Eleven stores in order to bid as one strong party on the Maverick
168 Susser Holdings Markets. There was one big hitch; 7-Eleven maintained the Sussers’ branding agreement lasted in perpetuity, and the Sussers had to hire a famous plaintiff lawyer, Steve Susman, to negotiate their way out. However, a deal with Maverick Markets eluded them. Oscar Wyatt, the famed Houston oil man, abruptly outbid the Sussers and Circle K, scooping up Erich Wendl’s Maverick Markets chain, rebranding them Coastal Mart, and dealing a blow to the consolidation plan. With hindsight, it was easy to recognize later that the outcome might have been very different if Sam L. had realized the full value of Maverick Markets, which he saw as over-priced. Such an overvalued position was hard for him to accept. Armand Shapiro explains the struggle Sam L. had with paying what he deemed an excessive price: “He struggled with acquisitions and got very nervous about paying too much. Our board helped him understand the price is reflective of the value, but there is no common formula. Sam L. balked at paying the high prices, but sometimes these were needed for better locations and better run stores.” Sam L.’s approach to this kind of acquisition changed over time under the tutelage of his board members, such as Armand Shapiro. But for now, Maverick Markets was out of the picture. Now there were two still standing: Circle K and Southguard. The 105 Circle K stores were merged with the 59 Southguard convenience stores in a joint venture partnership. The Sussers needed this alliance, as their worst nightmare was that Circle K would purchase the Maverick stores without them, holding a strategic advantage that would stifle the Sussers’ market acquisition opportunities. If this happened, the Sussers feared they would never catch up to Circle K.
Changing, Growing, Succeeding—Mid-1990s 169 The partnership’s negotiated conditions were that Circle K stores came free and clear of debt, and Southguard’s 59 locations were converted to the Circle K brand. Southland / 7-Eleven ultimately agreed to a separation deal from their licensee agreement, allowing Southguard to rebrand all the 7-Eleven stores under the Circle K logo. This partnership’s ten-year license agreement came with exclusive first rights of refusal, allowing Southguard to acquire or partner with Circle K locations in the future. This cemented the partnership with Circle K, which would lead to subsequent acquisitions in the future. Capital was needed for this transaction and provided by a Bank One, led by Gina Norris and Norm Bagwell, to establish a much larger line of credit for the company. The Sussers did finally win the day over and eventually bought the lost Maverick Markets. Years later, Coastal Mart (formerly Maverick Markets) stores were acquired by El Paso Natural Gas. When these stores did not prove to be strategic to its business model, and being out-competed by Southguard, El Paso scuttled its retail attempt, and Susser Holdings acquired the Coastal Mart properties in 2001, right after 9/11. It was a nice victory lap for Sam L., even though he still winces at paying two to three times the initial offer that was on the table back in 1995. The new Circle K / Southguard partnership—named Sales and Service Partners (SSP Partners)—thrived. Now with 164 combined convenience stores, Circle K expected the stores under the partnership to improve under the Sussers’ operational expertise. The Sussers did not disappoint and were asked to coach the eleven division managers at Circle K in strategies regarding how the Sussers dramatically improved the Circle K cash flow immediately after the acquisition. Sam L. was just getting his feet wet in the rough and tumble field of acquisitions, where many investors held the prestige of a trophy acquisition to be more significant than the potential to expand its profitability. But Sam L. knew the game from his Salomon Brothers days. He could cut through the clutter to focus on what mattered—building the company by acquiring undervalued assets and keeping a keen eye on improving operations and treating people right. His unwavering focus would ensure the enterprise’s success for years to come.
