Bizbeat: Lakeville Liquors' sales leads state munis

Lakeville Liquors led the state in municipal off-premises liquor sales in the latest state auditor's report, although it was second to Edina in net profit.

Despite having the top sales volume of more than $14.7 million in 2010, the most recent audited numbers, sales declined slightly at Lake- ville's three stores, partly due to new stores in neighboring Burnsville and Apple Valley, said operations director Brenda Visnovec. Lakeville sales led Edina, Eden Prairie, Richfield and Apple Valley. Lakeville also had the best (lowest) operating expenses-to-sales ratio, Visnovec said.

Unaudited results for 2011 show Lakeville's net liquor income continued a decline that began in 2008. Net income last year dropped by about $22,400, or 2.5 percent, to nearly $1.23 million. Last year's sales were down almost $400,000 to about $14.3 million, Visnovec said.

Visnovec expects Lake-ville's three city stores to contribute more than $2.2 million to city operations in 2012, including $1.4 million that went to pay off fire station bonds in February.

The City Council last year considered letting private firms take over its liquor business, but a consultant's study reinforced how profitable the business is and the idea was dropped. The business has contributed $4.5 million to city projects from 2006 through last year and has provided a loan of nearly $400,000 so remodeling could begin this spring on the city's new Heritage Center for seniors, veterans and history buffs. The money is to be repaid when the old senior center is sold and fundraising for the new center is completed.

Visnovec attributes the drop in liquor sales partly to business lost to six liquor stores built within five miles of its three stores since 2008. Five new stores are located in Burnsville at Costco, Cub, Byerly's, Haskell's and Liquorville.

The sixth was Apple Valley's newest and biggest city liquor store, on Pilot Knob Road and 157th Street. It is about 1 1/2 miles from Lakeville's newest store at Galaxie and 160th Street, Lakeville's northern border with Apple Valley, said Scott Swanson, director of Apple Valley's three municipal liquor stores.

Lakeville's loss may be Apple Valley's gain, as its Pilot Knob store has seen sales rise to $2.5 million a year.

Lakeville's third store opened on Galaxie in October 2007, and city profits peaked in 2008 at $1.3 million. In November 2008, Apple Valley opened its Pilot Knob store, Swanson said.

He noted that total liquor profits reached $915,000 last year, up about $140,000 from 2010. But total sales dropped in the same period by about $26,000 to just over $9 million. Swanson noted his Pilot Knob store also benefitted from a new Super Target opening next door. "We get people to drive farther to Target, then they come and see us," he said.

Swanson said the sales drop last year all happened at the city's store at 149th Street and Cedar Avenue, located at the heart of a reconstruction project for rapid bus transit. Increased sales at the city's other two stores helped offset about $200,000 in lost sales at the Cedar store, he noted.

Visnovec said customers diverted by construction also hurt sales at her Galaxie store, a few blocks east on 160th Street from the Cedar Avenue work.

Both liquor managers have noticed rising craft and microbrewery beer sales, mirroring a national trend, while big domestic brewers like Anheuser Bush and MillerCoors saw sales drop slightly last year.

Visnovec said she sends e-mail blasts to Brew Club members when new craft beers are arriving. About three weeks ago, for example, Voodoo Donut Beer arrived in 22-ounce bottles. "It tastes like maple syrup and bacon," she said. The 48 hot-pink bottles were sold out within two hours.

In March, beer fans followed a craft beer truck to a Lakeville liquor store to buy Bell's Hopslam beer, made in Kalamazoo, Mich, she said. Within a day, all 108 six-packs were gone.

Swanson noted that craft brewers produce limited quantities and restrict how much each liquor store can obtain. He said he has added a larger selection of craft beers in his big Pilot Knob store.

"It is a huge change in what people are looking for. They are tired of the same old thing," Swanson said. "There's amazing growth in the craft beer segment."