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Beer Growth Brands

While the beer category has seen consistently modest growth for several years — with consumption increasing incrementally from 2,621 million 2.25-gallon cases in 1996 to 2,825 million 2.25-gallon cases in 2002 — total beer consumption decreased 0.2%, to 2,818 million cases, in 2003. According to the Adams Beer Handbook 2004, the slight overall volume decrease included a 0.5% decline in domestic beer and a 2.2% increase in imported beer. As would be expected, these compare unfavorably with 2002 figures, when imported beer gained 6.0% and domestics were up 0.7%. Still, beer sales continued to climb, with total dollar volume increasing by 4.9% in 2003 to approximately $78.1 billion nationwide. This suggests that most brewers are successfully holding the line on pricing, as well as underlining the continued impact of higher-margin malt-based products.

“Low-carb” emerged as the marketing mantra over the past year, with a few product introductions following on the heels of Michelob Ultra’s successful debut as the first so-called “low-carb” brew late in 2002. Labatt’s Rock Green Light and, more recently, Coors’ Aspen Edge, joined the “low-carb” sub-segment. But Miller made the most noise with a hard-hitting ad campaign declaring that its flagship Miller Lite has been a low-carb product all along. And it worked. Sales of Miller Lite climbed in the marketplace in 2003, reversing three straight years of declines. This instigated an equally hard-hitting ad campaign from Anheuser-Busch stating that, in fact, all light beers, including Bud Light, are low in carbs. And so it goes, with Miller and A-B continuing to slug it out over the airwaves.

The “malternative” revolution of the past few years slowed considerably in 2003, with some of the original successful brands taking major hits. For example, Smirnoff Ice, which exploded on the market with more than 20 million cases in 2001 and more than 23 million in 2002, lost about 8 million cases to just over 15 million in 2003. But the brand made up for the loss with the introductions of Smirnoff Ice Triple Black (6 million-plus cases) and Smirnoff Twisted V (1.3 million cases) in 2003.

Overall, though, beer industry trends have maintained the same course for a number of years. The light beer category continues to do the industry’s heavy lifting, comprising more than 47% of all beers consumed in the U.S., led by the seemingly indomitable Bud Light, which continues to increase sales and remains the best-selling beer in the U.S. by far.

Sales of superpremium and micro/specialty beers slowed last year, following a double-digit percentage gain in 2002 (though off a small base). Meanwhile, the premium, popular, malt liquor and ice beer segments continued to see their market shares decline.

BRAND EQUITY

Still, as we’ve said here before, while identifying general trends comprises an important element in evaluating the health of an industry, brand equity remains the cornerstone of the beverage industry. Through the economic uncertainty and brewing industry consolidation of the past few years, as well as always-fluctuating consumer tastes, specific brands of beer have grown their business more than others. A melding of resources, creativity, perseverance, the right economic environment and just plain luck often go into creating and developing a successful brand, and still, it remains somewhat of a mystery. Indeed, there are beers in every category and at every price point that, for a variety of reasons, have either fallen behind or outpaced their respective competitors. And although identifying category consumption trends is helpful, actual brand activity is what generates profits. Thus, the rationale behind “Beer Growth Brands,” which uses the latest industry results to highlight those brands that have demonstrated noteworthy increases over the past few years.

Fast Track Brands

Domestic Brands must have exceeded 9 million 2.25-gallon cases in 2003,
and imported brands/microbrews must have exceeded 1.5 million 2.25-gallon cases in 2003,
with double-digit growth over each of the past four years.
(000 2.25-Gallon Cases)

BRAND SUPPLIER 1999 2000 2001 2002 2003 % CHANGE ACGR*
Yuengling Traditional Lager Yuengling Brewery 7,300 9,000 13,860 16,336 18,100 10.8% 25.5%
Modelo Especial Barton Beers/
Gambrinus
4,300 5,248 6,657 7,759 9,268 19.4% 21.2%
Corona Light Barton Beers/
Gambrinus
3,700 4,626 5,823 6,979 8,142 16.7% 21.8%
Michelob Amber Bock Anheuser-Busch 3,000 4,000 4,500 5,570 6,300 13.1% 20.4%
Newcastle Brown Ale Scottish & Newcastle
Importers
3,089 3,475 3,953 4,391 5,093 16.0% 13.3%
Stella Artois Labatt USA 68 232 490 981 1,568 59.8% ++

++ Greater than 100%. *Annual Compound Growth Rate

There are four categories of Growth Brands and the Fast Track represents the most demanding set of criteria. Domestic beers included in the Fast Track must have exceeded 9 million 2.25-gallon cases in 2003 with double-digit percentage growth over each of the past four years. Imported (and micro/specialty) beers included in the Fast Track met the same criteria, with their sales having exceeded a lower threshold of 1.5 million 2.25-gallon cases in 2003. All Fast Track Brands must have at least a five-year history.

Established Growth Brands

Top-selling brands that have grown moderately or substantially over the past four years.
Brands must have exceeded 3 million 2.25-gallon cases in 2003.

(000 2.25-Gallon Cases)

BRAND SUPPLIER 1999 2000 2001 2002 2003 2002-2003
% CHANGE
1999-2003
ACGR*
Bud Light Anheuser-Busch 395,000 436,000 469,500 505,000 517,000 2.4% 7.0%
Natural Light Anheuser-Busch 106,000 110,500 113,000 113,500 115,000 1.3% 2.1%
Corona Extra Barton Beers/
Gambrinus
65,500 74,000 85,119 91,224 96,105 5.4% 10.1%
Busch Light Anheuser-Busch 70,500 72,500 75,500 78,300 80,500 2.8% 3.4%
Heineken Heineken USA 47,000 54,000 56,800 62,400 62,500 0.2% 7.4%
Keystone Light Coors Brewing 28,920 31,480 33,100 35,820 39,800 11.1% 8.3%
Natural Ice Anheuser-Busch 26,000 29,500 30,900 32,500 33,500 3.1% 6.5%
Tecate Labatt USA 8,943 11,024 12,019 13,109 13,464 2.7% 10.8%
Guinness Stout Diageo-Guinness 9,579 10,035 10,684 10,715 10,987 2.5% 3.5%
Amstel Light Heineken USA 6,000 7,100 8,500 9,770 9,980 2.1% 13.6%
Sierra Nevada Pale Ale Sierra Nevada Brewing 5,264 6,032 6,626 7,106 7,165 0.8% 8.0%
Miller High Life Light Miller Brewing 3,800 3,900 4,300 4,900 6,200 26.5% 13.0%
Labatt Blue Light Labatt USA 2,301 3,260 4,160 5,067 5,482 8.2% 24.2%
Dos Equis Labatt USA 3,988 4,424 4,861 4,997 5,337 6.8% 7.6%
Pacifico Barton Beers/
Gambrinus
1,791 2,797 3,323 3,414 3,849 12.7% 21.1%
Fat Tire Amber Ale New Belgium Brewing 1,695 1,947 2,658 2,979 3,233 8.5% 17.5%

*Annual Compound Growth Rate

Other brands that have shown significant growth over the past few years, but have not yet been on the market for a full five years, have been designated as Rising Stars.

Rising Stars

Brands less than five full years of age that have exhibited notable growth over the past few years.

(000 2.25-Gallon Cases)

BRAND SUPPLIER 2000 2001 2002 2003 2002-2003
% CHANGE
Michelob Ultra Anheuser-Busch – – – – 5,900 41,000 ++
Smirnoff Ice Triple Black Diageo-Guinness – – – – – – 6,395 – –
Seagram’s Smooth United States Beverage – – – – – – 6,000 – –
Bacardi Silver O3 Anheuser-Busch/Bacardi – – – – – – 2,500 – –
Smirnoff Twisted V Diageo-Guinness – – – – – – 1,285 – –
Bacardi Silver Raz Anheuser-Busch/Bacardi – – – – – – 1,000 – –
Rock Green Light Labatt USA – – – – – – 523 – –
Warsteiner Premium Dunkel Warsteiner Importers 52 72 182 208 14.3%

++ Greater than 100%

In addition, in order to highlight traditionally top-selling beers that have consistently grown over the past four years, we’ve created an Established Growth Brands category. Because many of these brands are already operating from huge sales bases, their percentage gains are often modest relative to their overall case volume, even though these brands have had substantial sales increases and are often leaders in their respective segments. As in the Fast Track category, there is a threshold difference between domestic beers and import/craft brews.

Comeback Brands

Brands that have rebounded in sales to at least the previous level after a recent decline.

(000 2.25-Gallon Cases)

BRAND SUPPLIER 2001 2002 2003 2002-2003
% CHANGE
Miller Lite Miller Brewing 217,000 214,500 217,000 1.2%
Warsteiner Warsteiner Importers 1,442 1,434 1,499 4.5%

Finally, there are brands that we have termed Comeback Brands, which are traced back only three years. This means that a Comeback Brand must have experienced a sales decline in 2002 (compared to 2001) but will have rebounded in 2003. Importantly, the 2003 sales rebound must at least equal (or better) the sales levels in 2001 from which the brand had declined. *

Growth Engine


When it comes to growth, imported beer is the big engine that does. 0204ge

When you think of institutions that symbolize reliability, a few come to mind. Swiss trains are known for their punctuality. The Royal Canadian Mounted Police always get their man. “Neither snow, nor rain, nor heat, nor gloom of night” keeps the US Postal Service from delivering the mail.

Add imported beer to the list. Not a war, nor an economic downturn could stop the imported beer category from posting significant growth last year. While other industries were left in disarray by events last fall, sales of imported beer slowed temporarily while the nation reflected, then not only recovered, but surged in the final weeks of the year.

The category finished the year with sales of an estimated 23.8 million more cases than the year prior, a gain of 8.6%, according to Adams Handbook Advance 2002. While slightly lower than its typical annual growth of about 10%, within the category were stellar performances by a number of brands. The top 10 brands alone posted average growth of 11%.

The economic downturn seems to have had little effect on imported beer sales.