170 Susser Holdings Armand Shapiro Will beats skill. —Sam L. Susser Winners embrace hard work. They love the discipline of it; it’s the trade-off they are making to win. Losers, on the other hand, see discipline as punishment— and that is the difference. —Lou Holtz It is fatal to enter any war without the will to win it. —General Douglas MacArthur Armand was a confidante of the Susser family for years. By 1992 when the Sussers had turned the losses at Susser Petroleum and thought about merging Susser Petroleum into Southguard, Sam L. wanted Armand to become an independent director and advisor to the family and their enterprises. Armand had all the needed qualities—intelligence, experience, and business acumen. He had run private companies and taken them public; he had horse sense, street smarts, and financial expertise in spades. As well, Sam L. knew Armand would be a helpful buffer between him and his father if the negotiations ever proved to be difficult. He told Armand, “My father will listen to you before he listens to me.” It became a relationship that thrived on its success. Armand’s experience and passion for helping the Susser Holdings held many benefits over the years from the top down and from the bottom up. The Sussers’ board of directors morphed from a kitchen cabinet of family members and inside investors in the early years to a stout board of accomplished, highly experienced, independent representatives. Armand drove much of this evolution of the board of directors over the years. As the board became more organized, it was packed with bankers and investor groups. Armand understood the money men’s overriding value: create
Changing, Growing, Succeeding—Mid-1990s 171 a business plan and raise money. The money men knew how to invest in companies but did not know how to run them. Over time, Armand (and Bruce Krysiak) deftly shifted the Susser board’s make-up to add CEOs of other companies who held operational experience. They understood where the rubber meets the road—the winning formula where strategy, tactics, and execution merge together to create success. Armand and Bruce’s holistic approach was not limited to restructuring the board of directors; in fact, he was just as interested in stocking the shelves as stocking the board. One area in which Armand and Bruce cautioned the company was the product mix in the stores. After all, shelf space is precious and limited. For instance, he knew that tobacco sales were in decline, and this was a trend that was not going to be reversed. So the store mix needed to be readjusted by reducing tobacco products in favor of other items. As well, cigarette manufacturers and distributors had too much control and this limited the company’s flexibility. The product mix in the stores was adjusted accordingly. Sharing the Load Still another of Armand’s contributions was his realization that Sam L. was too involved in the minutia of the company because he wanted to handle everything himself. Sam L. felt the compelling need to oversee all matters, no matter how much time and effort it took, and this simply wasn’t feasible. Armand foresaw the danger in having the company’s leader too involved in micro-managing and not delegating enough. So the board pushed Sam L. to hire more senior managers to operate the company, and together they began to bring
172 Susser Holdings in top talent at a much quicker pace. Bruce urged Sam L. to create repeatable processes that allow him to protect the culture, drive the desired outcome, and know key players throughout the company even though it was no longer possible to personally know every individual or to micro-manage the business. With more operational managers to carry out the day-today tasks, Sam L. could focus on the bigger picture—growing through acquisitions and also building back up other Susser assets. The Sussers could see light at the end of the tunnel, and this time it was not an oncoming train… it was daylight, the dawn of opportunity. Renewed Focus Rob Darville remembers Sam L’s renewed outlook. “Once they turned the corner, and after completing the Circle K partnership, Sam L. focused on convenience store acquisitions and then built back up Susser Petroleum. He was a man on a mission.” His father, Sam J., and his Uncle Jerry were there to help drive the plan forward. Sam J., from his experience as a senior vice president at 7-Eleven, helped create the consolidation strategy whereas his uncle was action oriented and good with vendors and customers. As well, the two elder Sussers were highly engaged with every single major strategic decision, and Sam L. was responsible for planning, execution, and attention to detail. The three Sussers were an incredibly tight team and consumed with achieving their goals. And as often happens, their success begat more success. In 1996, Southguard purchased Circle K’s 50% interest in the SSP venture. Circle K was trying to restructure its financials due to poorly performing stores and mismanagement in
Changing, Growing, Succeeding—Mid-1990s 173 the early 1990s. Seeing an opportunity for further consolidation, Southguard acquired the balance of Circle K’s interest in their partnership. Kevin Mahany recalls the skillful execution of this deal: “Southguard understood the value of these stores and the Circle K brand. Now they had complete ownership of Circle K’s 103 stores in the Rio Grande Valley and Laredo. Their sizeable footprint in South Texas was now under their full control; they could control their destiny. They never stopped after that. It was brilliant.” Southguard continued its strategy of acquisition and consolidation. In 1998, the company acquired ten Ice Box stores on Mustang Island and in Port Aransas, and seven Exxon stores in Corpus Christi to boot. No, they never stopped. There was no reason to. Only those who will risk going too far can possibly find out how far one can go. —T.S. Eliot
