A Cellars’ Market

Establishing a sturdy retail profile isn’€™t getting any easier in the beverage alcohol world, as forces like market fragmentation and the growth of big box stores put poorly-defined shops at the greatest risk.

But operations attuned to change while maintaining their hard-won reputation in the marketplace seem often to have a better time of managing those forces. Change has been a constant for stores operating under the banner of Cellars Wine and Spirits in suburban Minneapolis-€“St. Paul. Ted Reeck, owner of the five Cellars stores, has been actively involved in the evolving beverage alcohol market here for more than 20 years, having run or been part of the management of more than a dozen stores with the Cellars name since 1990.

Finding the correct product balance in the Twin Cities area can be tricky – while Minneapolis-St. Paul has the fifth highest median household income in the country, behind only New York, San Francisco, Washington, DC and Anchorage, Alaska, it is still a relatively modest market, and ignoring any potential customer is risky, Reeck says. ‘€œI don’€™t want to be pigeonholed as a fine wine shop all by itself ‘€“ it’€™s a full-service business and I don’€™t want to lose out on any potential sale.’€

Wherever the Cellars banner has been hung, the philosophy has been the same: savvy product selection, smartly applied buying power, comprehensive staff knowledge and regular consumer education. With these essentials in place, the Cellars have found a way to establish an identity as being attuned to wine and spirit trends while embracing a broad swath of potential customers.

Perhaps the best way to showcase their philosophy comes from the company’€™s website: ‘€œGood taste should cost less’€¦and it does at The Cellars. This single statement guides everything we do at The Cellars. First and foremost, our buyers look for the absolute best offerings in the market and with our immense buying power we negotiate the very best possible price. And, even though our name is The Cellars, we’€™re not in the business of cellaring wine, we’€™re in the business of selling wine. The result? The finest products from around the world at ‘€œout of this world’€ pricing!’€

While Reeck is always willing to make certain the desires of regular customers are met, and continues to stock higher-end wines as needed, his sales approach is more focused on creating volume at the mid-range, at least when it comes to wine.

‘€œI have to have what I call eye candy wines for some people, but if you sell only one case of an expensive wine as opposed to 25 cases of a $20 wine, well, you can see what’€™s more important to me. I want some of it [the high end] and I want my customers to have access to it, but it’€™s not a huge profit center.’€

‘€œNiche wine shops must depend on a sophisticated audience and they don’€™t seem to work here. Maybe we’€™re too small of a market, and they’€™re too small for their buying power to let them take advantage of pricing, but I’€™ve always believed you have to do it all ‘€“ beer, wine and spirits ‘€“ to make it in this market.’€

In some ways, while the Cellars retail approach is dynamic, it could also be considered slightly old-fashioned in the age of social media.

‘€œI have my own way of doing things,’€ says Reeck, referring to the method he uses to market his promotions through direct mail to a well-established, store-grown database, and via television and newspaper ads.

Annual Event Sales

Those annual event sales are crucial to the public perception of the Cellars units. Twice yearly, in January and July, the Cellars stores offer what Reeck calls their progressive wine sale. Starting on the 20th, discounts kick in on all wines and continue to increase ‘€“ 20% off starting on the 20th and increasing 1% daily and so on until the end of the month. Bargain hunters must pick and choose, deciding whether to buy now or wait until the prices decrease, though since no restocking occurs during the sale, that’€™s a gamble for them

‘€œIt’€™s fun to watch customers come in, work the sale and figure it out,’€ says Reeck. ‘€œThey want to squeeze every percentage out of the sale, but if they come in the next day and it’€™s sold out, they’€™re out of luck.’€

‘€œIf you restock during the sale it wouldn’€™t work, but it’€™s fun to run out of items. Our customers enjoy it to a large extent and it’€™s well shopped, and while it gives me a chance to clear out inventory that’€™s not doing so well, it’€™s also developed into a profitable sale.’€ Until recently only vintage items were part of the promotion, but Reeck is considering including all wines going forward, and he’€™s trademarked the concept to protect it in his market.