“If there ever was a business that is almost recession-proof, it’s imports,” said John Lennon, president of Beck’s NA. “They’ve experienced only one down year in nearly 20 years since I’ve been in the business, and that was in 1991 when the federal excise tax doubled.” Corona

“Consumer fundamentals haven’t changed,” agreed Bryan Semkuley, vice president of marketing at Labatt USA. “Their choices are still based on quality and heritage.”

Even domestic beer prices have held in the face of the downturn, and some brewers are talking about raising them even more. If industry leader Anheuser-Busch raises prices, then some imports, especially those already more competitively priced, may be likely to do so, too.

“The pricing environment will be interesting in context of the economy and people being laid off,” said Steve Davis, vice president of marketing at Heineken USA, “but it’s not like a new Mercedes. Imported beer is still affordable. If domestic beer pricing goes up significantly, that opens up a lot of opportunities to either raise import prices or get more competitive.”

The slow-down in travel since September has had some effect on brands that rely on on-premise sales. Consumers are eating out less, so on-premise sales have suffered. Off-premise sales may be even stronger as a result, however, as more people stay close to home.

“From the consumer brand standpoint, things are getting back to normal,” said Don Mann, group director, Modelo brands at Gambrinus Co. “But September 11th affected on-premise sales much more than off-premise, and smaller brands were more likely to be affected. Corona, for example, now sells 75% of its volume in off-premise, so it hasn’t hurt us much.”

Southerly Neighbors

Corona, in fact, was on fire last year, and continued to drive the category. Sales of Corona Extra were up 14.9%, giving the brand as much incremental case volume as the next nine import brands combined.

“In 2000, our growth slowed a little, and people thought it was the end for us, that we’d hit a saturation point,” Mann said, “but last year and this year we’re back with double-digit growth again.”

Corona’s success has been due, in large part, to a very consistent strategy that has changed little in 20 years. It also has benefited from a growing Hispanic market. What is different is the increasing amount of support the brand has gotten as it has grown.

“It’s nothing revolutionary,” said Bill Hackett, president of Barton Beers, Ltd., “just evolutionary, and we’re spending more money to fund both local and regional programs, as well as enhancing our communication with retailers.”

“Corona’s positioning is somewhat different in that it not only competes with imports but domestics as well,” Mann said. “It’s a casual import. That positioning is time-tested and as unique as ever, so we’ll continue to refine and polish what works for us.”

The brand will enhance its sponsorships, including its 18-year association with Jimmy Buffet, the CART racing series, and motorcycle racing, with incremental spending and local market programs. In western states, for example, it sponsors a program that supports Hispanic artists.

Corona Light is on an even faster track. The brand grew more than 30% last year, demonstrating that consumers are embracing what was once considered a non sequitor, imported light beer. Much of the focus will be on Corona Light this year as both Gambrinus and Barton take it to the next level.

Marketing efforts will include an expanded outdoor campaign, first-ever print ads and new radio and TV ads that kick off this spring. The brand’s theme — “miles away from other light beers” — will be expanded in an early summer promotion that will feature a humorous light beer challenge.

LEADING IMPORTED BEER BRANDS

(000 2.25-Gallon Cases)

BRAND SUPPLIER COUNTRY OF ORIGIN 2000 2001p
% Change
Corona Extra Barton/Gambrinus Mexico 74,000 85,061 14.9%
Heineken Heineken USA Netherlands 54,000 58,000 7.4%
Labatt Blue Labatt USA Canada 14,106 15,269 8.2%
Tecate Labatt USA Mexico 11,024 12,026 9.1%
Guinness Stout Guinness UDV Ireland 10,035 10,690 6.5%
Foster’s Lager Miller Brewing Canada 8,956 10,196 13.9%
Beck’s Beck’s North America Germany 7,938 8,135 2.5%
Amstel Light Heineken USA Netherlands 7,100 8,000 12.7%
Bass Ale Guinness UDV UK 7,338 7,690 4.8%
Modelo Especial Barton/Gambrinus Mexico 5250 6,656 26.8%
TOTAL LEADING BRANDS 199,747 221,723
11.0%
OTHERS 77,603 79,427
2.3%
TOTAL IMPORTED BEER 277,350 301,150
8.6%

(p) 2001 Preliminary.
Source: Adams Handbook Advance 2002

Grupo Modelo’s other brands, including Modelo Especial, Pacifico and Negra Modelo, also continue to grow at a brisk double-digit pace. Modelo Especial has moved onto the top-ten bestseller list with a 26.8% jump in volume last year. Supported by a strong outdoor campaign, the brand is beginning to take root with consumers outside Hispanic communities. Both Pacifico and Negra Modelo will spend more heavily this year on existing programs. Negra Modelo is even looking at the possibility of a new campaign later this year.

Tecate, imported by Labatt USA, saw respectable growth of 9.1% last year, making it the fourth largest import. Growth was slower than in recent years due to price increases, according to Semkuley, but the brand is back on track this year. The brand focuses on the Hispanic market through programs that support soccer, music, CART racing and fiestas. New “Chicas Tecate” point-of-sale for all these programs features something as near and dear to Tecate drinkers’ hearts as soccer — beautiful Mexican ladies.

Dos Equis also saw double-digit growth last year and will continue its recent “Explore” campaign that capitalizes on the brand’s trademark red XX. Promotions this year will include “Cancun Adventure” and “Adventure Indexx” consumer sweeps that will offer chances to win Cancun trips and a Dos Equis edition Jeep Liberty.

Labatt USA’s other Mexican brand, Sol, will position itself more distinctively from Corona this year with programs focused on Cinqo de Mayo and the summer solstice in key markets.

Heineken, though pushed into the number-two import spot by Corona a few years ago, is still a formidable force in the category. Slower growth of only 7.4% last year still added up to about one-sixth of the category’s incremental volume.

“When people tighten their belts and don’t travel or go out as much, it has an effect,” said Davis.

Because of that, Heineken is focusing this year on making the brand more relevant to more consumers on more occasions and giving them more opportunities to purchase the product.

“We’re expanding channels beyond on-premise to more off-premise locations like grocery stores, c-stores and gas stations,” Davis said. “We have more packages for more occasions, like our new 24-pack keg-can case. This summer we’ll launch a new 24-ounce keg can.”

Promotions this summer will focus on the keg can with party themes that run from Memorial Day through Labor Day. Write-in offers will give consumers a chance to get coolers, tubs and other party-related merchandise.

For ethnic markets, the brand has tied in with VH1 to produce compilation CDs featuring a variety of urban music groups.

Amstel Light is now in its fourth year of a successful turnaround. The “Utopia” program — an intense focus on programs in key markets — has contributed to strong double-digit growth, including a 12.7% gain last year. Already in a dozen markets, the program will roll out to a few more this year.

Guinness and Bass both posted strong single-digit gains last year. Both brands are getting new ad campaigns this year to build on the consumer base they’ve established.

Guinness has had tremendous success with its Guinness Draught widget bottle, giving consumers yet another way to enjoy the product. The brand’s “Join The Guinness Party” program is wrapping up on St. Patrick’s Day. Encouraging consumers to “Party Like The Irish,” the brand hopes to remind people what the essence of being Irish is really about. 6803PRD10

The long-running Great Guinness Toast moved to November from February and is tied to a pay-per-view concert featuring the Bare Naked Ladies.

For its part, Bass has debuted vibrant new packaging, and is sponsoring a spring promotion that features an on-pack special edition of “Outside” magazine.

German beers had weaker performances last year than some others, but still posted positive gains. Beck’s remains in the top 10 with a 2.5% volume increase. St. Pauli Girl, too, had record sales volume last year. Lowenbrau, reformulated and repositioned after being acquired from Miller Brewing by Labatt USA two years ago, is still struggling, but is starting to show potential. Specialty beers like Paulaner and Warsteiner have been affected by the decline in on-premise business. TecateCC

Beck’s, though recently acquired by Interbrew (parent of Labatt USA), continues to pursue it’s “Build Beck’s” strategy, concentrating more heavily on its top 10 markets. The brand is by no means ignoring the rest of the country. After its recent Valentine’s Day promotion, upcoming national programs still include Beck’s $10 million summer “Putt & Win” contest and golf sponsorship, Formula One racing program supported with a specially designed can, and Oktoberfest.

A new ad campaign breaks in April, along with redesigned, more elegant long-neck bottles. New radio and television ads for Beck’s Light have helped Beck’s, too. Media buys will shift focus from concentrated buys on ESPN to more spot buys that extend the brand’s reach in major markets. 6803PRD23

St. Pauli Girl will capitalize on its annual selection of a new brand representative with a media tour to supplement the traditional poster program. This year’s pick, 1999 Playboy Playmate of the Year Heather Kozar, will do media interviews throughout the year.

Lowenbrau is positioning itself as a German biergarten in a bottle. This summer the brand will encourage consumers to replicate the experience at backyard barbecues, offering grills and other barbecue-related merchandise to retailers as display enhancers and consumer incentives. For Octoberfest, the brand will be offering a trip to Munich.

The Beverage Dynamics National Retailer Wine Panel recommends a lineup of top quality/value merlots.


Retailer Wine Selections

0204retThe Beverage Dynamics National Retailer Wine Panel recommends a lineup of top quality/value merlots.

Generally speaking, merlot’s rich fruit and soft texture is driving it toward becoming one of the red wines of choice for American consumers. With this in mind, we asked members of the Beverage Dynamics National Retailer Wine Panel to recommend some merlots they have recently tasted. As always, these selections include brief tasting notes, a rating and the wine’s suggested retail price (which varies from market to market).

— Richard Brandes

Rating System

* * * * * Five Stars (92-100) A top-flight wine. Superior in taste and character and providing an outstanding price/value relationship.

* * * * Four Stars (86-91) A very good wine and an excellent value. A wine for which customers will keep coming back.

* * * Three Stars (80-85) An above-average wine, at a reasonable price point, which many customers will enjoy.

* * Two Stars (70-79) An average wine.

* One Star (50-69) A below-average wine.