174 Susser Holdings Make the most of yourself by fanning the tiny, inner sparks of possibility into flames of achievement. GOLDA MEIR FOURTH PRIME MINISTER OF ISRAEL
Building and Buying—The Late 1990s 175 Building and Buying— The Late 1990s If you can show people how to build castles, make sure you do not neglect building and nurturing your own. —Suzy Kassem Realize building a cobblestone path to your destination requires laying down one stone at a time. —Jeffrey G. Duarte The late 1990s saw the continuation of the Sussers’ expansion plans—with a mix of store acquisitions and a building program under the new retail company structure, Sales and Services Partners (SSP). The company evolved to believe that the way to build a long-term successful business is by utilizing a winning combination of two tactics: build and buy. The exact formula to determine whether to build or buy was based on variables of cost and opportunity. The cost of a new build could run into the $2.5 million range while an acquisition could range anywhere from a $50,000 lease to a $3 million purchase, depending on the location and value of the property. The key was to achieve balance and avoid overextending the company while continuously investing in assets, managing the portfolio, and spurring disciplined growth. On the buy side, after the numbers were run, it turned out that some acquisitions were simply not viable. For example, at one point in 1998, a significant prospect emerged, and the team got to work doing the math and examining all the advantages and disadvantages. After six months spent analyzing the pros and cons, SSP viewed the burden of the price as too onerous. Struggling with plans for how to finance future acquisitions, Sam L. was introduced to Mort Fleischer, founder of Franchise Finance Corp. of America (“FFCA”), a large real estate investment trust (REIT) company owning and
176 Susser Holdings operating real estate that generates income. Mort’s ability to securitize mortgages and long-term debt was based on a model that Mort provided to Sam L. Its fundamental principle was this: Operating Cash Flow divided by other People’s Money (“OPM”) produced an infinite rate return. “Mort’s Model” became one of the keys to unlocking financial hurdles in the future. In 1998, the original eleven outside investors in the Sussers’ convenience store operations wanted to take their chips off the table. After nine years of significant gains, they wanted to realize a return, which is an understandable desire for any investor. Since their initial investment had returned eight times over, it was propitious for them to seek payback. This also would be a smart move for SSP and its growth plans as consolidating the holdings would allow Sam L., as the single shareholder, to more efficiently negotiate with private equity firms in the future. Furthermore, with several significant acquisitions on the horizon, there was a short window of opportunity to get liquidity. Once Institutional Private Equity came in, it would lock up everybody for many more years and increase the risk of the enterprise. The repurchase of the outside equity was financed by debt, primarily from FFCA using securitized mortgages. The closing involved signing thousands of pages in the offices of a giant law firm in Phoenix. It took over 48 hours, and there was a two-hour delay from 2:00 a.m. to 4:00 a.m. in the morning when the “lucky pen” was lost. Sam J. had used one Sheaffer black fountain pen for all the important contracts throughout his career, and now that Sam L. was acquiring a controlling interest from Sam J. and Jerry, he gave the pen to Sam L. for good luck. The pen fell right into the cracks of one of the elegant sofas, and the closing had to stop until it was found at 4:00 a.m. in the morning! The pen continues to be used for every significant acquisition, and so far, it remains lucky!
Building and Buying—The Late 1990s 177 Loading up with Private Equity With plans underway for building new stores, the pursuit of acquisitions was still at the forefront of the Sussers’ strategy to grow the footprint expeditiously. With the original investors now out of the picture, SSP needed to locate new investment money. Fortunately, this did not take long. After a little persuasion and the opportunity to catch the vision, Arena Capital, CapStreet Partners, and Bank of Boston joined in with an infusion of $37.5 million spread out over two transactions. This would seed two major acquisitions in 2000: The former Maverick Markets and convenience stores and dealers from El Paso/Coastal and Tex Mart. A. N. Rusche Distributing Company The 1999 acquisition was made in order to enhance Susser Petroleum’s ability to handle the demand for gasoline at their convenience stores. That year, Susser Holdings acquired Houston-based A. N. Rusche Distributing Company, a wholesale fuel distributor and Chevron’s oldest and largest jobber, adding 185 dealer sites. This invigorated the Susser Petroleum wholesale arm that was currently supplying 35 dealers. Rocky Dewbre moved to Houston to run this business as Chief Operating Officer of Susser Petroleum, reporting to Rusche’s experienced and talented CEO, Jim Boss. Rocky remained the Vice President of Strategy for Susser’s retail operations. Rocky recalls, “A. N. Rusche was acquired because it was a strong wholesale business that produced strong financial returns, despite not having invested in scalable technology. Of note, we needed more volume. We knew that if we could grow the wholesale fuel business, we could move up the food chain and get better volume pricing. This $50 million acquisition was a truly transformative event.”