The Cellars other major biannual sale, the ‘€œEquinox/Odd Bins’€ promotion, held as the name suggests around the 21st of April and September, gives Reeck a chance to push brands that the stores have taken a major position on, and to present wines that need to move out of vintage or even that could benefit from being shown in two vintages at a time. Here the local suppliers come into play, as Reeck looks for vintages heading out of supply, providing a great way for wholesalers to clean out their warehouses while promoting a brand. ‘€œIf they give a little on the brand and it makes its way into the store for the sale, it’€™s worth it for them and me,’€ he says.

Sales like these often depend on the Cellars purchasing power for success. ‘€œIt’€™s very important to be able to buy when the opportunities are there and take advantage of them,’€ Reeck says, noting that building wholesaler and supplier relationships helps him uncover volume bargains that he can pass along to customers.

Cellars eschews many of the other sales and promotional tools ‘€“ Reeck sees loyalty program and senior discounts as ineffective. ‘€œMy brands and pricing speak for themselves,’€ he says, noting that when asked about senior discounts, he’€™ll point out that his base price is usually lower than discounted items at competitors.

Currently there are five Cellars in the Minneapolis-St. Paul metropolitan area, in the suburbs of Woodbury, Roseville, Eagan, Plymouth and most recently, Bear Lake. Store sizes vary – Cellars Wines & Spirits of Woodbury, Reeck’€™s oldest store opened in June 1990, is 6,400 sq ft; White Bear Lake, opened barely two years ago, is the smallest at 4,200 square feet, with the others ranging in square footage from 5,700 to 6,800.

The new store at White Bear Lake, while smaller, is developing business well, increasing sales by about 30% per year in the face of competition fairly close by. Reeck sold a store in 2011 when out of the blue he was offered a price he ‘€œcouldn’€™t refuse.’€

Reeck started his foray into beverage alcohol retailing in the late 1980s, when he and partners at that time took over an existing wine and spirits shop. Within a few years, the team had opened two more stores, and while Reeck is now sole proprietor of the five existing Cellars stores, there have been 15 locations along the way.

‘€œOpening more stores was a necessity in the development of the company over the years, and as time goes on, I’€™m aware that it needs to happen if you’€™re going to set yourself apart from the competition.’€

The product mix and volumes in the stores are roughly the same with perhaps a few percentage points variance, says Reeck, who personally oversees all the wine and spirits purchasing ‘€“ he leaves the beer business in the hands of each store manager.

‘€œEven though the stores operate in different areas, I watch the percentage of each category and we average one-third, one-third, one-third. An individual store might reach, say, 40% in beer or wine, but on average it works out that way.’€

Constant Customer Education

With wine selling such a fragmented business only barely dependent on brands, constant customer education takes pride of place at the Cellars. In-store seminars and tastings are well promoted in advance via the company’€™s newsletter and direct mail circulars, with a full annual calendar presented so that planning is simplified for customers. Mini-seminars, held at least weekly at each store, are brief and punchy ‘€“ perhaps 40 minutes long with tasting included. More organized seminars are based on particular topics – Wines Of The Moment, Deck Wines (from Chenin Blanc to Zin!) and Southern Hemisphere Battle being some recent examples ‘€“ and generally fill the aisles in stores. ‘€œWine Lunch Saturdays,’€ a program held from October through May, takes the Cellars’€™ wine education goes on the road to some of the Twin Cities best known chef-driven restaurants.

Store specialists and managers run many of the seminars though guest winemakers and others are occasionally brought. Seminars that garner extra attention in advance will be expanded to allow more attendees, and some regulars are known to arrive in small groups. But since there’€™s no dedicated space, the seminars, which include tastings, can fill the store floor. ‘€œIt’€™s in the heart of everything – it gets crowded but it creates a buzz in the store, which is good for business in the long run,’€ says Reeck, both for the return on investment and as a loyalty building exercise.

‘€œWe see new customers all the time who are hungry to try new stuff ‘€“ that’€™s why the seminars are a beautiful place to bring them the new. They appreciate and are receptive, but in any case, you have to keep things fresh and moving.’€

Other special events include charitable combinations like the recent ‘€œCorks, Cuisine & Conservation’€ event held to benefit a local watershed preservation concern, complete with silent auction and multi course dinner at a fine dining restaurant.