MERLOT

*****
FIVE STARS

6803WINE1 ***** (94) Chateau St. Jean 1999 Sonoma Merlot (California). Lots of red currant and berry fruit; big and lush; layered nicely at the end with vanilla and toasty oak; not a merlot for the shy. ($24)


EdgewoodLORES***** (93) Edgewood 1998 Napa Valley Merlot (California). Silky and accessible with tiers of bright berry flavors, lots of complexity and a seamless finish; Napa merlot at its best. ($25)


***** (93) 1998 Chateau Picampeau, Lussac St. Emilion (France). Born in the clay and limestone soils on the hills north of St. Emilion, this wine is a pleasure to drink; blend of 80% merlot and 20% cabernet sauvignon, it has flavors of cassis and blueberry and velvety tannins; wonderfully rounded and most enjoyable. ($15)


***** (92) Swanson 1999 Napa Valley Merlot (California). Currant, cherry and cedar, from the noticeable, firm tannins; concentrated anise and black olive and bittersweet chocolate on the finish; balanced with a depth of flavors. ($28)


***** (92) Forman 1999 Merlot (California). This intensely flavored wine delivers the goods; deep purple in color, it offers plenty of sweet black cherry and berry fruit; full-bodied with low acidity, this wine is very good now and over the next 7-10 years. ($40)


6803WINE2***** (92) Rodney Strong 1997 Alexander Valley Merlot (California). Looks good; smells good; tastes good; rich plum and cherry; dense; big but elegant with a long, lingering finish; not many better California merlots. ($26)


***** (92) Chateau Ste. Michelle 1998 Cold Creek Vineyard Merlot (Washington State). Packed with fruit showing focused flavors of currant and sweet black cherry; hints of spice and vanilla add interest to this well-balanced merlot. ($28)


***** (92) Canoe Ridge 1999 Columbia Valley Merlot (Washington State). Bright and forward with distinctive cherry and black currant flavors; dense flavors linger on the finish; approachable now and will develop with cellaring. ($25)


***** (92) Sterling 1997 Reserve Merlot (California). Full-bodied with well-integrated tannins; berry flavors round out this medium-weight merlot. ($70)


Columbia***** (92) Columbia Crest 1998 Columbia Valley Reserve Merlot (Washington State). Complex flavors of blackberries, mocha, cloves with a sweet cedar-oak wood taste; a long, smooth finish; a terrific wine. ($25)


****
FOUR STARS

**** (91) 1999 Geyser Peak 1999 Sonoma County Merlot (California). A wine of unmistakable quality; the stylish yet rich, it begins and ends with a persistent flow of delicious black fruit flavors; nicely textured, this wine is superbly satisfying on the palate; reasonable price point; best served 2002-2003). ($19.50)


**** (91) Cold Water Creek 1999 Napa Valley Merlot (California). Succulent and polished with classy plum and blueberry flavors; plush, ripe tannins. ($15).


**** (91) 1999 Chateau Martet, Les Hauts De Martet, Sainte-Foy-Bordeaux (France). This wine hails from a region in Bordeaux not often seen in this country — Sainte-Foy, located close to St. Emilion; the merlot grape sets the tone for this wines wine; soft, juicy and generous, this will be mistaken for a much more expensive wine. ($13)


**** (91) Veramonte Alto de Casablanca 2000 Merlot (Chile). Soft and silky flavors of spicy oak; a real good value; tastes like it’s twice the price. ($10)


**** (90) Carmenet 1999 Dynamite Merlot (California). Ripe and persistent, this wine excels in its presentation of cassis, sweet earth and creamy; elegant enough for coq au vin, and deep enough to hold its own with a generous helping of baby back ribs, there are few meat entrées that would not welcome a chance to be served with this wine; best served 2002-2004. ($17)


**** (90) Falesco 2000 Merlot dell’Umbria (Italy). Deep purple with thick aromas of chocolate, blackberries and cherry; medium-bodied with ripe fruit and sweet tannins that go along with a long lingering finish; a good value to drink now and over the next 5 years. ($17)


**** (90) Marilyn Merlot 1999 Napa Valley Merlot (California). This wine tastes as great as the label looks; stunningly seductive with smooth, full body and a luscious finish. ($24)


**** (90) Bridgman 1999 Columbia Valley Merlot (Washington State). Waves of dark fruit and spice nuances; hand-crafted; a wonderful expression of classy merlot. ($18)


**** (90) 1999 Chateau Cadillac-Branda, Bordeaux Rouge (France). Located in the Fronsac vicinity, the Lesgourgues family has been fashioning delicious wines that are drinkable upon release; a blend of 80% merlot and 20% cabernet sauvignon, its the former variety that, not surprisingly, dictates this wine’s softness and drinkability. ($9)

Sales Are Up for Wines from Down Under


0206ausAustralian wines have had notable success recently in the U.S. market and more are on the way.

View of vineyards in the Hunter Valley, New South Wales. PHOTOS COURTESY OF AUSTRALIAN WINE EXPORT COUNCIL

By Dan Berger

The good news about Australian wines is that Americans love them; that sales, if plotted on a growth chart, remain headed in a northeasterly direction, and that demand is even growing in the superpremium sector.

And fortunately, the only bad news is that more and more brands are popping up here as a result of a massive surplus of wine in Australia. This means that greater competition may well hold down retailers’ profits as competition heats up and everyone discounts.

But one fact is obvious: no retail shop can afford to be without a number of lines of Aussie wines. Consumers are demanding them.

Australian wine’s rise to popularity in the United States is based on its price-quality relationship along with its juicy California-esque style. But price is an important part of the attraction.

One factor here is the weakness of the Australian dollar, making all Down Under products more reasonably priced here. Meanwhile, the surplus of wine has the added benefit to American buyers of a strongly motivated Australian industry eager to move a product that has a degree of perishability: not all wine improves over time.

One reason for Australia’s surplus of wine is the fact that in a large area known as Sunraysia, three hours north of Melbourne, grapes grow in massive amounts. Australian wine makers, those clever blokes, take this fruit and blend it with high-quality grapes from cooler wine regions such as Padthaway, McLaren Vale, Yarra Valley and Clare Valley to make stellar bargains.

v5
Scenes from Margaret River,
Western Australia
.

v2
The Barossa Valley,
South Australia.

These wines have had a decade of remarkable growth in the United States, mainly with wines in the $5 to $10 price range. So much so that the latest figures show that 8.7 million cases of Australian wine was sold in the United States in 2001, a 24% increase over 2000. And if early 2002 sales figures hold up, the Aussies will sell 10.5 million cases here, yet another 20+% growth rate — a growth rate that started more than a decade ago.

Getting a handle on any group of wines with odd-sounding names (some of the top brands use aboriginal words in their names) isn’t easy, so here is look at some of the better-known brands.

Penfolds/Rosemount: The merger of these two powerhouse companies under the name Southcorp more than a year ago caused a bit of turmoil for some wholesalers and retailers, because the company then had brands that competed in the same price niches. But sales of all this company’s brands in 2001 ultimately never wavered and rose significantly. The former company’s largest selling brand, Lindemans, reached nearly 1.6 million 9-liter cases in 2001, a 12.9% increase over 2000. And even though prices for these items in the $8 price niche slipped a bit, the wines improved in overall quality. Key to the Lindemans portfolio is Bin 65 Chardonnay, the No. 1 Australian imported wine. But the line also includes an excellent Cabernet and a deeply flavored Shiraz. Meanwhile, wines under the Rosemount Estate brand rose nearly 20% to 1.5 million cases in 2001. Rosemount had been the most successful exporter of Australian wines over the last half-decade, based on percentage of wine produced. The Hunter Valley-based brand now markets some 50% of its total production in the United States. Its wine maker, Philip Shaw, who now can assist all of Southcorp’s brands, is a brilliant blender.

Meanwhile, the Penfolds brand, under-marketed here, remained a half-million-case brand in 2001, but with consolidation in its lines, that surely will change. The line includes the prestigious Grange, a red wine of incomparable depth and aging potential. It is Australia’s flagship wine, made almost entirely of Shiraz, and thus sets the tone for all high-powered reds from Australia. It typically sells in the $125 range, and up.

However, the consolidation now puts two important wines into the marketplace, the $8-niched Rawson’s Retreat, and the $13 Thomas Hyland line. Both are exceptional wines for the money.

John Gay, president of Southcorp’s U.S. operations, noted that the company’s sales increases in 2001 over 2000 were done without discounting “until the final quarter, when things got ugly.”

He noted that for the last decade, the growth of Australian wine was largely due to the success of the Lindemans and Rosemount wines, with Rosemount having “the greatest points of distribution, both on- and off-premise; you could find them anywhere you went.

“And one of the things that people have trusted is the quality-value relationship, which has always been true with Rosemount and Penfolds wines. People knew that they paid a $15 price but got a $20 taste.”

He said the improvement in the quality of the company’s brands that are price sensitive, such as the Koonunga Hill line (at about $10), allowed the introduction of the even softer-priced Rawson’s Retreat, which is discounted to $5.99 in many locations.

RETAILER OF THE YEAR

RETAILER OF THE YEAR:
SHERRY-LEHMANN, INC.

0101roy

The leadership at Sherry-Lehmann, Inc., includes (from left to right) Shyda Gilmore, general manager; Sara Weinberg, vice president, director of advertising; Ken Mudford, chief purchasing agent; Michael Aaron, chairman; Michael Yurch, president; and Chris Adams, manager.

 

One of the most well-known beverage alcohol stores in the world, Sherry-Lehmann continues to upgrade and reach for new business.

By Cheryl Ursin

Sherry-Lehmann is not an ordinary wine shop.

First of all, it’s located on New York City’s Madison Avenue, the most expensive shopping street in the world. According to a recent article in USA Today, on Madison Avenue, the average annual rent per square foot for retail space is $550, more expensive than the toniest shopping streets in London and Paris. And Sherry-Lehmann, located between 61st and 62nd Streets, is in the heart of it, up the street from Barneys New York, across from Maxim’s, the New York branch of the famous Paris restaurant, nestled between shops selling expensive crystal.

Second, the size of the Sherry-Lehmann store can be deceiving. At 1,800 square feet, it’s a tiny jewel of a shop, outfitted to look like a wine cellar: rough plaster and wood beams form the ceiling; the walls feature dark wood paneling and glass-fronted cabinets dating back to the 1930s; wine-themed art and antiques are on display; and to top it off, a staff, wearing ties and dark-green aprons, which speaks in low tones to customers about the fine points of the finest wines and spirits in the world.