178 Susser Holdings Rocky’s words are not an overstatement. This acquisition increased the wholesale gasoline business of Susser Petroleum… by six times over. Maverick Markets/Coastal States/El Paso Shortly after completing the 100% debt financed acquisition of Rusche in 1999 and the 100% debt financed shareholder redemption in 1998, Sam L. became aware that two in-market strategic assets were going to be put on the market in short order. After years of struggling with too much debt, he decided he needed to take on an institutional equity partner to help finance the next two acquisitions. Sam L. hired Morgan Keegan to help raise private equity. This was during the “dot.com boom,” and it was incredibly hard to find a private equity firm which was willing to engage with a business that wasn’t an internet story. Of the 50-60 firms that reviewed the Offering Memorandum, one was Arena Capital. They had an operating partner named Bruce Krysiak who had worked with Sam J. at 7-Eleven in the 1980s and was on the Board of SSP in 1995-1996 when Circle K owned half of the Susser’s operation. In years prior, he had worked in the retail industry, serving as President/COO at Circle K, Dollar General, and Toys ’R Us. His career path led him to an executive position with Arena, the New Yorkbased private equity firm, was looking to invest in convenience stores. Although management had turned down investing in the Sussers, Bruce knew better. He told the firm’s management, “I want you to review this company again and reconsider investing in the Sussers. These guys are winners.” With tacit approval from his firm to reevaluate, Bruce called up Sam L., asking him, “You looking for money?” “Always,” Sam L. told him, “We are a company with $300 million in revenue, looking to leverage our size to further scale the business.” “We are interested in making an investment up to $30 million,” Bruce said. Bruce and Sam L. flew down to the Rio Grande Valley to assess current stores and discuss strategy, including the potential hiring of Mitch Telson to serve as an executive recruiter to assist in finding additional talent as the company grew
Building and Buying—The Late 1990s 179 in the coming years. Their discussions continued over the next few weeks, revolving around deep strategic plans. It became abundantly clear to SSP that Bruce would be a valuable asset serving as non-executive chairman. Sam L. closed the $30 million deal with three firms, Arena Capital, Bank Boston/ Bank of America, and Capstreet. Bruce was soon appointed and would serve in this capacity for fourteen years. With that, Bruce and Sam L. began a long and fruitful relationship. The deal was on. Sam L. took some money off the table and put the rest into the company which allowed it to complete the Maverick Market deal in the ten days following 9/11, a horrific national tragedy that shut all the airports down, forcing the Sussers and their outside board members to spend a week in Boston following a board meeting. Finally, they were able to rent two cars and head back to Texas. By the time they got to Cleveland, Boston’s Logan Airport reopened. The Susser jet was the very first plane to depart Boston, stopping in Cleveland to pick everyone up. Tex Mart and Laredo Taco Company Rounding out the 1990s was an instrumental, albeit smaller, acquisition that set the table for Susser Holdings, successor to SSP, to begin expanding its fresh-food supply to customers and become the darling of the industry. After acquiring thirty Tex Mart convenience stores in the Rio Grande Valley at a hefty price, due to their store size and the fact that they were highly profitable, the leadership began investigating Tex Mart’s small fresh-food offering. Though the stores were performing very well, it was wise to examine how they could be grown into something still greater. The fresh-food side of these stores was only a small operation, selling only 50-75 tacos a day at each location, all made in the back of the store in electric skillets purchased from Wal-Mart. After the tacos were prepared, they were placed under a heat lamp but sold out quickly with the help of an exceptional relationship with a radio station that relentlessly promoted the delicious tacos during the morning drive
180 Susser Holdings time. Small numbers, yes, but the customers that bought them loved those tacos. The question was: Could this taco operation be expanded efficiently? The leadership at Susser viewed fresh cooked food as a key to improving the customer experience and differentiating their offering. As well, additional food purchases in the store resulted in increases in the amount customers spent per visit. In short, the more tacos sold in the store, the more highmargin drinks and snacks would sell as well. Such a small existing operation would be difficult to expand to all Susser stores, so the idea surfaced to make the fresh food at a centralized commissary and then distribute it to the local stores. However, after spending $4 million on the project, the complex mix of logistics, timing issues, and an inability to efficiently control the temperature and the quality of the food meant that this was not the right process. Something else was needed. Then they hit pay dirt with a new idea and a new brand—Laredo Taco Company. Financial analysis showed that the freshfood business was very lucrative. Not only were the margins from fresh food twice those of other store items purchased, but tag-along sales increased as well. If you were buying a fresh taco, you needed a drink to wash it down and might also be interested in a cup of fresh fruit made available next to the homemade salsa. If you were waiting for your taco to be cooked, you might shop around a bit. The prosperous concept that was developed was to install a kitchen onsite with a grill prominently positioned in front of the store so that the customers could see the food being made. The cooks were soon viewed essentially as “grandmothers,” and they were encouraged to “cook with love.” As it developed, store operations held focus groups to determine the best type of tortilla to serve for each geographical area because of community differentiation. The Sussers wanted to make the food to order and customize the food offered to best meet local taste preferences.
