Akeley’s muni was among state’s most profitable in 2021
A report from the Minnesota state auditor ranks city-run liquor operations by sales and net profit.
The Akeley muni ranked 14th statewide in net profits during 2021, compared to other city-run liquor stores, while Rapids Spirits placed 41st in gross sales. Meanwhile, a state report shows the Nevis muni barely eked a net profit that year.
Municipal liquor stores saw a historic increase in on-sale sales and profits in 2021, according to a report comparing city-owned liquor operations statewide, released Dec. 19 by the state auditor’s office.
“After struggling during the closures of 202, Minnesota’s on-sale liquor operations bounced back with a 105% increase in profits for 2021,” said State Auditor Blaha in a public release. “In addition to strong profit growth, the number of unprofitable on-sale operations declined from 35 in 2020 to just seven in 2021.”
Park Rapids (population 4,247) operates an off-sale-only liquor store, Rapids Spirits, which reported $3,505,887 in total sales for 2021.
In gross sales, the city ranked 41st of 177 cities with municipal liquor operations, comparable to the sales figures for the off-sale-only operations in Delano and Sauk Rapids and the on- and off-sale in Hinckley.
Rapids Spirits Manager Scott Olson pointed out that the store’s gross sales ranking was surpassed in four cities with equal or less population.
After cost of sales, the store’s gross profit was $920,623, or 26.3% of sales. Operating expenses totaled $623,692, leaving operating income of $296,931.
With an additional $3,880 in revenue, the store ended the year with a net profit of $300,811, or 8.6%. In this percentage, Park Rapids ranked 85th statewide, just below the off-sales in Vergas and Morris and a few spots above the off-sale in Eden Prairie.
Olson noted the state average net profit for off-sale-only operations is 8.7%, and that 45 of the cities ranking ahead of Park Rapids in net profit percentage had on- and off-sales, which tend to be more profitable than strictly off-sale operations.
The city made no net transfers in or out of the liquor fund in 2021, according to the report.
Menahga (pop. 1,349) has an on- and off-sale liquor operation, Northbound Spirits. The store reported sales totaling $1,098,112 in 2021.
Compared to other cities with munis, Menahga ranked 91st of 177 in gross sales, comparable to the sales at Walker’s off-sale-only operation and the on- and off-sales in Le Center and Remer.
After cost of sales, the gross profit was $375,513, or 34.2% of sales. Operating expenses totaled $231,127, leaving operating income of $144,386.
With $2,275 in additional revenue, the store’s net profit was $146,661, or 13.4% of sales. This put Menahga in 26th place statewide in terms of net profit as a percent of sales, just above the on- and off-sale in Fifty Lakes.
The city made net transfers of $60,000 out of its liquor account.
“Northbound Spirits seems to be on a similar path for net profit for 2022,” said temporary City Administrator Laura Ahlf. “The year-to-date net profit in November 2022 was $123,075.37 – off-sale $36,472.22 and on-sale $86,000.55.”
Ahlf said interim and new management have done a good job of monitoring sales and hope to add more entertainment to improve on-sale revenues in 2023.
Nevis (pop. 384) scored $857,734 in sales at its municipal on- and off-sale in 2021.
The city’s ranking in gross sales was 104th out of 177, a little below the on- and off-sale in Kenyon and above the one in Randall.
After cost of sales, there was a gross profit of $348,287, or 40.6% of sales. With operating expenses totaling $359,746, the store had an operating loss of $11,459.
Non-operating revenues of $22,244 brought the store back up to a net profit of $10,785, or 1.3% of sales. Nevis ranked 159th in net profit as a percent of sales, higher than only five cities that showed a net profit.
The city transferred a net $35,000 out of the liquor fund for the year. City Administrator Dawn Veit declined to comment.
Akeley’s (pop. 416) on- and off-sale liquor operation reported sales of $487,237 in 2021.
This put Akeley in 135th place out of 177 cities in gross sales, somewhat behind the on- and off-sale in Boyd and ahead of the one in Clarissa.
After the cost of sales, gross profit totaled $259,921, or 58.3% of sales. With operating expenses of $188,018, the store had an operating income of $71,903 and other revenues of $1,583.
The muni ended 2021 with a net profit of $73,486, or 15.1% of sales. On this metric, Akeley ranked 14th statewide, slightly behind Fergus Falls’ off-sale and Verndale’s on- and off-sale.
The city’s liquor account had a $5,000 net transfer out on the year.
According to muni manager Lacey Hitchcock, “2021 was a hard year coming off of COVID, but it turned around and we ended up having a great summer, which allowed the liquor store to have a decent year.”
She added that 2023 could be interesting, with the redevelopment of State Hwy. 34 through town starting midsummer, which will restrict access to the muni.
“We will be looking at doing some much needed improvements, like remodeling our bathrooms, adding a patio and remodeling the outside of the liquor store, to go along with the roof that was replaced in 2022,” Hitchcock said.
The big picture
Statewide, the auditor’s office reported, municipal liquor store profits were up 1% in 2021, with on-sale operations faring much better than off-sale ones. The net income of on-sale munis rose 105% on the year, while net income decreased 8.5% for off-sale stores.
State law requires cities whose liquor operations show a net loss in at least two of the past three years to hold a public hearing to determine whether to continue liquor operations. Based on 2021 data, 20 cities are required to hold a hearing in 2022, compared to 24 in 2021.
In other highlights of the report:
- All municipal liquor operations had a combined net profit of $36.5 million in 2021, a 1.3% increase over 2020. For on-sales, net profits totaled $6.4 million; off-sale net profits totaled $30.1 million.
- Across the board, net profits increased 57.9% over the past five years – 45.1% for off-sales and 172.5% for on-sales.
- Thirteen Minnesota cities, 12 of them in Greater Minnesota, reported net losses for 2021. This was 24 fewer than in 2020.
- Statewide, municipal liquor operations reported a 26th consecutive year of record sales, totaling $423.5 million. Total sales in 2021 increased by $12.9 million, or 3.2%, over 2020.
- Operating expenses for all municipal liquor operations statewide totaled $86.3 million, an increase of $4.9 million, or 6%, over 2020.
- Metro Area munis are considerably larger and more profitable than their Greater Minnesota counterparts. Though only 18 of the 177 Minnesota cities (10.2%) that own and operate liquor stores are in the Metro, they represent 33.5% of total sales and 26.2% of net profits, averaging sales of $3.6 million in 2021 compared to $1.6 million for all Greater Minnesota operations.
- Minnesota’s munis had net transfers (transfers out minus transfers in) of $23.1 million in 2021, an 8.3% increase from 2020. Of that total, $8.1 were in the Metro and $15 million in Greater Minnesota.
- In the Headwaters Region, which includes Hubbard County, the average net profit for off-sale-only liquor operations was $327,000 or 9.4% of sales; and for on-sale establishments, $60,000 or 7.3% of sales. As for the North Central region, which includes Wadena County, off-sale net profits averaged $88,000 or 4.6% of sales, while on-sale net profits averaged $120,000 or 11.9% of sales.