But one does not see the nine POS terminals, hidden as they are in the store’s antique sales counter, nor the rest of Sherry-Lehmann’s $2 million, state-of-the-art computer system. (See sidebar.) Neither does one see the buzzing warren of offices and storage and other workspaces above and below the sales floor, including a phone room, an office devoted to Sherry-Lehmann’s website sales and a staging area for deliveries. And one certainly does not see the store’s 65,000-square-foot, climate-controlled warehouse, located, as it is, in Brooklyn.

The fact is, though some 700,000 people walk into the Sherry-Lehmann store each year, the bulk of the store’s business comes by phone, fax and, increasingly, through its website.

And Sherry-Lehmann’s business, in total, reaches sales of over $30 million a year.

All About Wine

Ninety-four percent of those sales are wine — and wine is what Sherry-Lehmann is famous for. When Sam Aaron, one of the two brothers who founded the business, died in 1996, The New York Times hailed him as “a seminal figure in developing America’s taste for wine.” Meanwhile, People magazine described him “as the man credited with introducing many Americans to fine wine” and called Sherry-Lehmann itself “one of the world’s best-known retail wine shops.”0101roy2

Michael Aaron and Sara Weinberg, director of advertising, reviewing one of the Sherry-Lehmann ads used in The New York Times.

Michael Aaron, chairman of Sherry-Lehmann (and son of Jack Aaron, the other founder), and Michael Yurch, Jr., Sherry-Lehmann’s president, proudly continue the tradition of wine expertise. Aaron, who began working at Sherry-Lehmann at the age of 14, also worked at vineyards in California and France and at Excelsior Wine & Spirits, an importer. He is widely regarded as a world-class expert on French wines, receiving the Ordre du Merite Agricole from the French government in 1997 and the European Wine Ambassador’s Award from the European Wine Council in 1999. Yurch, who has been with Sherry-Lehmann since 1985, also has extensive experience in the industry, including a stint at an importing company. “And Michael [Yurch] is one of the foremost experts on Italian wines,” added Aaron.

What’s the guiding principle behind choosing the wines for such a well-known and highly regarded operation? “Well-chosen diversity,” said Aaron. Sherry-Lehmann stocks 5,000 wine and spirit items. “We most likely sell more classified-growth Bordeaux than any other individual store in the world,” said Aaron. “We started following California wines decades ago and introduced Mondavi in the East as well as Jordan wines. We introduced expensive South African wines with great success where, before, only inexpensive ones were available. And I can go on and on and on.” Indeed, Sherry-Lehmann introduced Dom Perignon to the U.S. in 1947, as well as Chateau Petrus, which was basically an unknown vineyard here when Sherry-Lehmann “discovered” it and began selling it in the mid-1960s.

The store also exclusively introduced several well-known brands of distilled spirits to the U.S., including Chivas Regal in the 1940s and The Macallan in the 1970s. Indeed, spirits also play an important role, Aaron noted, even in a store as wine-focused as Sherry-Lehmann. “We carry over $1 million in spirits inventory,” he said. That includes about 60 single malt Scotches ranging in price from $35 a bottle to $3,950 for The Macallan 50 year old, as well as 160 different cordials. The store also carries about 70 cognacs, “and we have at least 50 different vintages of Armagnacs alone,” Aaron added.

But even more important to Aaron is the fact that Sherry-Lehmann does not focus only on the most expensive products and the wealthiest customers.

Make no mistake, though: Sherry-Lehmann does more than its share of high-ticket sales. Its average American Express order is $345 compared to the industry average, for wine & spirits retailers, of $45-50. And phone orders of $5,000 or more are old hat in the phone room, coming in, as they do, at the rate of several a day.

The store also attracts its share of the famous and wealthy. Aaron himself used to wait on Greta Garbo. “I used to call her ‘Miss Brown,'” he remembered. Other famous people who frequented the store in the past –Aaron would not comment on present customers — include four US presidents: Hoover, Eisenhower, Nixon and Kennedy.

But Sherry-Lehmann prides itself on providing top-notch service to all its customers, no matter how much they spend. Wines selling for $6 a bottle are proudly displayed in the store’s windows next to bottles selling for $100 or more. And every bottle of wine at Sherry-Lehmann — “Whether it costs $5 or is a $5,000 bottle of Petrus,” said Aaron — is kept in climate-controlled storage, either at the store’s Brooklyn warehouse or in its 2,700-squre-foot temperature-controlled wine cellar onsite.

“This is something that is really important,” said Aaron. “We are not just merchants to the carriage trade. We concentrate on inexpensive wines. We must sell over 30,000 cases a year of wine priced under $15 a bottle.”

Because It’s Really All About The Customers

This fits with Sherry-Lehmann’s drive to provide the best possible customer service. Chris Adams, store manager, called that “the democratization of the wine experience.”

“We translate that into ‘You’re about to buy wine; it should be an easy, fun, informative experience and it shouldn’t matter — and it doesn’t here — what you’re buying,'” he explained. “We treat everyone as if they’ve just walked into the greatest wine store in the world. It should be a marquee experience.”

Jeffrey Young, president of International Technology Solutions, the New York City based consulting firm that has been working with Sherry-Lehmann on its new computer system, can vouch for that. “They are very customer-centric,” he said. “When it came to the computer system, serving the customer was their most important consideration.” For Young, that meant not only that the system had to be “super-quick,” but it had to be able to handle things like a customer wanting his own gift cards used with his holiday order or telling a salesperson exactly when the bottle a customer has requested would be delivered from the warehouse.

When it comes to providing top-notch customer service, the secret, according to Aaron, is to have top-notch employees. Sherry-Lehmann employs 70 full-time people and adds another 70 to 80 seasonal people during the holidays. (See sidebar.) “I would rather overstaff than understaff,” said Aaron, “because the customer is better served.”

Sherry-Lehmann is constantly looking for quality employees. Luckily, said Adams, “The people we attract, they’re the ones you’ll see, after they’ve finished their day at 6:00, they’re still here, reading [about wine].”

One reason is the effort Sherry-Lehmann management puts into making the store a great place to work. “We create an atmosphere in which people feel comfortable and challenged,” said Adams. “Now, have some of our people moved onto great and prominent positions in the industry? Absolutely. But we pride ourselves on our ability to sustain a level of excellence year after year after year.”

Sherry-Lehmann provides a lavish educational program for its employees, including its seasonal ones. “We offer an incredible training program. We spend a few thousand dollars per employee, just to train somebody and build up their confidence so much, they enjoy selling and aren’t nervous wrecks,” said Aaron.

Initially, new employees are given close to a week of classroom training, which includes a presentation by Aaron about the history of Sherry-Lehmann, as well as tastings. In addition, new employees take a correspondence course on French wines and spend their first few weeks handling “test” orders and shadowing senior salespeople.

The training never stops. Employees taste at least 15 wines a week and attend special Saturday staff tastings, which are sometimes wine dinners held in some of the best restaurants in New York City, such as Daniel and the Four Seasons.

“We want to get them to where they can recommend something they like with confidence,” said Adams, a former teacher who handles some of the classroom training. “And we want them to be flexible enough so they can talk about our house wine or a tite de cuvÈe with equal comfort.”68FEATCOM

At least a half-dozen employees are kept busy fulfilling orders and handling other duties in the back-office computer room.

Though Aaron and Yurch both place a lot of emphasis on the importance of customer service, they point out that they have not fallen into a trap common to small retailers. “Some people take pride in always being behind the counter of their stores, waiting on customers themselves,” explained Aaron, “but if you’re always doing that, then how is the business going to grow?”

Likewise, both Yurch and Aaron try to limit their travels — to France, Italy, California, to look for new discoveries, to maintain relationships with winemakers — to 30 days a year each.

Aaron, who does work on the salesfloor on occasion, firmly believes that his time is better spent looking for — and sometimes creating — new business opportunities for his store. Often, his actions benefit other New York State retailers as well. For instance, in 1986, he was instrumental in having the state law changed so that wine and spirit retailers could also sell related accessories, such as corkscrews, wine books and glasses. “We now sell thousands upon thousands of glasses. All that extra business is found money,” he said.

Similarly, also in 1986, he lobbied hard to get the laws changed so that wine and spirit merchants in New York could accept credit cards. “Can you imagine, in this day and age, if merchants couldn’t accept credit cards, how limiting that would be? People don’t walk around with cash anymore,” he said.

And Aaron fought for 15 years to be allowed, as a licensed retailer, to hold wine auctions. “I fought Christie’s,” he explained. “They wanted the law to be that only auction houses, not wine merchants, could hold wine auctions.” Once the law was changed, Sherry-Lehmann teamed up with Sotheby’s, Christie’s rival, and from 1994 until last year, made headlines with its auctions, in which wines from private collections were sold.

Sherry-Lehmann severed its relationship with Sotheby’s a year ago. “We’re taking a hiatus from auctions,” said Aaron. “With our tremendous retail growth, with the growth of our website, with the installation of our new computer system, we have no room for auctions on our plate right now.”

The fact of the matter is, according to Aaron, to be a success — perhaps, in the current competitive climate, even to survive– a retailer has to work hard. Very hard. “Normally, I’m here by 6:15, 6:30 in the morning and I try to go home at about 4:00, where I’ll work some more,” said Aaron. “I try to spend at least seven to eight hours working at home on the weekends. What I can do in those eight hours at home would take me a week to do in the store.”

And all that work is aimed at improving all the facets of his business. “Small retailers have got to start becoming real merchants,” he said, “because real merchants are going to be the ones to survive. To survive, you’ve got to devote all your time and energy to being creative about your business.”

Cheryl Ursin is contributing editor to Beverage Dynamics. Her writing has also appeared in the New York Times and other publications.

SAFE & SOUND

In his 40 years in the liquor business, Byron Gambulos, owner of Byron’s Liquor Warehouse in Oklahoma City, OK, has seen his share of crime. “We’ve been robbed twice, had two shoot-outs and I’ve been pistol-whipped once,” he said.

