City liquor stores see green as craft beers catch fire

When the economy hurts, a little craft beer helps.

That seems to be the attitude among patrons of municipal liquor stores in the Twin Cities, several of which are seeing sales increase at a faster-than-normal pace this year.

By the end of August, Edina's liquor stores had surpassed sales as of the same time last year, even though its busiest store was closed six weeks for remodeling. Lakeville, which has the state's biggest municipal liquor operation, has seen sales increase about 6 percent so far this year. Richfield's sales are up about 8 percent, and Brooklyn Center is seeing a rebound in sales as stores continue to recover after three flat years during the recession.

Managers said savvier marketing of monthly specials and a craze for craft beers are driving sales.

"People are realizing that they still need to socialize, but they might not be going out and being as lavish as they used to be," said Brenda Visnovec, Lakeville's liquor operations director. "They're socializing at home with family and friends ... "

Craft beers have become a hobby, much like wine has been, she said. "People are drinking less by volume, but they're buying something more expensive."

City liquor managers are cautious about forecasting a record year, saying that much depends on the coming holiday season, traditionally the busiest time for municipal liquor stores. Everything from bad weather to how many Fridays there are in a month can skew month-to-month sales.

But so far this year, customers who are watching for value, buying in bulk and willing to spend more for what's perceived as a quality product are pushing sales past the usual 3 percent to 4 percent annual gain.

"The trend in August was very, very good ... [but] I don't want to be too giddy," said Steve Grausam, Edina's liquor operations director.

Edina's busiest liquor store, near Southdale, last year became the first municipal liquor store in Minnesota to do more than $6 million in business, Grausam said. The store was closed for six weeks while the layout was changed to increase visibility and improve traffic flow, and a tasting area and display case were added.

By the end of August, the city's liquor operation had recouped what it had lost during the store's closure and still outstripped last year's gross sales by $11,000.

"Edina is a little bit different," Grausam said. "Younger communities may have residents who are more cash-strapped. We're lucky that we maybe haven't had as many financial difficulties."

In Lakeville, craft beer sales is the trend that grabs Visnovec's attention. The store has a Brew Club whose members receive advance notice of specials. They are passionate about craft beer, she said.

"It's incredible," she said. "We put out a blog saying we received Voodoo maple bacon-flavored beer, and we sold ten cases within an hour. ... The bottles retailed at around $15 each, and people were buying the limit."

Brew Club customers come from as far away as Plymouth, Visnovec said.

"People are not real brand-loyal; they want the latest and greatest," she said. "They like to feel like they're special, and they're willing to travel for that."

In Richfield, too, craft beers "are huge," said Bill Fillmore, municipal liquor operations manager. But people are buying nice wines, too.

"It's been a particularly good year," he said. "We've had a lot of people from out of town, a lot of out-of-state travelers."

People have been price-sensitive for years, Fillmore said, but a warm spring spurred sales of "white goods" like gin, vodka and rum, and those are still going strong. Customers are willing to pay a higher price for something like craft beers.

"People perceive that the economy has gotten a bit better, or they finally got jobs," he said.

Tight margins

Brooklyn Center residents are still looking for good deals, said Tom Agnes, the liquor operations manager. He's hoping for a 3 percent increase by the end of the year.

While 45 percent of the product sold in Edina is wine, in Brooklyn Center beer makes up almost half of sales. That market is split between premium and cheap beers. But flavored vodka also is popular and people are crazy for a monthly Minnesota craft beer special, said Agnes.

"I think when it comes to liquor, it's like groceries, they're going to buy it," he said. "But we used to go through a case of Dom Perignon [$169 a bottle] in a year. Now we go through half a case a year."

In the end, what matters to cities is not so much sales volume as the profit they can spend on parks, fire engines and other city needs. Liquor store managers said they're braced for price increases on wine, beer and spirits, all linked to poor grape and grain crops. They are hoping those price increases don't hit before the holiday season.

"That's still our goal," said Grausam. "Each and every year we want to make more money."