Events like these are especially important to the Cellars’€™ business, as competition, already hearty, has recently been increased by the move into the market of Total Wines and More, which is expected to open a total of seven stores in the state over the next few years. But he’€™s sanguine about the impending impact. ‘€œIt will be interesting how much I feel them. Costco came in as did Sam’€™s Club and their effects so far have been zero for me, so I’€™m not overly concerned.’€

Spirits Sales Vibrant

While the Cellars wine business evolves, the spirit side is vibrant as well, though a major concern is managing the flood of new products and maintaining the correct product mix, Reeck says. ‘€œThere are so many new items coming out constantly on the spirit side that it’€™s getting to the point that you can only carry so many things and have to say ‘€œno more.’€™ I can now be picky about what I do ‘€“ there’€™s a cost of admission, and the quality must be good compared to its peers, but suppliers need to make it worth my while, work with me and help me sell.’€

Minnesota being one of the few states with an open market law, wherein retailers can buy the same product from different vendors, Reeck can pick and choose his deals for established brands, but that doesn’€™t make new decisions easier.

‘€œI don’€™t want to look a guy in the eye and say ‘€˜Sorry, you’€™re out,’€™ but it’€™s a decision that has to be made; when there are too many single facings of everything and there’€™s a collage of products on the shelf, it doesn’€™t work.’€ Of course, he buys to stay current with trends ‘€“ as a store known for single malt Scotch selection, he sees the changes even in that fairly staid category ‘€“ but without growth or continuing support from vendors, products are frequently cut.

This is where the Cellars’€™ long-standing supplier relationships are important. ‘€œOnce I have a relationship with a supplier and they support what I’€™m doing, that makes it easier and their brands will get a little better consideration than the guy who walks in and says ‘€˜Here’€™s my brand, put it in,’€™’€ he says, noting that without back-end support, even the most heralded new brands must perform quickly in his stores.

But even good relationships won’€™t convince him to add new products if he doesn’€™t like what he’€™s tasting. ‘€œIf I don’€™t approve of the quality, it doesn’€™t matter how good my relationships are, shelf space is so tight you can’€™t spin your wheels no matter how good a relationship is.’€

Reeck says the Cellars are always open to expansion and new units, and would love to find a space at the right price in Minneapolis proper. Just as in his stores, he has found that change is inevitable in beverage alcohol retailing. ‘€œRight now I have five stores, but who knows? It might be eight by the same time next year or it might be four.’€

The Hoppier, The Better

For the five Cellars stores operating in the suburbs of the Twin Cities, the main concern when it comes to beer is finding the correct balance between customers’€™ ever-changing enthusiasms and what will become a steady seller.

‘€œOur general rule of thumb is that we can sell a few cases of anything, but people today are so interested in moving around, trying new things and finding new brands, that it’€™s new, new, new, all the time,’€ says Rod Olson, store manager of the Roseville unit.

The Cellars owner Ted Reeck leaves beer buying decisions to each individual store manager, and Olson says that works well on the individual unit level. The national explosion of craft brews, mirrored in Minnesota and the upper Midwest area as new breweries come on line one after another, has made it an exciting if dizzying time to be a beer buyer.

With more than 2,000 skus of beer and cider stocked in the Roseville store, Olson says these days it’€™s the hoppier, the better for his customers. ‘€œWhen a new brewer comes into the market, the distributors will ask them what they have in the hoppier end, and if they don’€™t have something, their chances aren’€™t so good of getting in,’€ he says.

Besides a rapid churn in new brews and a taste for hops, locals have shown to be a good market for ciders, Olson says ‘€“ his current count has reached more than 50, and all of them selling well. So, too, do 750 ml bottles of many brews. ‘€œBombers do really well for us ‘€“ someone can buy a four-pack of something rare and pick up two of the pricier bombers and we ring up $80 for what is about a six pack of beer.’€

And while many stores are turning their backs on imports, Olson says the Roseville locations continuing emphasis on quality and rare European brews has made him friends among that sector of beer buyers drinkers.

Of course, all these ever changing brands means fewer double facings and more tumult in the beer aisle, with monthly resets not uncommon, but Olson says change is good. ‘€œI have enough space to do whatever I want here, and we’€™re always open to something new.’€

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