One of the robberies turned into a shoot-out when Gambulos, who is himself a deputy sheriff, shot the robber, who had struck on a Saturday afternoon when the store was full of people, including seven cashiers. “He was making everybody lay down on the floor,” said Gambulos. After being shot, the robber fled and was arrested later in Dallas, after having kidnapped a number of people in another robbery attempt.

The second shoot-out occurred when Gambulos was driving home alone. “At that time, I lived on a dirt road and it was snowing,” he remembered. “I saw that a car was following me.” He pulled his car off the road, to where it couldn’t be seen, and then headed up the dirt road on foot. A second car was pulled across the road, waiting to block him. “I fired a couple of shots over that car and a couple over the other car,” said Gambulos. Though passing police heard the shooting and came to Gambulos’s assistance, the would-be robbers were never caught.

To this day, Gambulos, armed with a sawed-off shotgun, legal in Oklahoma, often beats the police to his store when its alarm system goes off. “It’s exciting,” he said.

Most of us, of course, would rather live without that kind of excitement.

But every retailer has to come to terms with the possibility of crime, from violent robberies to shoplifting and employee theft. A recent article in the St. Louis Post-Dispatch found that the retail food industry lost $4.84 billion to various forms of theft nationwide last year.

And Byron Gambulos is far from the only one in the liquor business to have experienced robberies. According to the latest study on workplace violence, done in 1996, from the National Institute of Occupational Safety & Health (NIOSH), liquor stores rank second, behind only taxicab services, as the workplaces with the most homicides.

During a robbery, the single most important thing for retailers and their employees to do, say security experts, is to give robbers what they want. Don’t resist, whether or not you see a weapon. Statistics from the National Association of Convenience Stores (NACS) report that employees who actively resist a robber are 49 times more likely to be killed than those who do not.

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Equipment available from Sensormatic, a company that supplies a variety of security apparatus, includes the “VideoViewer” (left) and the “Touchtracker” (right.)

“We tell our people not to resist one iota,” said Larry Marcom, one of the partners at Ben’s Fine Wines & Spirits, a four-store chain in Reno, NV. “After it’s all over, then call the police.”

Gil Neuman, chief operating officer at Kent Security Services, a large security firm based in Miami, suggested reminding employees regularly of this. “Tell every new hire,” he said, “but also have refresher courses, maybe an employee luncheon, twice a year, about security.”

That said, the NACS does point to two situations where you might be better off resisting: if the robbers try to force you to leave the store with them or if you feel your life is in danger. (In other words, if you think the robbers are going to harm you even if you don’t resist.)

When it comes to robberies, an ounce of prevention is truly worth more than a pound of cure. According to the NACS, one of the best ways to prevent robberies is to have a cash-control policy that keeps as little cash as possible in the registers. Louis Glazer, president of Sigel’s, a 15-store chain in Dallas, TX, agreed. “We don’t carry more than $200 in our registers,” he said. “No one’s going to hold up anything for $200.”

Store design can play a role as well. The stores in the Ben’s Fine Wines & Spirits chain are all designed to provide a lot of visibility. All are well-lit with many windows and with shelving that is never more than four feet high. In addition to discouraging robberies, Marcom said, that visibility also helps to prevent shoplifting.

Gambulos takes advantage of a service provided by his local police. He has them regularly review his store and point out any security weaknesses they see.

And many retailers hire armored-car services to bring their deposits to the bank. “It’s expensive, but it’s better than me going to the bank with a shotgun,” said Gambulos.

While robberies are certainly the most frightening type of crime, other kinds pose a different, though very real, danger. Left unchecked, theft, especially employee theft, can cause a retail business to fail. According to one security company, Sentry Surveillance in Kennesaw, GA, an estimated one-third of all business failures are caused, at least in part, by employee theft. According to a recent article in the Washington Post, employee theft is expected to cost U.S. retailers about $12.85 billion dollars this year. That’s over 44% of retailers’ total shrinkage.

“The biggest problem is definitely employee theft,” said Ben’s Marcom, “because they can hurt you a lot more.” Indeed, according to a survey done recently by Jack L. Hayes International, a loss-prevention consulting firm based in Fruitland Park, FL, the average dishonest employee steals approximately 8.6 times more than the average shoplifter, $847.81 versus $98.56.

“You have to set a policy of zero tolerance,” asserted Sigel’s Glazer, “and, still, every once in a while, you’re going to get a bad employee.”

The first step in preventing employee theft is careful screening at the time of hire. According to Kent Security’s Neuman, whose company can do background checks on employees for its clients, you should check for criminal records. Because these are a matter of public record, you do not need the person’s consent. He also suggested doing a credit check, for which you do have to ask the person’s permission. You should also test for drugs, Neuman said, both initially and then randomly after that.

And in day-to-day operations, don’t be afraid to implement policies that let employees know that you are watching them. “We want our people to know,” said Sigel’s Glazer. Among the security precautions Sigel’s takes: cameras trained on the stores’ registers, locked doors to which only certain employees have the key, a policy of allowing goods to be received only through one certain door while shipments can only leave the store through another. Neuman has advised his retail clients to have a rule that employees can only use clear bags to bring belongings to and from work. He also suggested not having garbage containers at the back of the store because that makes it easier for a dishonest employee to “dump” stolen goods out with the trash, to be picked up later.6801FIU700

Sony’s new FIU-700 series fingerprint identification unit provides authentication and data security.

One of the latest developments in security technology, called remote viewing, can be especially effective against employee theft. Remote viewing is when the retailer can view what his store’s cameras are recording, in real time, from anywhere. Some security companies report clients tuning into their stores from their home televisions during commercial breaks.

Sony has recently launched a new service, called Sony On Site, targeted specifically at smaller retailers, that allows them to watch their stores live or access archived recordings, from a password-protected website. The retailer can even use the service to manipulate the cameras’ tilt-and-pan options in order to see better. And the service can be used to monitor the store’s registers, sending the retailer an e-mail or pager alert for certain types of transactions, such as when an employee enters a “no sale.”

A typical Sony On Site set-up, four cameras, whose images are stored for 30 days on the website, costs $295 per month, according to Ken LaMarca, director of sales & marketing for Sony’s security systems group.

Earlier this fall, another company, Sensormatic, demonstrated its remote-viewing capabilities by showing Oktoberfest in Germany live on its website.

Another source of theft in a store ­ vendors ­ should not be overlooked. LeMarca reported that one of Sony’s newest customers, a beverage alcohol store in New Jersey, found that vendor theft was its number-one security problem. “You can lose as much from delivery people as from anyone else,” said Sigel’s Glazer. “Sometimes they take out more than they bring in.” Retailers can protect themselves from vendor theft by maintaining careful receiving procedures: checking every order for accuracy, never leaving the delivery person alone and using cameras at the back door.

The Good Old 5-Fingered Discount

What can you do about the most well-known form of retail theft, shoplifting?

“Pray,” said Byron Gambulos. “[Shoplifters] are a part of doing business in America.” But while he’s been praying, Gambulos has also implemented measures to discourage shoplifters. One is making the cashier lanes, through which customers must pass to leave the store, only two feet wide. “That prevents a shoplifter from running out,” Gambulos explained. Another is to station a security guard at the front door.

And shoplifters run the gamut, from little old ladies stealing miniatures to groups of professional thieves. Sigel’s catches shoplifters at its 15 stores two or three times a month. And Glazer estimated that 70% of the time, those shoplifters were working in groups. He remembered one incident, involving two older women, where one of the women had hooked two half-gallon bottles of Chivas Regal to a special waistband she was wearing under her skirt.

“We file charges and the police take them to jail,” said Glazer. Like many retailers and security experts, he believes that a firm policy of prosecuting shoplifters serves as a deterrent.

“With professional [shoplifters], you need to put your foot down,” agreed Dave Shoemaker, group vice president of strategic marketing for Checkpoint Systems, a company that produces electronic article surveillance (EAS) systems. “Prosecuting sends a message to the street that is very clear.”

EAS systems, which use sensors at the door of a store to set off an alarm if a tag on a product is not deactivated at the check-out, are, of course, designed specifically to discourage and catch shoplifters. In an independent test commissioned by Checkpoint and done by PricewaterhouseCoopers, Checkpoint’s EAS system caused in-store shrink at four stores in a supermarket chain to decrease by almost 70%.6801sscdc134

Sony’s new FIU-700 series fingerprint identification unit provides authentication and data security.

However, Sigel’s tried and then removed an EAS system from its stores. “It was too expensive to maintain,” explained Glazer, citing the labor needed to put tags on all the products. “You have to measure the cost of the labor versus the amount you are losing to theft.”

EAS companies, including Checkpoint and Sensormatic, are working with suppliers on implementing source-tagging. This is when the EAS tags are placed on products at the supplier level. With source-tagging, the EAS tags can even be placed beneath the labels on bottles.

The most common type of security equipment used in liquor stores is, of course, the camera system. “Cameras are another lock on the door. They are definitely a deterrent,” said Ben’s Marcom.

And advances in technology have created camera systems that have more abilities and cost less. “We just installed a new camera system in one of our stores for $800 that, I assure you, would have cost $5,000 ten years ago,” said Sigel’s Glazer. One of the features of this new system is that it can show images from all eight of its cameras simultaneously, rather than have to rotate between the cameras.

The buzzword in camera systems these days is “digital,” but it can be a confusing term. There are, for example, cameras that use digital technology inside the camera and result in clearer images, even in low-light or back-lit situations. However, a digital camera can be used in a system that produces the traditional output, namely videotape.

There are, however, digital recorders. Rather than record on videotape, these record their images digitally, to the hard drive of a computer. These recorders have a number of advantages over traditional VCRs. “The real benefit is reliability,” said Sony’s LeMarca. “VCRs, with their take-up reels and spinning heads, wear out constantly.” Videotapes themselves, when used over and over again, as they are in security systems, also deteriorate.

Digital recorders can save retailers a tremendous amount of time. These recorders allow store managers to get right to the scenes and sequences they need. “Five years ago, they had to go through miles and miles of tape,” said Don Taylor, the director of market development for Sensormatic. Digital recorders can be programmed to play only those images where some pre-determined event is occurring, for example, when it records movement in a store that is closed for the night or when a cashier rings a no-sale. “I like to compare it to going to ‘Song 4’ on a CD rather than fast-forwarding through a tape to get to the same song,” said Sony’s LaMarca.

