Savage fights to restore liquor profits

  • Article by: DAVID PETERSON , Star Tribune
  • Updated: May 5, 2012 - 9:58 PM

Faced with competition, it's stepping up marketing.

Fighting back against a plunge in profits, Savage is preparing to shake up its municipal liquor operation -- and market itself more aggressively.

"The most we've ever spent in previous years on marketing and advertising is $5,000 to $8,000, and that's nothing in the real retail world," City Administrator Barry Stock told council members. "We've lived the luxury of not having much competition."

Now, competition has arrived, in the form of big-box stores and other rivals, and profits have sunk.

Sales at the city's two booze outlets peaked in 2008 at $6.24 million and have fallen since -- along with profits, which peaked in 2007 at nearly $550,000. The low point for profits was $155,317 in 2010. Although 2011 saw an uptick, to $177,197, that figure is still, a city analysis confesses, "a fraction of what was generated in 2007."

And that has consequences. The city has relied on proceeds to support major civic improvements, including an environmental learning center and its library building. As recently as last year it was suggesting that liquor money could be a fallback in case a planned sports dome falters financially.

So costs are being cut amid lots of thought about jazzier attempts to pull customers in the door.

A priority, officials say, is getting out the word that municipal liquor is not always more expensive.

Some competitors "have done a good job marketing themselves as discount liquor and they're not," operations director Pete Matthies told council members. "I'm learning a lesson there."

A price comparison carried out by the municipal liquor staff in Lakeville found, according to an internal analysis prepared for the Savage council, that Savage's prices "are competitive, particularly when it comes to beer" -- something Savage's online customer survey found is not well known.

The analysis does conclude, however, that there are substantive as well as perception issues: "By being attentive to pricing, driving home the community-commitment message and providing an overall better customer experience, Savage Liquors can capture a bigger share of the market."

City officials are not sure what to do about that "community-commitment message" -- the notion that a "muni," unlike the private sector, turns over all of its profits to civic betterment.

Some are convinced it ought to be a major pitch, especially considering some residents don't even know the liquor stores are city-owned. "We ought to put out a press release about the profits going to the community," said Council Member Gene Abbott.

But others are wary, warning that in today's political environment that is not always something to stress. In fact, Matthies has strived to create stores that don't come off as city-owned but as robust retailers much like others.

With Matthies retiring, the city is not interested in promoting from within. It is seeking an outsider with a canny eye toward promotional magic, in particular the use of social media to generate buzz.

The city is also turning a cool eye on costs. Officials note for instance that Savage is the only city with just two stores to have a person with Matthies' title and status. As he throttles back his involvement, a replacement will take a humbler role.

Saving nearly $60,000 in the short term, the city is expected to shift from a civil-service grade 14 "liquor operations director" and grade-10 "assistant liquor operations director" to a grade-11 "facility manager" and grade-8 "store manager." There have also been outright cuts in staff over the past two years.

Just how much to pep up the sales pitch remains to be seen over the coming months as the new person comes aboard, but the mayor and council members signalled some unease over the prospect. "We don't have to go whiz-bang and real flashy," said Mayor Janet Williams. "Let's focus on targeting the new people in town."

David Peterson • 952-746-3285

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