Building and Buying—The Late 1990s 181 It turned out that making fresh food on site, with homemade tortillas loaded with high quality ingredients, was a tantalizing prospect for customers, making them hungry enough to open up their wallets. This was the right recipe for success and blew away the Tex Mart sales of tacos made in the backroom and sold self-service from a case with a heat lamp. As with many good ideas, it nevertheless had some starts and stops to find the best approach, ultimately taking years to get it all done right. Part of the problem was that one of the most beloved and special leaders at Susser—Roger Smith—was looking for something very different in a taco than what was preferred by the typical Hispanic Texan convenience store customer. Finding the Right Flavor Roger had worked in the convenience store business since 1974, spending time at both 7-Eleven and Circle K. At 7-Eleven, he came to know Sam J. Susser, and his path crossed with Sam L.’s as well in 1999. “Sam L. painted the picture that Susser wanted to continue growing,” Roger remembers, “They had put some capital together and wanted to go shopping—to acquire convenience stores through acquisitions. He was very convincing.” It was not a hard sell, and Roger came aboard in 2000 as senior vice president of operations. His skill set delivered more efficiency in the operations through numerous improvements. Conversely, however, his ability to understand South Texas customer flavor profiles, unfortunately, was insufficient! Being in charge of store operations, Roger worked closely with Laredo Taco Company to develop their menu. But Roger hailed from Wyoming, where Tex-Mex is nearly unheard of, and his taste in tacos and burritos did not sync up with the preferences of Mexican cuisine connoisseurs in South Texas. After one of the initial in-store trials, the customers did not fancy the flavor of the food they ate. Roger was dumbfounded and asked Sam J. Susser, “Why does no one like them?” Sam J., after sampling the menu items, immediately knew the reason,
182 Susser Holdings exclaiming, “They taste horrible!” Roger helped the family put together a focus group of Spanishspeaking cooks in Laredo and Brownsville, and the company simply followed their guidance. It led to a new line of business that added hundreds of millions in revenue and really built a great company. Armand Shapiro remembers the long road to reach the end goal of capturing the best food profile. “It took a lot of work. But once we hit upon the right menu with the right tastes, it was crazy successful and increased our gross margins. It was revolutionary, a first in the industry.” Soon, customers were gobbling up the tacos, cooked fresh right before their eyes, at a rate of 100-150 a day in the stores where they were offered. However, only a few stores were big enough to add the in-store grill. So when building new stores in the future, the footprint was expanded from 2,400 to 4,000 square feet to accommodate the grill, and eventually the stores were built at 6,000 to 8,000 square feet with 5-8 times the number of parking places to accommodate the larger staff and increases in customer count. In addition, as expansion continued, the blueprint was altered to increase the number of gasoline pumps from two pumps to eight or even twelve depending on the property’s size. Like the perfected ingredient list of a delicious taco, the individual factors came together for a winning combination: larger locations, more pumps, more retail space, and convenient parking, and freshly made food from Laredo Taco Company. These all contributed to the success of Susser. To improve is to change; to be perfect is to change often. —Winston Churchill Papas a la Mexicana are pan fried potatoes sautéed with spices and wrapped in a warm tortilla. Machacado is a scrambled egg mixture with Mexican spices enveloped in a warm tortilla.
Building and Buying—The Late 1990s 183 With more square feet and the proven success of Laredo Taco Company as motivation, additional fresh food items were added to the stores’ portfolios— items like fried chicken, various lunch offerings, bakery products, churros, bunon-a-run (a kolache with sausage and cheese in a sweet bun), and more. This success bred more success and led to the introduction of other food products and merchandise for customers.
184 Susser Holdings
Building and Buying—The Late 1990s 185 Imbuing the Susser Culture The most important person in the organization is usually the one that is closest to the customer. Strive to support that person. —Jerry Susser What you stand for and how you treat people is everything. —Anonymous The company also held its first all-day trade show for Circle K store managers and other key employees in 1998. Before this time, the company was not able to afford such a massive event. Managers were usually sent out to other places for meetings. This gathering of store managers would become a repeated event, a tradition that was welcomed by all. It only added to the culture that the Sussers would become renowned for: a tightly knit family atmosphere—one for all and all for one—and a collective embrace of unity that all held with the highest esteem. As the company grew, the annual trade show and sales rally moved to San Antonio since Corpus Christi’s convention center wasn’t large enough for the 2,000 participants. Highlights included visits from celebrities like the Dallas Cowboys Cheerleaders, an egg cracking contest amongst the various divisions, and drawings for five new red Ford Mustangs in partnership with Coca-Cola as an incentive to drive sales. Furthering the development of this unified culture was Sam L.’s passion and drive. He became known for his consensus-building nature, accessibility, and innate curiosity. He excelled at collaboration, kept his door open to everyone, and honestly wanted to know more about how goals could be achieved and what new methods might work better. He worked very hard to develop a family-like atmosphere within the company and stressed the importance of taking care of employees. The Sussers’ success was
186 Susser Holdings also their success. Sam L. enjoyed ribbon cuttings (donning his red velvet hat and red and white patent leather Stacy Bush dress shoes for the occasions) and charitable events, and with his larger-than-life personality, he brought a lot of fun wherever he went. The employees eagerly anticipated seeing what costume he would wear when he gave his speeches at the company’s annual trade show; whatever it was, they knew it would be memorable. Sam L.’s indefatigable energy was carefully focused on doing the right thing and not concerning himself with strictly profit for profit’s sake. Instead, he took the long-term view that when the customer had a fully satisfied experience, he or she would come back, and when that positive experience took place often, then volume and rapid repetition would drive success. We never worried about margins. It was all about increasing the customer count, same store sales, and the cash flow per customer visit. You can’t pay your bills with percentages, but you can with pennies! —Sam L. Susser The leadership team measured every bit of activity, customer count, sales, and GP per customer; every single expense was measured, and a highly transparent culture was created where both mistakes and achievements were discussed and celebrated. As the 1990s drew to a close and a new millennium approached, the overriding question was whether Susser could continue its successful expansion plans in the 2000s. No one should have worried; the company did not disappoint.