But, according to LaMarca, the disadvantage of digital recorders, for the time being anyway, is their cost. “A digital recorder costs $5,000 to $7,000,” he said.

No matter how cutting-edge the security system, however, “it alone won’t save you,” said Ben’s Marcom. Whether the camera system’s images are stored on videotape or a hard drive or a website, they must be reviewed regularly, for example.

“Security is a lot more than having a camera or screening during hiring,” agreed Kent’s Neuman. “It needs to be a way of living.”

Unfortunately, the issue of crime is never going to go away. But, concluded Neuman, “Even though you can’t eliminate it, you can make it go elsewhere.” *


On Guard?

Should retailers use security guards in their stores?

No, said the National Association of Convenience Stores (NACS). In keeping with the association’s position that convenience store employees should not resist a robbery attempt, the association states on its website that “the presence of a security guard, particularly an armed guard, represents a primary form of resistance and has the potential to exacerbate the likelihood that violence will occur during a robbery.”

But many retailers and security experts say that security guards have a place in a retail store. “Guards are the greatest deterrent,” said Charles Sennewald, a security consultant based in Escondido, CA. “And that guard could be a little old lady in uniform. A guard is a witness, someone who is paid to pay attention to things that others don’t.”

Kent Security Services in Miami, FL provides a security guard service. “Guards are a presence and they take notice,” said Gil Neuman, Kent’s ceo. “They observe and report.”

Both Sennewald and Neuman advise against using armed guards. “Never armed,” said Sennewald. “In a robbery, a real stick-up, more often than not, the robbers will shoot the armed guard.”

Byron Gambulos of Byron’s Liquor Warehouse in Oklahoma City, however, uses armed guards, all of them certified as police officers. Usually, there are three at his store, two inside and one in the parking lot; during the holidays, he uses five, including one, armed with a shotgun, on the roof.

“At first, people were a wee bit leery [of the armed guards],” he reported, “but 35 to 40 years later, people feel differently.” His guards are present in the morning when the store is opened, walk female customers to their cars after dark and escort employees to their cars at closing.

In most states, even unarmed security guards must be licensed. Armed guards often have further licensing requirements. In some cases, they are certified as special police officers and can make certain types of arrests while on duty. The employer of armed guards is legally responsible if those guards do use force.


How to Confront a Shoplifter

A store manager at Sigel’s once chased and caught a shoplifter.

“I was furious,” said Louis Glazer, president of the 15-store chain.

Glazer was concerned about the danger to his employee of confronting a thief alone. And that is a valid concern. “You really have to judge their demeanor,” said Gil Neuman of Kent Security Services. “Whatever they are taking is not worth your life.”

Another danger in confronting shoplifters is the possibility of being sued. Charles Sennewald, a California security consultant and author of Shoplifters Vs. Retailers: The Rights of Both (New Century Press, 2000, paperback, 104 pages, $11.95 ), has been a consultant and an expert witness in over 600 lawsuits involving shoplifting, three of which went to a state supreme court.

“I am involved in one now in which a uniformed security guard with 22 years of experience watched a woman he believed was shoplifting and then, on her way out, asked to look in her backpack,” he said. “She had a fit, she called the police and an ambulance and now she is suing for being falsely accused.”

Sennewald advised avoiding a confrontation whenever possible. “The best thing is not to accuse or confront but to make eye contact or offer service,” he said “One way or another, signal non-verbally that you know what they are doing. I guarantee you they are going to be scared and, 99 times out of 100, they are going to get rid of it or just buy it.”

But what if they are heading out the door and you do need to confront them? First, you need to let them leave the store. Otherwise, they can say that they were planning to buy the item. But, said Glazer, don’t let them go too far. “Don’t follow them to their car,” he said. “It needs to be done at the front door. Otherwise, you are putting yourself in danger.” And never confront someone alone, he advised, always have others from the store with you.

Checkpoint Systems, which produces EAS systems, teaches its clients how to approach a customer when the EAS system’s alarm goes off. “Initially apologize, saying something has set off your inventory control system,” said Dave Shoemaker, group vice president of strategic marketing for the company. “Tell them, ‘We need to correct our mistake.’ Separate them from the bag, put the bag through the detector alone. Ask them if they might have forgotten to purchase something. Typically, the person will give it up and confess, hoping you will let them go.”

That’s when you ask them to come back inside, said Shoemaker, “because that’s when you call the police.”

Play It Again, Sam’s


Play It Again, Sam’s

WITH MORE THAN $60 MILLION IN ANNUAL SALES, SAM’S WINE & SPIRITS IS THE LARGEST SINGLE STORE WINE RETAILER IN AMERICA, AS WELL AS A CHICAGO INSTITUTION.

There are many second- and third-generation beverage alcohol retailers who boast about having grown up in the family store. Chicago retailer Brian Rosen likes to say he learned the business from the passenger seat. Literally. He recalls that starting at about the age of seven, he was enlisted to sit in the front seat of the store’s station wagon and make sure it didn’t get ticketed or towed while the driver was delivering orders to office buildings and apartment houses throughout Chicago. sams.1a

The Third Generation: Brian Rosen, co-owner of Sam’s Wine & Spirits in Chicago, follows his father Fred and his grandfather Sam in operating one of the top beverage alcohol operations in the country.

These days, Rosen is in the driver’s seat as owner, along with his brother Darryl, of Sam’s Wine & Spirits, the retail operation founded by their grandfather, Sam Rosen, in the late 1940s. Working along-side their father Fred at the gigantic store on Chicago’s North Side, the brothers mark the third generation in the business. And the business has certainly grown with each passing generation. What started as a neighborhood tavern is now, with sales in excess of $60 million last year, the nation’s single largest beverage alcohol outlet.

“We are the nation’s largest wine retailer,” Rosen said with understandable pride. Having outgrown their original location the family constructed the current 33,000-sq. ft. superstore in 1996. “It’s truly a one-stop shop for everything — wine, spirits, beers and accessories,” he added. As would be expected in an operation so wine-oriented, the sales ratio at Sam’s works out to be about 80% wine, with 11% of sales attributed to distilled spirits and the rest split between beer, non-alcoholic beverages and foods.

Much More Than a Local Liquor Store

And while the store has been a fixture in it’s neighborhood for more than half a century, it’s grown to be much more than just the local liquor store. “The customer to-day is more educated,” Rosen observed. “They demand more from the retailer. They demand not only price, which is easy. That’s a function of buying. Today, they want price, they want quality, they want selection and they want parking. The customer wants excellence in all aspects of the business. These days, customers are willing to pay a few more pennies on the dollar to be treated better. They want to be guaranteed a good visit from entry to exit.”

It’s that guarantee of price, quality, selection and a knowledgeable, courteous and helpful staff that has allowed Sam’s to thrive. “In a general sense, everyone is our customer,” said Rosen. “Nationally, we are shopped by wine connoisseurs. Sam’s is known as the place for price, selection, service and that hard-to-find bottle of wine. And then I’ve got a regular customer who never buys anything but a sandwich and bottled water. We specialize in wine, but we’ve also become that generic place to get everything.

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Sam’s has one of the most extensive selection of wines in the U.S. and features nearly 300 different types of beers.

“We don’t really consider any local competition,” he continued, explaining that Sam’s is much more concerned with competing against the major national retailers. “The company we probably most keep an eye on is Costco.”

Costco would probably be kind of hard for the Rosen family to ignore since the low-cost chain recently opened a store a few blocks away. Surprisingly, having the giant retailer muscle it’s way into the neighborhood hasn’t really had any negative effect on Sam’s.

“I’m quoting my grandfather here, but Sam always said, ‘You cannot run a business by price alone.’ You have to factor in service. You have to consider selection. There’s an X factor that’s about more than price,” Rosen pointed out. “If you want to buy a just-released Bordeaux future for ten bucks cheaper, then knock yourself out. But if you want to educate yourself about that Bordeaux, you’re in the wrong spot [at Costco].”

Give The Customer A Choice

sams.6When Rosen talks about selection being a big part of what makes the store different, he’s by no means exaggerating. A scan of the wines listed on the store’s website reveals 488 cabernet sauvignons (327 from American producers), 904 chardonnays (346 American) and 373 wines from Bordeaux. That degree of choice is impressive, but probably shouldn’t be surprising from a store with close to $50 million in wine sales. It’s in the less popular varieties that Sam’s shows the true depth and breadth of its wine expertise. There aren’t many stores that can offer more than 300 rieslings and more than 40 gewurtztraminers. Not to mention the 22 wines available from coastal South Africa or the 78 from South Island, New Zealand. And how many retailers would be able to tell a customer where Wachau is, let alone present them with a selection of 36 wines from the region ranging in price from $12 to $105 a bottle? (Wachau is in Austria, by the way.)

Despite the fact that customers can select wines from anywhere in the world, the largest percentage of sales, according to Rosen, comes from California wines (1,758 different labels available) followed by French (1,907 different wines offered). “Customers are choosing Australian, Spanish and Argentine wines because of the value,” he observed, citing the success of a number of wines such as the Australian phenomenon Yellow Tail. “There are great wines for a lot less money. Everyone knows that Australia is making $20 bottles of wine that are selling for $4.99 to $7.99.”

In the coming years he believes that we’ll see a continued influx of good wines from regions “where labor is cheaper, the price of land is less and there isn’t a lot of marketing money.”

THE TOP 10 KEYS TO RETAIL SUCCESS

Retailing is nothing if not competitive. The name of the game is to offer the lowest prices, the best selection, the most easily accessible location, the most memorable advertising, the fastest check-out.

And many beverage alcohol retailers believe that the industry will soon enter its most competitive and swiftly changing period in history. “I think retailing as we know it is in a state of flux. It is changing rapidly,” said Jack Stoakes, president of Liquor Mart in Boulder, CO.

According to many retailers, including Stoakes, the change they are watching with the most
anticipation is shopping via the internet (see story, page 14). Many believe that state laws currently prohibiting interstate shipping of alcohol will eventually change and web sites will emerge as a new source of competition — and, more importantly, as a new business opportunity.

