Geared to grow

Jim and Mary Anne Kowalski,
Kris Kowalski Christiansen,
Kowalski’s Markets:
651.578.8800
kk*******@*******is.com
www.kowalskis.com

by Beth Ewen

“OUR PHILOSOPHY is to expand when we’re financially able,” says Jim Kowalski, CEO of the Kowalski’s grocery store chain in the Twin Cities. They started when he and his wife and business partner, Mary Anne, purchased in June of 1983 their first store, a Red Owl on Grand Avenue in St. Paul. Jim had worked for Red Owl for 20 years before then.

“I had to get an $80,000 unencumbered loan to get financing. I had a buddy with a creamery, that he sold to Land O’Lakes,” Jim says, and they used that money to purchase and refurbish the first store.

By 1985 two more stores became available from Red Owl, and they took the leap. “It was a big jump, but it was the right thing to do. It was scary,” says Mary Anne. The first store “was growing in sales slowly, which is the best way to grow, so I figured we can do this again.”

The Kowalskis, eventually joined by their daughter, Kris Kowalski Christiansen who today is chief operating officer, now have nine Kowalski’s stores throughout the Twin Cities, plus a production deli and production bakery, including a flagship store and corporate headquarters in Woodbury that’s modeled after the architecture they fell in love with when visiting Italy.

They bought and sold stores in the early years of their business, and by the mid-1990s decided to aim toward the upper end of the market. “In 1995 we made the decision not to compete against the price-cutters,” Jim says. “You can’t give groceries away and survive and that’s what they were doing. At that point we took it in a whole different direction.”

In fall of 2008 the Kowalskis announced they would add up to eight wine and liquor stores adjacent to their groceries, but with separate entrances as state law requires.

“We have locations on our boards right now,” Jim says about future expansion plans. “We’ll do about a store a year. You can’t sit still or you get run over. You have to spread costs.”

Upsize interviewed the three family members late last year about their business philosophies, Mary Anne’s work with active civic leadership that she says has transformed their company’s culture, and the imperative to keep growing.

Jim Kowalski: We started in June of 1983. I had 20 years in the business before then, with Red Owl. It was chaotic. I had to get an $80,000 unencumbered loan to get financing. I had a buddy with a creamery; he had sold it to Land O’Lakes. We took that loan to get going.

Upsize: Mary Anne, what was your reaction to that idea?

Mary Anne Kowalski: It was short. I thought it was a good idea.

Kris Kowalski Christiansen: She grew up in the Grand Avenue neighborhood, in St. Paul. It seems that was one of the reasons her answer was yes.

Mary Anne: The confidence in Jim was a huge piece of that. He had been very successful in the grocery business. I was a paraprofessional peer counselor in Hudson. I had something to add because of the people stuff.

Kris: I decided that, I think I’d like to do this with them. I had the people skills and some bookkeeping experience.

Mary Anne: We had the one store, it was growing in sales slowly, which is the best way to grow. The opportunity came to expand in 1985 because Red Owl was selling two more stores, in White Bear and on Lexington avenue. That grew us into two stores right away.

It was a big jump, but it was the right thing to do. The employee base was there. It was scary, but it was growing so I figured we can do this again.

Jim: When I negotiated for White Bear, that was a plum. We took the other store, too. I think the coup was getting the White Bear store. I negotiated with the owner, I changed his mind; it was set to go to someone else. I told him I thought we’d do a better job. I helped him structure the deal. We said we’d take the best and the worst.

Upsize: Who is your main competition today?

Jim: You compete with everybody, the SuperTargets, the Cubs. We’ve chosen to go to an upscale market for obvious reasons. In 1995 we made the decision not to compete against the price cutters. You can’t give groceries away and survive and that’s what they were doing.

Mary Anne: The path we took was upscaling. The only upscale grocer at the time was Lunds/Byerly’s. So we remodeled Grand Avenue. In 1994, we put big dollars into Grand Avenue, at least $3 million, and then White Bear right after that.

Jim: We took a designer to Summit Avenue in St. Paul. We drove the streets. I said we want to create a store like Summit Avenue. The store has a traditional look that never goes out of style. If you start getting retro or modern, the fashion can fade.

Our business was skyrocketing. Did we get a bump with every remodel? Yes. It leveled in the last few years, with Target, SuperTarget, Trader Joe’s, Aldi.

Upsize: Kris, you’re the only child of Mary Anne and Jim, and now are chief operating officer. How did you get involved in the business?

Kris: I was a cashier growing up. I graduated from St. Thomas in 1988 and got an MBA from the Carlson School in 1998. I held a variety of positions. I did HR, marketing.