Building and Buying—The Late 1990s 187 You can’t pay your bills with percentages, but you can with pennies! SAM L. SUSSER
188 Susser Holdings Happy is the man who finds a true friend, and far happier is he who finds that true friend in his wife. FRANZ SCHUBERT
Secret Weapons—Susser Wives 189 Secret Weapons— Susser Wives You only require two things in life: your sanity and your wife. —Tony Blair A successful marriage requires falling in love many times, always with the same person. —Mignon McLaughlin I t has long been said that behind every successful man is a strong woman. There are numerous examples of men who give their wives great credit when explaining why they were successful. Successful men depend on their wives’ work and support as they are building their business. It is the wives who often physically provide labor in building a business, working beside their husbands. It is the wives who serve as sounding boards as their husbands negotiate through all the challenges and decisions that must be made. It is the wives who “keep the home fires burning,” taking care of the children and various household tasks while their men are out burning the midnight oil or wining and dining suppliers and customers. That is why appreciative husbands understand the importance and value of a strong wife. The Susser family was no different. Minna Schwarz Susser, the matriarch of the Susser family, inherited two service stations from her parents when they passed away—Hattie Schwarz in 1930 and Julius Schwarz in 1933. When she married Sam Susser five years later, her new husband took over operation of these service stations and expanded their operations to sell wholesale fuel to local companies. It was a family operation with their children, Jerry and Sam J., growing up in the business. The Susser brothers both married lovely, beautiful and intelligent women who played an active role in growing the business in the early years, providing immense support for their husbands as they journeyed down the road to success in the wholesale fuel business of South Texas.
190 Susser Holdings Patricia Ann “Pat” Maltzman Susser Sam J. Susser married Patricia Ann “Pat” Maltzman, daughter of Sam Herbert Maltzman (1903-1963) and Birdie Levin Maltzman (1908-1984), on August 16, 1962. Pat was born February 1, 1942 in San Antonio. She and Sam J. have four children: Sam Louis, born August 14, 1963 in Corpus Christi, Nueces County; a son born in 1964 who did not survive infancy; Sheryl Lynn, born January 15, 1966 (adopted) in Fort Worth, Tarrant County, and Stephen Neil, born April 11, 1969 (adopted) in Fort Worth, Tarrant County, Texas. Sam J. referred to Pat as his “greatest asset.” When it came to entertaining clients, she was always accommodating. Believing it was an absolute honor to be invited to someone’s house for dinner, Sam honored many clients by bringing them home for dinner over the years. Usually, it was on the spur of the moment. He would call Pat at 4:30 p.m. and tell her that four people were coming home for dinner after their meeting. That’s all she needed—she proceeded to cook up a storm. Pat was always accommodating and would produce her “go-to” meal: her signature Caesar Salad, Carne Asada (marinated and grilled T-bone steaks), Indian spoonbread (cornbread with cream-style corn, jalapenos and cheddar cheese) and fresh vegetables with superb hollandaise sauce. She was always able to prepare this meal on very short notice, and it was always perfect. Eventually her quick-sure recipes would get her on local TV, making her a local cooking celebrity. She was Corpus Christi’s Julia Child! Elizabeth Aleen “Liz” Cavazos Susser Jerry Susser, Sam J.’s brother, married Elizabeth Aleen Cavazos on March 25, 1972. Liz was born December 6, 1944 in Cameron County, Texas. Jerry and Elizabeth had two children, Jonathan and Jennifer. Jonathan Julius was born April 10, 1973 with Jennifer Lynn following two years later on June 2, 1975. Both were born in Corpus Christi. Jonathan married Erin Denelle Watkins on April 20, 2003, and they have three children, Joseph Louis, 15; Jessica Raye, 14; and
Secret Weapons—Susser Wives 191 Jillian Leigh, 11. Jennifer married Mark Benjamin King July 6, 2013 and had a daughter, Lilly. Early in their marriage, Elizabeth was actively involved in building the wholesale fuel business. Jerry recalled: “We had developed the automatic gas meter for pay at the pump with a magnetically-striped credit card and turned it on in January 1974, when the price of regular gas was 24 cents a gallon. Then the oil embargo happened; a spike in gasoline prices occurred due to a shortage of gasoline and the government allocating distribution. Companies that had underground storage now needed controls, and our equipment was in high demand. We sold to various cities and municipalities who hooked up their fueling systems, including the Ohio Bell Telephone Company and the City of Cincinnati. Both developed a two-card system, one for employee cars and another for company cars, to control their consumption. Through our system, we could provide reports on stations, cars and company trucks. If a customer was in arears, they could shut him off. In April of 1975, Elizabeth, being very pregnant, and I drove from Corpus Christi to Cincinnati, Ohio, to deliver and install a truckload of $ave-A-$ machines. We installed ten $ave-A-$ steel terminals on a pedestal, and Elizabeth was right there helping us take care of business.” In addition to her active involvement in the family business, Elizabeth has also represented the family business in Corpus Christi, contributing greatly to the community over the years through such organizations as the Texas Historical Foundation, where she serves on the Board of Directors, the Christus Spohn Foundation, and on the board of the Corpus Christi Museum of Science and History.
