Austina Geiger moved to Isanti two years ago from Roseville, where she enjoyed shopping at a Total Wine & More outlet and wondered whether she would have to make a 36-mile trip back to it for bargains on wine.
Not long after arriving, she asked John Jacobi, manager at the municipal-owned Isanti Liquor, if he could stock Double Dog Dare boxed wine, which she used to pay $12 for at Total Wine. Jacobi ordered the wine and priced it several dollars cheaper.
“He was not only competitive but undercut Total Wine’s price,” Geiger said. “I was amazed.”
Six years after the arrival of the Total Wine superstore chain in the Twin Cities, the region’s liquor retail business has been upended. Now with eight locations around the Twin Cities, Total Wine’s vast selection and ultralow pricing drove some competitors out of business and dented the financial performance of many others. The victims included city-owned stores whose proceeds allowed local officials to boast of keeping tax collections down.
Now a surprising turn can also be seen. Thanks to a quirky Minnesota liquor law, some liquor stores in the state have found a way to beat Total Wine at its own game. The law requires that all alcohol products must be made available to all retailers in the state, including the private labels that Total Wine uses to drive its highly profitable business model. The result: all Minnesota’s liquor stores could stock the wines and spirits that Total Wine sells exclusively in most other markets.
“Total Wine helped me tremendously,” Jacobi, the Isanti Liquor manager, said.
When a customer wanted Marchese Dell’Elsa Moscato d’Asti, which Total Wine sells for $13, Jacobi ordered it and found he could price it at $8 and still make a good profit. “I’m building customer loyalty and still making my normal 50% markup,” he said.
Ed Cooper, a spokesman for Total Wine, declined to comment on its pricing or competition in Minnesota. “Much of what you ask is proprietary information that we would rather our competitors not know,” he said.
Minnesota’s complex liquor laws were designed to ensure room for mom-and-pop sellers of alcohol products and to let municipalities enter the business if they wanted. As a result, the Twin Cities has a hodgepodge of alcohol retailing. Shoppers can cruise from a suburb with only municipal stores to one next door with an expansive range of private sellers.
When the superstore arrived in Minnesota, its executives were aware and wary of the state’s prohibition on exclusivity in alcohol products. The retailer’s former chief executive, David Trone, called them “very unusual” in 2015.
But even before then, he believed the structure of the state’s liquor retail industry had created a pricing bubble that Total Wine could pop and still make a lot of money. “We believe the pricing is too high without much competition,” Trone said in a 2013 Star Tribune interview. (He stepped back from the company in 2016 and was elected a Democratic congressman from Maryland in 2018.)
Even some of Total Wine’s local competitors agreed with Trone’s view of the market back then.
“Historically, the Twin Cities, especially the municipal stores, had high prices five years ago,” said John Wolf, who started Liquor Boy in 2012 on an everyday low-price model. Recently, he transformed Chicago Lake Liquors in Minneapolis to a similar concept.
The law also lets any Minnesota liquor store sell private label alcohol from other big retailers like Costco, Trader Joe’s or Target. But those big-box retailers have smaller margins on their products than Total Wine does, store owners said, making them less lucrative to stock.
Total Wine’s sourcing and pricing model creates more room for other liquor stores to make money.
One key element is that store salespeople steer customers to wines that have the biggest profit potential. Those are usually labels with which Total Wine has an exclusive relationship in other markets and marks with a yellow tag that says “Winery Direct.”
In a survey by the Washington, D.C.-based nonprofit Checkbook and the Star Tribune in Total Wine stores in Eagan, Bloomington, Boston, Arlington, Va., Cary, N.C., and Pleasant Hill, Calif., a salesperson was asked for four different wine recommendations for a party. All 24 wines offered by Total Wine staff had the yellow tag. No national brands were suggested.
Winery Direct items account for six of the 15 bestsellers at St. Anthony Village Wine & Spirits, said Mike Larson, operations manager. The firm has locations in St. Anthony and Silver Lake that both experienced sales declines after Total Wine’s arrival.
Over the past year, sales of Total Wine’s exclusive items elsewhere rose about 20%. “Our business is nowhere near what we were prior to Total Wine but we were up $290,000 last year,” Larson said.
Retailers far beyond the Twin Cities are also reaping benefits of carrying Total Wine’s products that are exclusive elsewhere.
Longville Lakes Bottle Shop, a municipal store three hours northwest of Minneapolis, started carrying Total Wine’s products about two years ago when Twin Cities residents heading north to their lake cabins started requesting them.
“We’re a town of 156 but we do $1.2 million in sales a year because of my customers from the Twin Cities,” said Nancy Raines, manager of Longville Lakes. “In the summer time those customers are saying ‘I pay $23.99 for this in the Cities and you’re selling it for $17.99.’ I can sell them products for a lot less because I don’t need a 150% markup.”
The independent liquor stores and municipal shops that carry Total Wine’s exclusive-elsewhere products usually stock about 25 to 30 of its bestsellers. The selection expands with customers’ requests.
Brenda Visnovec, manager of Lakeville municipal liquor stores, was one of the first to confront Total Wine’s inventory and prices head on. She posts Lakeville’s Total Wine’s prices on the shelf next to her store’s prices.
“We took Total’s experience and turned it in our favor,” she said. “Our sales were up 50% for their items in 2019 and our overall sales for the year are up by more than $1 million. We’ve increased our profitability learning from Total and all of those proceeds go back to the community.”
Only a few stores are willing to compare their prices and Total Wine’s so directly. Total Wine lowered its prices on some items in its Burnsville store to compete with the nearby Lakeville stores, but Visnovec didn’t budge.
Now that Total Wine’s labels are more well-known by consumers, retailers such as Liquor Boy, Chicago Lake and some muni stores advertise “their price” and “our price” so as not to call attention to a fierce competitor.
Some Twin Cities liquor retailers have avoided competing with Total Wine’s exclusive-elsewhere products and are recovering more slowly from its entry in the market.
Edina’s three municipal stores saw a dramatic decline in profits after Total Wine opened in Bloomington at the end of 2014, but they have recovered to that year’s $1.4 million profit level and are near to the peak they reached in 2012.
“2019 was a very healthy year,” said general manager Josh Furbish. “We did it by adjusting our staffing models, listening to what customers want, streamlining our buying and beefing up e-commerce and delivery. Together it’s made a significant impact.”
Liquor stores closest to Total Wine tend to be most vulnerable to it. In Roseville, a number of liquor stores have closed and two have opened in the five years since Total Wine opened.
“We had 10 liquor licenses in Roseville when I had my store and now there are six,” said Steve Burwell, who owned Fairview Wines and Spirits before closing it in 2017. Cellars, Love from Minnesota, Hamline Liquors and Tower Glen Liquors have closed or gave up their license.
More Minnesota liquor retailers could order Total Wine’s exclusive-elsewhere products, but it’s not easy to do, Wolf said. “Getting the product is a pain,” he said. “It can take two to five weeks to get and it’s often back-ordered so it’s difficult to maintain inventory.”
Jacobi, the Isanti dealer, said that some liquor-store owners are complacent and afraid of change. “They even think they are helping Total Wine,” he said.
Nadine Babu of St. Louis Park likes the quality and taste of the private labels but usually buys them at places other than Total Wine to save money for holiday and tailgating parties.
“I can easily save $5 or $6 per bottle buying Oak Ridge Winery direct from Liquor Boy,” she said. “I want to give my business to a local company and keep costs in mind, too. It’s a win-win.”