But, these retailers say, the internet is not the only source of competition. In many areas, the booming economy has led to a flurry of beverage alcohol store openings. In Boulder, for example, Stoakes reported, “One [new competitor] has already opened, one is about to open and more are on their way.”

Whether the competition is using the latest in internet technology or has just signed a lease on the store location across the street, retailers have to keep on top of their game in order to remain successful.

What do some of the top retailers in the country consider the 10 most important elements to success?

10 A SOUND FINANCIAL BASE

Without this, in a business where competition is fierce and margins thin, beverage alcohol retailers cannot weather the storms that will inevitably come their way.

“Every business has its ups and downs,” said George Schaefer of Schaefer’s Wines, Foods & Spirits in Skokie,IL. “Without a sound financial base, one bad year can put you out of business.”

Lack of capital can also hamper retailers by making it impossible to take advantage of good deals when purchasing. This, in turn, keeps them from achieving the next key to retail success.

9 PRICING

Having the capital to invest in a large purchase of product when the wholesale price is low is key, according to Byron Gambulos, owner of Byron’s Liquor Warehouse in Oklahoma City. He has good reason to think so: his store has grown from $3 million dollars in sales in 1964 to approximately $16 million per year today.

Many retailers acknowledge that offering good prices is essential, no matter what else you do. “Customers will do your market research for you,” said Hal Gershman, owner of Happy Harry’s Bottle Shop, a four-store chain headquartered in Grand Forks, ND. “They always know where the best prices are.”

Gershman added that “excellent pricing is the easiest marketing tool there is,” but he warned that there is more to it than just the low price. “Lowering prices requires no brains,” he said. “Being profitable with those low prices is where the talent lies. How you purchase, how you merchandise the rest of the store so that customers will buy something else, that’s the trick.”

8 MERCHANDISING

Merchandising, the art of arranging products, whether permanently or as part of a temporary special, to encourage customers to buy more items, is also key, according to many retailers.

“I am a firm believer in the basics of merchandising,” said Louis Glazer, president of the Sigel’s chain in Dallas, TX. “If people can touch and feel the products, they will probably buy.” Indeed, that’s one reason Glazer makes sure Sigel’s offers the coldest beer in Dallas.

Merchandising in-store is an affordable form of marketing, he pointed out. “Some retailers can afford newspaper ads, some can’t. But there’s always something you can do, such as signage or a ‘What’s New’ section of products.”

7 STORE DESIGN

The store itself is an important sales tool. Gershman is in the process of moving the third of his four stores into a location designed in a style he calls “prairie architecture.” His stores, which he affectionately refers to as his barns, do resemble those farm buildings. They are large sites with peaked roofs and, in some cases, a grain-elevator-style tower. On the inside, they boast 30- to 40-foot ceilings and post-and-beam construction.

“Your facility has to be well-maintained, easy to shop, with wide aisles and excellent lighting,” he said. “People need space to shop. We try to keep our store designs open so that people always have a view of the whole store.”

He saw the effect of store design for himself when he moved his first two stores into their “barns.” One store was moved only 1 1/2 blocks from its original site. “We had exactly the same products and the same wine racks,” Gershman reported, “but people thought we had doubled our selection.”

Design can give customers a feeling of comfort. Being comfortable, they will shop longer, and, hopefully, buy more. Also, they will be more likely to return. “I believe in light,” said Gambulos. He also believes in wide aisles, low shelving, color-coded signage and just the right amount of sound, not too loud and not too quiet. “It has to be a customer-accepted environment,” he said.

And careful design can also give customers a feeling of security. Gambulos, for example, insists that the lights in his parking lot be bright enough to read a newspaper by. In addition, he posts armed guards, mostly off-duty deputy sheriffs, both inside and outside his store.

Another telling detail that should not be overlooked — “Cleanliness,” said Gershman. “It’s very difficult to keep all those bottles clean, but it’s important.”

And, of course, design means nothing if it’s not in a good location. “The old saying about ‘location, location, location’ is more true than ever,” said Schaefer. “Today, shopping convenience is key.”

6 BEING KNOWN IN THE COMMUNITY

Schaefer’s, which was founded by George Schaefer’s father in 1936, is, of course, well-known in Chicago and its suburbs. The best way to become well-known, aside from being in business for 64 years, is to focus your operation’s concept. Maybe your store is known as a fine-wine shop; maybe it’s known as a warehouse-style operation that carries everything at the low prices. There’s an operation in New York City, called Best Cellars, that specializes in wines priced at $10 per bottle or less. Other operations, like Schaefer’s, offer extensive gourmet-food departments. Some even install restaurants or wine bars in markets where that is legal.

“The niche we’ve found,” said Schaefer, “is offering service and personal attention. We know we’re not going to get all the business, but we do want our fair share.”

Many retailers become well-known in their areas for the charity and community work they do. “We give tens of thousands of dollars a year to charities, especially to arts groups,” said Happy Harry’s Gershman. “It’s amazing the good will it generates and it’s also the right thing to do.”

5 SELECTION

One thing a retail operation can become known for is having a large selection. “Having a good selection is a big deal,” said Gershman. “It’s one reason for our success. When people want something specific, they come to us because they know we’ll have it.”

Gambulos agreed. “I carry everything I possibly can, including every new product,” he explained. “I may not keep every new product, but I will try theXm all out.”

Indeed, should web sites become a viable way to sell alcohol nationwide, Jack Stoakes thinks that Liquor Mart will be in a good position to compete. “Wine.com has 2,000 wines,” he pointed out. “We carry 7,000 to 8,000.”

4 PRODUCT KNOWLEDGE

What goes hand in hand with having a good selection? Knowing something about all those products. Otherwise, customers are going to look at the thousands of wines or dozens of single malts in your store and wonder why they should care.

But like anything else, imparting that product knowledge is a bit of an art. “There are a lot of people in our industry who know everything about wine but can’t carry on a conversation about it without aggravating the customer,” said Schaefer.

3 ADVERTISING

Advertising is another way to stand out in the customer’s mind, “whether it’s a billboard, a mailer or an in-store brochure,” according to Sigel’s Glazer.

Gershman agreed. “You have to keep an energy and excitement about your store. You can’t just open the doors and wait,” he said.

2 GOOD EMPLOYEES

One of the most important ingredients for success is also one of the most difficult to achieve: hiring and retaining quality employees. “Frankly, the single biggest reason why we still have only one store is the difficulty of finding good people,” said Schaefer.

In this era of low unemployment rates, getting hired has definitely become a seller’s market. “If you’re a warm body, you get hired,” is how one retailer put it.

Some find that college students make ambitious, eager employees. “But then, they do graduate,” said Gershman. “May, especially, is a month of transitions for us. ‘

Stoakes is happy about the new Social Security law that allows retirees, ages 65 and older, to collect all of their Social Security benefits no matter how much they earn. “That’s been a real boon,” he said, “and is really going to help the crunch in the labor force. Retirees can now continue working for longer and can work more hours.”

And many retailers find themselves paying more money and offering more perks to keep their quality employees happy. “If you pay $4 an hour to your help, you’re going to get $4 per hour help,” said Gambulos, who starts his employees off at $8 an hour. “And you’re going to find yourself hiring new people every 30 days.”

Gambulos tries to do what he can to make his employees happy, including installing a snack room for breaks and paying incentives. For example, on especially busy days, such as during the holiday season, Gambulos awards bonuses of $25 to $50 to cashiers who can ring up a certain number of customers per shift. “On those busy days, when customers are usually in a bad mood, everybody in our store is popped up,” he said.

Byron’s, he happily reported, can ring up 700 customers in a single hour.

1 AND THE #1 KEY TO RETAIL SUCCESS… CUSTOMER SERVICE.

It’s what all the other keys — good employees, good prices, good selection, good-looking store — unlock. “You have to have the proper attitude to do retailing, which is: whenever a customer walks into your store, whether they are looking to get change, ask the time or even use the bathroom, they are doing you a favor,” said Sigel’s Glazer.

Gershman echoed his sentiment. “Every customer is my best customer. I don’t care if they are buying a pack of cigarettes or a thousand dollars worth of wine. They deserve the same respect, courtesy and level of service,” he said. “It’s the root of everything.”

The most successful retailers are the ones who have thought the most about all the details of providing customer service. Greeting customers at the door in a way that is friendly but not pushy. Providing clean bathrooms for customer use. Organizing products so they are easy to find. Making the check-out process as fast and painless as possible. Carrying those purchases out to the customer’s car.

And even the smallest details do get noticed. Gershman, for example, refuses to use point-of-sale pieces featuring pictures of scantily clad women in his stores. “I think it makes our female customers uncomfortable,” he said, “and we do get positive comments about it.”

The key to the most beneficial customer service, these retailers say, is to think long-term. In other words, the customer is more important to them than any individual sale. George Schaefer reported that he encourages his people to sell down, suggesting a product that is less expensive than the customer said he was willing to spend rather than more. “I tell them you are making a customer not a sale,” he explained.

And once you’ve got happy, loyal customers, you’re in.

HOLIDAY PROFIT PLANNER


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FROM MASSIVE IN-STORE DISPLAYS AND FESTIVE DECORATIONS TO CUSTOM GIFT BASKETS, IN-STORE GIFT CENTERS AND A
VARIETY OF SPECIAL SERVICES, RETAILERS USE A VARIETY OF TECHNIQUES TO INCREASE HOLIDAY SALES.

Bigger is better when it comes to holiday merchandising. But to ring up additional sales and maximize profits, it’s just as important to have a knowledgeable and solicitous sales staff as well as a range of supplier gift sets and co-packs and, where permitted, the extra services and promotional initiatives — such as gift baskets, tastings and in-store gift centers — that can make the difference between a ho-hum holiday and a spectacular selling season.

Big, bold and colorful in-store displays, utilizing supplier point-of-sale materials, a retailer’s own creative display-building prowess or a combination of the two, are among the most important ways to capture customers’ attention and spark impulse purchases. While effective in-store merchandising is an important year-round effort, it takes on special significance at the holidays.