192 Susser Holdings Catherine Susser The grass is always greener where you water it. —Catherine Susser Sam Louis Susser would continue this tradition of Susser women involvement in the family business, bringing in his own beautiful and talented wife Catherine into the family as his life partner and staunchest supporter. Sam L. married Jane Catherine Gilbert on September 3, 1995 in Houston, Texas. She was born April 24, 1968 in New Orleans, Louisiana, and earned a Bachelor of Business Administration and a Master of Public Accounting from the University of Texas at Austin in 1991. She was a senior accountant at Price Waterhouse when they married. Sam L. and Catherine’s first child, Sophie Redwine, was born July 16, 1998 with Sam Edwin following two years later on May 9, 2000. Eli Gilbert completed the family when he was born March 3, 2003. All of Sam L. and Catherine’s children were born in Corpus Christi. In December 2021, Sophie Redwine, 23, and working for Lazard in New York doing restructuring work; Sam Edwin, 21, was headed to work for Goldman Sachs in New York upon graduation; and Eli Gilbert, 18, had started at SMU on a tennis scholarship and academic scholarship where he was studying business. Long active in the Corpus Christi community, Catherine is a community volunteer and school board member and past President for the Corpus Christi Independent School District (ISD). She serves on the Board and is the past Chair of the Governor’s Commission on Women’s Issues. She was past president of the Windsor Park Elementary Parent Teacher Association and served as the chief accountant for Corpus Christi ISD early in their marriage. Appointed by Speaker Joe Straus, Catherine also served on the Texas Commission of Next Generation Assessment and Accountability, and she and Sam L. have taken a leading role over the years in dealing with the various civic and political issues that have impacted the local schools. Catherine has often had a visible role representing Stripes in the community. Sam L. and Catherine Susser, along with Stripes, were Silver Sponsors of the
Secret Weapons—Susser Wives 193 Junior Achievement of South Texas’ Corpus Christi Business Hall of Fame which honors the most esteemed leaders of business and free enterprise in the Coastal Bend area. Thousands of students in south Texas are prepared for the real world through Junior Achievement’s hands-on programs that teach students about work readiness, entrepreneurship and financial literacy. The Sussers are also strong supporters of higher education, supporting Del Mar Community College, the University of Texas, Texas A& M University-Corpus Christi, and the STARS Scholarship Fund. The Sussers support other important organizations, personally and through their business. They are strong supporters of Driscoll Children’s Hospital, Christus Spohn Hospital, MD Anderson, UT Southwestern, the TOKC Foundation. Catherine is a “Go Red for Women” member of the American Heart Association of Corpus Christi. She has previously served as president of the Corpus Christi Charity League, a non-profit comprised of 40 women who annually raise funds for charitable projects in the area. All monies raised each year are donated to a chosen organization. In addition, Sam L. and Catherine are active members of their Congregation Beth Israel in Corpus Christi and Temple Emanu-El in Dallas. In 2014, when Sam L. Susser was awarded the title of CSP’s Retail Leader of the Year, he included the Susser women in the comments he made while accepting the award. He thanked Catherine, his parents, Sam J. and Pat, and his uncle, Jerry Susser, and aunt, Elizabeth, for being “perfectionists” and for prioritizing the people who work for the company. He, too, understands that the Susser women deserve much credit for the family’s business success.
194 Susser Holdings If you don’t know where you are going, you’ll end up someplace else. YOGI BERRA
The Long Game—2000s 195 The Long Game—2000s Momentum builds success. —Suzy Kassem In preparing for battle I have always found that plans are useless, but planning is indispensable. —Dwight D. Eisenhower When the panic of Y2K had passed, and everyone settled into the rhythms of a new millennium, it turned out that the outlook was sunny for the coming years—at least, it was in the Lone Star State. Demographic forecasts projected that, for the first decade of the twenty-first century, the population growth in Texas would be eight points higher than the national average. South Texas, where the Susser Holdings’ core market was centered, was expected to have growth of three times the national average. And the oilfield activity in west Texas and eastern New Mexico meant there would be plenty of money being made by numerous employees in the area. This was money that could be spent in the Sussers’ convenience stores. Sunny days, indeed. In 2000, Susser Holdings once again brought in private equity to help finance acquisition-related growth, injecting $30 million into the company. The next year, the Sussers acquired thirty TexMart stores and 121 Coastal States stores (the 103 Maverick Market stores the company tried to buy in 1995 were included in this). These acquisitions doubled the Sussers’ store count. By this time, the company had a multitude of footprints in areas that included spring-break beaches, neighborhoods of all income levels, and wide-open agricultural areas. Another $7.5 million in private equity was also infused into the company in 2001. It was a great start to the decade.
