Marriage of Convenience

Beverage Aisle
Marriage of Convenience by Hank Behar
May 15, 1998

Express to Success
What happens when a 22-store chain weds a 45-store chain and the family traditions don’t exactly match?
By Hank Behar

What happens when a 22-store chain weds a 45-store chain and the family traditions don’t exactly match?

From Karachi, Pakistan to Richmond Virginia, from ownership of one lonely c-store to CEO of a 67-store chain, and from economic uncertainty to burgeoning prosperity-all in less than eight challenging, turbulent years that could have been scripted by Horatio Alger. Who said the American Dream is dead?

Owais Dagra is the man from Karachi and the 67 stores are all his, assembled by the hand in an upward spiral of hundred –hour weeks and dogged determination that began in 1990, when he bought his first outlet and converted it from a loser to a winner in six months. Today, he stands second only to 7-Eleven as the dominant c-store presence in central Virginia and his new goal is $1 billion in sales within the next five years. And why not? He’s only 33.
“I thrive on a challenge,” says Owais Dagra. “I get energized to succeed.”

So eight years ago, in an affirming gesture of soaring self-confidence, he decided to geometrically expand his one-store kingdom by purchasing the 14-store U-Totem chain. He had very little money and 13 of U-Totem’s 14 units were reliably losing money. But the acquisition was as inevitable as water rushing downhill – in spite of the fact that the one profitable store was excluded from the deal. Who under those circumstances would be foolish enough to lend him the money to make the buy?

No one, it seemed. Ten bankers in succession turned him down. But then he found a believer: the chairman of the Consolidated Bank and Trust Company who, after listening to the first half-hour of Owais Dagra’s three-hour presentation, decided that he’d heard enough; he would lend him the money. If anyone could turn the chain around, observed the chairman, Dagra could. In six months he did. He was 27 at the time.

Growning Upward

Owais Dagra knew what had to be done at U-Totem. Its stores were dark, dingy, out of date and uninviting. That much was obvious. The question was a matter of execution- How to make the necessary changes and emerge with a strategy that had a good chance of success? So he embarked on a three-pronged program:

Redesign the stores to make them brighter, safer and more appealing to shoppers, especially women.
Reduce labor costs by changing the product mix and bringing in more high-margin, impulse items
Mount an enlightened employee policy that would attract and keep good people.

His redesign called for removing all advertising and signage from the windows to let in the maximum amount of light, and resisting the temptation (i.e., money) from suppliers to showcase their products. He also swept the aisles free of displays to promote comfortable and unencumbered browsing, and for night-time shopping, he installed bright lights to make the stores appealing and safe.

And, while other convenience store chains were plunging into the world of prepared foods (after all, what could be more convenient?), Owais Dagra took different track, concentrating instead on packaged items that require little preparation by store personnel, thus lowering labor costs.
To boost margins, he tilted the stores’ product mix toward a wider selection of high-profit items, such as beverages, candies, snacks and novelty items, placing them several locations throughout the stores so they’d be within arm’s reach of shoppers.

A Gaint Step

Soon he had 22 stores, renamed Southern Express and then, in December of last year, Owais Dagra took on his biggest challenge, acquiring the Fas Mart chain. It was David pocketing Goliath, for Fas Mart consisted of 45 stores, about twice as many as Southern Express.

Managing an acquisition of that size is challenging enough, but the newly formed company had to find the answer to even greater challenge: How to blend the marketing strategies of the two chains. They were very different.

Fas Mart was dedicated to an everyday-low-price (EDLP) policy, and had acquired a wide following in the region, while Southern Express was committed more to heavy promotions, while slashing price cuts on a monthly basis for selected packages.

When it came to beer, fas Mart promoted large multi-packs, such as 18s and 24s, while Southern Express focused on single-serves and rarely carried beer multis larger than 12-packs.
In soft drinks, however, there was agreement: Both companies promoted 12-packs heavily, with promotions typically at $2.99.

Fas Mart, with its EDLP mode, had also taken on supermarkets in pricing, separating it even further in its merchandising philosophy from Southern. The volume was there, but the margin didn’t measure up to Owais Dagra’s plan.