Even being an only child they didn’t say I had to be in the business. I wasn’t interested in groceries. I was interested in fashion. But they took me to lunch and said how they wanted to grow the company. That was in 1990 and I’ve been here since.

I’ve been very close to my parents and have great respect for them. I liked the company. I was always intimidated and I thought I could never do that.

Mary Anne: You liked the upscale track we were taking.

We had to give her a push after three years to say what do you think. We brought in a business counselor, who helped. You can get accolades from your parents, but it’s your parents. The business counselor did boost your confidence.

Upsize: How do you plan for the future succession of your business?

Mary Anne: We don’t’ see ourselves retiring. That said, we aren’t all that involved in the daily operations. I’m very involved in civic leadership. We had the financial pieces in place, but we didn’t have the culture piece. About five years ago, I wrote a curriculum for civic leadership and piloted it at our company.

Upsize: Has that improved operations at your company?

Mary Anne: It does and it did and it’s a big part of our human capacity. We went from having a mission statement to adopting an identity statement of why we’re here.

Kris: It’s good for me because it helps us get out of the first generation operators to a company operating statement.

Jim: It gave us a language for the culture we had.

Mary Anne: There’s an infrastructure built. We’re principle-driven but we always were. We have names for that now. We have 108 key leaders. Meetings are always run a certain way.

This is all part of an organization called the Minnesota Active Citizenship Initiative. We’ve tried to recruit others. We attend once a month, the MACI.

It’s about democracy. It’s all about being connected to a broader purpose. We just took it a step further and now we take the new hires, 16-year-olds included, through Active Citizenship Training. We teach them how to be active citizens of the world, starting here.

Upsize: This sounds like a key part of your company, yet I wouldn’t have expected that from a family operating a grocery business, or any business.

Mary Anne: It’s turned out to be my life’s work. I was feeling disconnected from the world around me as a leader. I was worried about the country and I felt frustrated about what I could do. I got together around these ideals. You reserve judgement: you put on a panel and say let’s talk.

Upsize: How do you and Jim divide the responsibilities?

Mary Anne: He’s the owner and president, I’m the owner. We have equal everything: debts and assets. laughs

Upsize: The store where we’re sitting, in Woodbury, is your corporate headquarters. It’s beautiful. How did this come about?

Mary Anne: In 2000 we built this. It’s our dream store. This was a huge risk built from the ground up, with an Aveda section, a Juut spa right in-house.

Kris: My Dad does the designing.

Mary Anne: We’d been to Italy, and fell in love with every piece. That was the catalyst.

Upsize: After 2000 you really began expanding, didn’t you?

Kris: It was really fast. We bought five stores from GJ’s and we’ve since closed two. In 2004/5 we brought two Driscolls. We have 9 Kowalski’s, one Cub, we’re building in Eagan, we have 3 LLCs, a production bakery, a production deli.

Jim: Our philosophy is to expand when we’re financially able to.

Kris: We forgot to say we built Oak Park.

Jim: You think we’d know this stuff, wouldn’t you? laughs. We have location on our boards right now. We’ll do about a store a year. You can’t sit still or you get run over. You have to spread costs.

Mary Anne: We’ve had stores that have just been gangbusters. Grand Avenue was successful. It was doing $8,000 a week, all of a sudden it jumped to $17,000. We opened here in Woodbury huge, then it backed off.

Upsize: Which is more important, in your opinion, talent or experience?

Jim: Talent. Talent.

Kris: Common sense always outweighs expertise.

Upsize: What about money or ideas?

Jim: Right now I’d have to go with cash. Ideas are a dime a dozen. Right now cash is king.

Upsize: What’s one thing you wish they would have told you, about being an entrepreneur?

Jim: We’ve been blessed. We had entrepreneurial thinking right out of the chute. We just had it. Looking at the number of programs we went through, at universities, we think ‘we do that.’ Somewhow we were blessed with this thinking.

Upsize: Are you doing anything differently in this tough economy?

Jim: We’re emphasizing value more. Our value is harder to see than the free gallon of ice cream.

Mary Anne: We’ve stayed true to who we are, what we’ve always wanted and we’re doing it better. We’re working ot get the message out, to have the consumer understand about our products.

Jim: We spend the majority of our dollars internally, to educate customers.

Mary Anne: We’ve gone into good foods for good health. We have signage throughout the store. Our people are educated on the products we have, on the quality of first produce, for example.

Jim: We spend a lot of time developing the experience of the consumer. We started with the basics, that grocery shopping is boring. We got very into how to create the experience. They don’t have to understand it as long as we do.

I’d say the most important difference is courage. Having courage in your convictions is the most important asset you can have. There’s an awful lot of people who get stopped because of fear.