196 Susser Holdings 2004—High Standards The first few years of the 2000s saw more growth, and by 2004, Susser Holdings had 315 retail stores, 330 gasoline dealers, and 25 unattended gasoline pumps. The family business, which supported approximately 3,600 employees, was looking to open 18 new units in 2004 and 40 new units in wholesale. Intensity is the cost of excellence —Warren Buffett ‘Cool’ guys have a long and distinguished history of getting their butts kicked by intense hard workers. —Anonymous Part of the reason behind this growth was the company’s ongoing dedication to make excellence a systematic part of how the business operated, and in 2004, this commitment was publicly recognized when Susser Holdings, doing business as Circle K, received the Outlook Award for Community Involvement. The Outlook Awards recognize companies that make high standards part of their daily routines. Susser was a natural pick because top-tier systems, checklists for excellence, and strong company values are all part of the way the company handles its day-to-day affairs. At the company’s annual all-day trade show, sales rally, and store manager recognition event in 2004, Sam L. dressed as a cow—complete with udders—to have a little fun and show appreciation for all the efforts of the company’s employees and staff.
The Long Game—2000s 197 2005—Growth with Circle K Beginning in January 2005, Circle K began making its mark all over the Rio Grande Valley as well as much of South Texas, including Laredo and Corpus Christi. New stores were opening constantly in the first half of 2005. One place where the company really made a splash, pun intended, was on Padre Island. This locale had very specific needs for its potential store customers. Islanders often had to cross over the causeway, what they refer to as Over the Bridge (OTB), to gain access to modern conveniences or just get a few groceries. This was troublesome and sometimes irritating to have to go OTB to get lastminute items. Although Susser already had two Circle K stores on Padre Island, it constructed its first Superette on the island—at the corner of Park Road 22 and White Cap. A grand opening was held February 25. Targeting island dwellers and visitors, the store featured grocery items, such as fresh meat and produce. At 4,700 square feet, this store was not any bigger than a regular Circle K, but it offered a wider selection of products, thus allowing islanders to avoid the inconvenient ten-minute trip across the causeway. Prices were a little higher than at a grocery store, however, because Susser did not buy in bulk as grocery stores could. Still, when one considered the time and hassle that was saved for islanders, the small rate hike was a small price to pay, and the new format was a smashing success. Susser knew that food business was very lucrative. As Roger Smith recalls, “Standalone margins in fresh food were double convenience stores’ normal merchandise. Tag-along sales increased as well because customer frequency increased—as well as a more complete store visit experience. We focused heavily on how many times customers visited a store. With fresh food, the frequency increased as did the time spent in the store. This all added up to more dollars per customer visit.” Steaks, pork chops, fresh produce, fresh-baked bread, frozen foods, a larger selection of over-the-counter medicines, and a wide variety of Blue Bell ice cream were just some of the grocery items now available on the island. Like many other Circle K’s, this store had five gas pumps and a Laredo Taco 2004 Trophies
198 Susser Holdings Company as an in-store restaurant offering hot, made from scratch tortillas used to make tacos and other food items for breakfast and lunch. Customers watched as the food was prepared in the open kitchen. As with the other stores offering a Laredo Taco Company, the name was used to “conjure up the imagery” of an authentic South Texas Mexican food offering. The LTC logo was loosely based on the Texas Ranger badge, a highly revered icon in the state of Texas associated with honor, integrity, and bravery. Nothing is more authentically Texas than the Texas Rangers which reinforced the “from here” locally owned and operated Laredo Taco Company brand promise. Like other stores, this location was provided with basic recipes and menus, but they had the freedom to tweak things to satisfy the tastes of their local clientele— island visitors in South Texas, in this case. The decentralized menu allows for creativity but still holds all the Laredo Taco Company locations to established food safety standards. As Kevin Mahany commented, “When we moved into the food service business in order to be competitive and differentiate our brand, we made a strategic choice to be more than just ‘heat and serve’—one side heats, the other serves. It’s more interactive.” Susser had more than 100 Circle K convenience stores in the Coastal Bend when 2005 began, but new stores would be opening constantly in the first half of 2005. By March, there were 307 Circle K branded convenience stores and one Stripes branded convenience store. The company produced $1.5 billion in annual revenue, and Laredo Taco Company was in 115 locations. The Sussers’ strategy for Circle K’s success was to strive to be fast, fun, friendly, and delicious. They paid particular attention to product temperature and also store appearance because so many people were visiting the stores. Emphasis was placed on developing a team of employees that could grow along with the company. A policy was enacted of only promoting store managers and area managers from within, and employees were given scholarships to obtain higher education from community colleges and local public universities so they could advance their careers. By July 2005, Susser had 315 Circle K stores in operation as well as 370 other stores that were Circle K dealers throughout Texas and Oklahoma. That month,