A phalanx of brightly lit cold doors
greets shoppers at Fas Mart

The Beverage Beat

The first major decision in reconciling the two philosophies was to main flexibility.

“I don’t believe in a single retail concept,” says Owais Dagra. “Each market, each region, sometimes each store, has its own needs, so we adapt to them. In neighborhood stores for example, where many of our customers are steady, repeat shoppers, we feature multi-packs and specials, while at interstate or highway locations, single serves do much better. It would be foolish to have the same strategy for both.”

One common ingredient at both chains, however, was a strong commitment to beverages, as a core category.

The cold vault, for example as in most c-stores, accounts for 80 to 90 percent of bottle and can sales, so to maintain that percentage Owais Dagra is installing 15 to 20 cold doors in all new Fas Mart locations, giving him up to four times more beer and wine on display than conventional c-stores.

And the doors themselves are enlisted in the overall merchandising effort. Measuring 30 to 80 inches, compared to 26 to 70 inches in conventional doors, they have less metal and more glass for greater product visibility. They’re also lit from within with high intensity fixtures that bathe the shelves in 90-foot candles of light compared to 40-foot candles in most cold doors. The result is a bright beverage presentation that attracts the eye of the shopper.

And the doors are not confined to the back wall. Instead, they form an L or U shape from the side to the rear, placing them within easy reach as soon as the shopper enters the store.

On the hot side of the beverage aisle, coffee is coddled. Each store has a coffee island, complete with all the equipment that typical, demanding coffee drinkers require, plus built-in sinks for quick and easy rinsing of mugs and other containers they bring in for quick fill-ups. “We make it as attractive as possible for our coffee customers,” says Owais Dagra, noting the importance of the high-margin coffee category in the overall profit picture. Cappuccino, espresso and flavored coffees, however, have not caught on very much in the area thus far.

Hot cup sizes at Fas Mart are 12-, 16-, and 20-ounces, selling for 69 cents, 79 cents and 89 cents. Cold cups run from 22-to32-to44-ounces, selling for 79 cents, 89 cents and 99 cents.
And then there is the never-ending problem of out-of-stocks, which rob many a store of precious profits. But not at Fas Mart.

“Out-of-stocks are less of a problem for us” observes Owais Dagra, “because the size of our cold vaults give us more storage space than most c-stores. So when holidays and weekends come and deliveries are slow, we can go to our inventory, both cold and warm, and fill in our shelves from stock.”

I=C

Cold doors, coffee islands and marketing strategy all have their roles to play in the success of Owais Dagra’s endeavors, but none is as important in his mind as people.

“We’re in the people business more than the c-store business,” he declares. “We try to make our working environment as pleasant as possible so we can attract good people and keep them. I actually consider our employees as customers, and if we keep them involved and treat them right, they’ll treat their customers right and everybody wins. We ask for their input, we want their suggestions and we involve them in defining their own job descriptions. It’s I equals C – Involvement equals Commitment. That’s always been one of my guiding principles.”

What are the Owais Dagra’s plans for the future? To reach $1 billion in annual revenues within five years. Present billings: $150 million.

Owais Dagra, Left, and Frank B. Bradley
shake hands as Fas Mart changes hands.

An American Journey

If there was eight days in a week, then no doubt Owais Dagra would work all of them. As it is, Owais Dagra, president, CEO and owner of the Fas Mart chain of the c-stores, is restricted to working only seven days a week, approximately a hundred hours per. And it shows in his record of accomplishment, having risen in eight years from one store to 67, grossing $150 million annually.

Here’s the timeline of his trip from there to here:

1964 – Born in Karachi, Pakistan
1975 – Arrived in Richmond, Virginia. Age 11. Lived with his aunt, a social worker. High school in Richmond.
1980 – Returned to Karachi after father’s heart attack. Age 16.
1983 – Took over and expanded family hardware business. College in Karachi. Age 19.
1989 – Returned to Richmond. Age 25.
1990 – Bought first c-store. Age 26.
1991 – Bought U-Totem chain (13 Stores). Age 27.
1997 – Bought Fas Mart chain (45 stores). Age 33.
1998 – Planning to gross $1 billion by 2002. Age 38.