“We’ve found that you’ve got to get consumer attention on the product. What we’ll do is visually try to get their attention,” explains Charles Sonnenberg, of Frugal Macdoogal’s, a leading retailer with operations in Tennessee and South Carolina and known for his elaborate and eye-catching in-store displays.

Sometimes, a simple case-stacking and case card are enough to catch a customer’s attention. However, larger, more intrusive, and inventive displays are often required not merely to stop customers in their tracks and generate appreciative “ooh’s” and “ahh’s” but to actually trigger a purchase.

Which products do retailers want to showcase in high-impact displays? While there are many factors to consider in deciding which brands to display, many retailers say that featuring higher-priced brands that lend themselves naturally to gift-giving are most appropriate. For example, one retailer pointed out that if he had to choose between a display for either a premium vodka or a super or ultra premium, he would almost certainly opt for the higher-priced brand. The reason? Simply that increased sales of the higher-priced product would result in a greater level of profitability as measured by actual dollars rather than percent of markup, or margin.6809HOLO2

Even stores that don’t ordinarily accommodate enormous displays of product often find it rewarding to set up special in-store gift centers during the holidays. “Our warehouse style doesn’t lend itself to massive displays although we do create displays for gift baskets, co-packs and seasonal products,” says Mike Sanford, general manager of Spec’s in Houston.

While supplier co-packs and gift sets form an important component of holiday sales, gift baskets represent an opportunity for retailers to provide a highly desired service that caters to the needs of key customer segments while simultaneously selling high-profit products and promoting their own expertise in spirits, wine and related gourmet and gift items.

Noting that corporate gift-giving in Texas is rebounding sharply from a fall-off several years ago that was related to a downturn in the local economy, Sanford observes that the practice of corporate gift-giving has evolved over the years. “It used to be that a company might buy 100 cases of Jack Daniel’s and give everybody a bottle. But now it’s more focused on wine and more focused on the presentation of the gift basket itself.”

Each December Spec’s distributes its own catalog in which up to 30 pre-made gift baskets are featured ranging in price from $14.99 up to about $100. “That gives customers the opportunity to come in and make a quick grab and go,” explains Sanford. “The reason we have so many is that people have different budgets and some of our baskets are wine-only or spirits-only or non-alcoholic.” Spec’s also creates custom gift baskets. “The best-sellers vary from year to year,” says Sanford, “but $35 to $50 seems to be the magic price point for the pre-made baskets. There is no magic price for the custom-made gift baskets — we’ve done them for $14.99 up to $1,000 — we’ll get calls from customers who say they want to spend ‘X’ and this is what they drink, just fill up the basket.”6809HOLO3

A full range of gift-giving and party consulting services are a hallmark at Brown Derby stores in Missouri. “We have a feel for what our customers want and service is very important at a full-service store,” says owner Ron Junge. “So we have party planning, full service deli very, specialty wines and cheeses, gift baskets, gift wrapping and just about anything else you can think of at our two fine wines stores.”

Retailers also laud the quantity and quality of supplier-created holiday co-packs and gift sets. These items are especially important for retail operations that do not create their own gift baskets because they allow for the establishment of in-store gift centers, a source of incremental business.

At Liquor World stores in the mid-Atlantic region, for example, 20′ x 8′ islands featuring a wide array of supplier gift packs are set up for the holidays. Liquor World arranges all of the supplier sets together for a visually impressive presentation that appeals to casual browsers as well as shoppers on a gift-finding mission. “We are competing not just against other liquor stores and beverage outlets but also against department stores and other specialty retailers to convince customers to buy a beverage as a gift,” notes co-owner David Trone. “We think there is a lot of add-on sales potential in these gift packages and the spirits suppliers in particular seem to excel at producing the very best packages.”

Trone also believes in dressing his stores for the holidays. It’s not unusual to see “a significant number of themed holiday displays” at Liquor World “from champagne Christmas trees to major wine displays and Christmas decorations such as sleighs, toy trains and fireplaces on floor-level platforms and suspended from ceilings. The key is you want the store to have a festive, upbeat, exciting appearance,” explains Trone. “We want our customers at a fine wine superstore to feel the same way kids feel when they go to a Toys R Us. We want to set the tone for the holidays.”

Increasing High-End Sales

With the holiday selling season in view and a raft of new ultra-premium entries across a broad spectrum of categories, what can retailers do to increase their sales of higher-priced spirits?

“Ten years ago, who would have thought we’d be selling vodkas for $35?” asks Liquor World’s Trone.

“But today, we sell a lot of it. The product is good and the packaging is beautiful. Who knew?”

Who knew, indeed. Today, however, retailers know more than ever about what it takes to sell the good stuff — the boutique tequilas, small batch bourbons, esoteric single malts, outrageously priced cognacs and hard-to-find armagnacs not to mention exotic rums, specialty gins and a plethora of outlandish vodkas.

Conversations with a handful of leading retailers around the country quickly reveals a consensus on a couple of key points: shelf position and product knowledge are perhaps the two most critical elements in successfully selling high-end spirits at retail.

“There’s really an insignificant number of people who come in and ask for single barrel bourbon,” observes Frugal Macdoogal’s Sonnenberg. “It really is in-store merchandising” that makes or breaks such a potential sale. The challenge, he says, is to position the product within the store so that attention is focused on it — with an old whiskey barrel display, for example. “Then there has to be more than great bourbon. You have to have meaningful information on it that legitimizes why it is special. And then it still requires some selling” by store personnel.6809HOLO4

“It’s very simple,” says Sanford, of Houston-based Spec’s. “Shelf placement is the biggest key.” At Spec’s, as at other successful retail outlets, super premium products are placed on the “eye-level” shelf to maximize sales.

About three years ago, Brown Derby stores changed its shelf management program in order to place high-end products at eye-level. “Our shelf planning is based on dollar return,” says owner Junge. “A lot of people put private label at eye-level but we put higher-end items there because they represent more actual dollars of profit.” At some of his locations, Junge has also set up special sections to showcase items of $100 or greater value. “At some stores we have the items in glass cases or behind glass doors.” These sections contain mostly cognac, armagnac and scotch.

In addition to eye-level placement and the extensive use of shelf talkers, Spec’s makes good use of its salesmen and in-store tastings. Sanford says tastings have been permitted in Texas for about three years and are still somewhat restrictive in nature. Nonetheless, he says they have been quite useful in promoting sales of high end spirits. “Tastings are very effective. There are times when, if it’s a $700 or $800 bottle, if we sell a few bottles we’re ecstatic; and if well sell through 8 to 12 bottles of a tasting of a $30 to $50 bottle we’re happy.”

The benefit of in-store tastings go beyond the immediate objective of allowing a customer to sample a product and making a sale. “Once they buy it, they have their friends try it and we get it into more people’s mouths to try it,” Sanford says.6809HOLO5

In addition to tastings, Spec’s stresses ongoing product information and education for its store personnel, especially for the people on the floor selling. “We train our employees and we have seminars all year long,” explains Sanford. We try to do seminars on categories rather than individual products. We want to give our people a working knowledge of why a customer should spend $100 on this versus $50 on that.” He says that the training is focused on product knowledge rather than specific sales techniques or suggestive selling strategies. The thinking is that if the store personnel is well informed, interested in the products and friendly, they will be able to assist customers by relaying the information and making them comfortable with the decision to make a high end purchase.

“There are a lot of little things that go into successfully selling” high-end spirits, adds Liquor World’s Trone. “Selection, critical mass, shelf position and promotion” are some of the more important aspects of the effort, he says.

Critical mass means having a broad product selection in the store to get the customer’s attention. “One or two vodkas are not enough,” he says. “You need about 20 to make a statement. Then we put them all together on the eye-level shelf and they feed off each other and the customer is drawn to it. If you have 20 vodkas, it gives the whole category more credibility and it makes the customer think, ‘there must be something to this.'” As for promotion, Trone says that favorable reviews and tasting notes are among the most efficient and cost-effective methods.

“Now we have people coming in looking for a specialty tequila and they are quite prepared to spend the type of money that is required and it’s incumbent on us to sell them on it,” says Sonnenberg. “They are basically coming in with a mindset that they want to spend $50. So we should try to sell them on a $60 product. Again, once the customer is in the store, we need to say this is an ideal gift for holidays.”

So, as retailers set about setting the tone for this holiday season — decorating stores, hiring and training extra help, setting up gift centers, preparing gift baskets and planning displays — it’s important to note that the five weeks from Thanksgiving to New Year’s Eve constitute the most critical sales period of the year. And with a strong economy there’s every reason to think this holiday season will once again be a bright one for beverage alcohol retailers throughout the country. As Brown Derby’s Junge says, “I think this holiday season is going to be good. We’ve had strong sales this year, so if it continues the holidays will be as good if not better than last year.” *

ADVERTISING & PROMOTION AWARDS WINNERS

Advertising & Promotion Awards

The best advertising, promotion, packaging and
merchandising materials in the beverage industry today.

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As consolidation continues to ripple through the beverage alcohol industry, particularly at the supplier and distributor tiers, sales of all beverage alcohol segments, including wine, beer and spirits, continue to trend up. This vitality is reflected in the dynamic merchandising and advertising of many high-profile products, which in turn helps to drive the growth. It’s no wonder that the 16th anniversary of the Beverage Dynamics Advertising & Promotion Awards competition once again proved to be provocative, and a challenge to the judges who were faced with having to decide among the best entries.

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The focused and well-researched investments that companies make in packaging, advertising, merchandising and promotion obviously play an important role in directing consumers toward certain brands. This is crucial, for even though consumers have been spending record amounts of money in our robust economy, competition among brands remains fierce. And nothing can appeal to consumers like a creative advertising campaign, fresh packaging and an innovative promotional program.

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Our panel of judges — listed at the end of this article — included well-respected members of the advertising, marketing and design communities. They graciously gave of their time, experience and energy, and we’d like to acknowledge their participation. It wasn’t an easy task choosing the winners, especially in the many categories where there a number of exceptional entries. The following pages are meant to showcase those winners and the companies behind our industry’s best advertising, packaging, promotions and merchandising materials.

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