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COVID-19 helped off-sales more than it hurt in 2020

The state auditor's municipal liquor store report charts a strange year for booze biz.

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A four-year comparison shows how much sales and profits increased from 2017 to 2020 at the Rapids Spirits municipal liquor store in Park Rapids. Infogram by Robin Fish / Park Rapids Enterprise, Jan. 4, 2022

Despite a challenging year for bars and restaurants in 2020, local municipal liquor operations turned a profit and Park Rapids’ off-sale-only store saw an increase in sales.

“It was a strong year for off-sales,” said Scott Olson, manager of Rapids Spirits in Park Rapids. “Talking with my counterparts in other cities, it seemed to hold true for the most part that the off-sale side, for municipal liquor stores and also privates, saw a sizable increase because of the closures of restaurants and bars at times, and/or their reduced capacities.”

Meanwhile, liquor operations with an on-sale side experienced the same challenges as other bars and restaurants, Olson noted, referring to public health guidelines and executive orders during 2020 due to COVID-19.

As a result, he said, “we saw some unprecedented growth numbers.”

According to “Analysis of Municipal Liquor Store Operations” for 2020 from the Office of the State Auditor, 179 Minnesota cities operated 213 municipal liquor stores in 2020, mostly in Greater Minnesota. Of those cities, 86 operated both on-sale and off-sale establishments, and 93 restricted themselves to off-sale liquor sales.

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Net profits increased 65.4 percent among off-sale operations, while on-sale establishments showed an increase of 6.8 percent, the report states.

Thirty-seven Minnesota cities’ municipal liquor operations reported net losses in 2020 – including Sebeka, Mahnomen and Wolf Lake – but the Park Rapids, Nevis and Akeley munis were not among them.

In Menahga, however, Northbound Spirits did lose money in 2020 – a fact not reported to the state auditor’s office on time for the report.

Park Rapids

The report shows that Rapids Spirits had 2020 sales totaling $3,429,983, an increase from $3.03 million in 2019.

After the cost of sales, the off-sale-only store had a gross profit of $898,134, up from $767,000 in 2019.

Accounting for operating expenses of $649,617 and other revenues totaling $10,480, the store pulled down a net profit of $258,997 or 7.6% of sales – the same percentage as in 2019.

Of 179 cities statewide with municipal liquor operations, Park Rapids ranked 41st in the state by gross sales and 79th by net profit as a percent of sales.

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The Nevis muni, an on- and off-sale liquor operation, turned a profit in 2020, but the impact of COVID-19 on bars and restaurants put a stopper in the enterprise's growth. Infogram by Robin Fish / Park Rapids Enterprise, Jan. 4, 2022

Nevis

The Nevis Municipal Liquor Store reported sales totaling $723,259 in 2020. This was down from more than $800,000 in 2019.

Less the cost of sales, this came to a gross profit of $280,158, also down from the muni’s 2019 gross profit of almost $362,000.

With operating expenses totaling $257,434 and $9,981 in other revenues, this left the on- and off-sale operation with a net profit of $32,705 or 4.5% of sales. This figure was 10.1% in 2019.

Nevis ranked 109th statewide in gross liquor sales and 112th in net profit as a percent of sales.

“2020, basically, is COVID,” said Erin Rhoades, manager of the Nevis muni. “We were shut down more than everybody else. Our city council thought it would be more responsible if we shut down. So, we missed the deer opener … basically, all the way up to New Year’s.”

Rhoades also noted that privately owned bars received COVID relief funds, for which city-owned operations didn’t qualify.

“It’s exciting that we made a profit,” she said, “but I can tell you, 2021 isn’t even gonna be as good as 2020, because we were still coming out of the hole.”

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Rhoades said the muni’s goal for 2022 is to make up the lost ground. “We’re having to cut staffing,” she said. “We’re having to cut a lot of stuff just to make it back from the shut-down.”

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Closures and restrictions in 2020 due to COVID-19 hurt the on-sale side of Akeley's muni, but the store remained profitable. Infogram by Robin Fish / Park Rapids Enterprise, Jan. 4, 2022

Akeley

Akeley’s on- and off-sale liquor operation posted sales totaling $400,532 in 2020. In comparison, the muni made over $500,000 in sales in 2019.

Minus the cost of sales, this was a gross profit of $186,156, down from $244,000 in 2019.

Meanwhile, the Akeley muni’s operating expenses totaled $168,152, while non-operating revenues totaled $1,327. This left a net profit of $19,331 or 4.8% of sales, compared to 4.6 percent in 2019.

Statewide, Akeley ranked 139th by gross sales and 109th by net profit as a percent of sales.

“We were only open for, like, six months of it,” Akeley muni manager Lacey Hitchcock said about 2020. “When we actually did open, it started off slow, but when summer hit, I think people were ready to come out. We had a decent summer.

“And then of course, winter came along, and (COVID) started going around, and we closed down. We tried to stay open and keep our employees working for the most part. Some of them are on partial unemployment, and partially working. We tried do do our best, and we came out ahead, and we’re happy with that.”

By contrast, Hitchcock said, 2021 was “phenomenal. We had one of our best years last year. So, we’re looking forward to that audit, for sure.”

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According to Menahga city staff, Northbound Spirits' sales jumped in 2020, yet the on- and off-sale liquor operation posted a net loss on the year. Infogram by Robin Fish / Park Rapids Enterprise, Jan. 4, 2022

Menahga

The City of Menahga, whose liquor operation posted a significant loss in 2019, did not submit its 2020 financial information to the state auditor’s office in time for the report.

City staff reported that Northbound Spirits’ 2020 financial statements showed total sales of $900,335 and a net loss of $18,210.

Statewide trends

The state auditor’s report explains that cities were originally allowed to operate liquor establishments as a way to control the sale of alcohol, providing access to areas that might not be able to attract a privately-owned establishment. Also, profitable municipal liquor stores can provide revenue to supplement local taxes and fees.

Statewide, municipal liquor operations had a total net profit of $36 million in 2020, an increase of $8.2 million or 29.2% from 2019. On-sale operations had a total net profit of $3.1 million, a decrease of $412,793 or 11.7% on the year. Off-sale profits totaled $32.9 million, an increase of $8.6 million or 35.2%.

With sales totaling $410.6 million, 2020 was the 25th consecutive year of record sales for Minnesota’s municipal liquor operations. This was an increase of $38.5 million or 10.3% over 2019.

Meanwhile, municipal liquor stores’ operating expenses decreased $665,413 or 0.8% statewide to a total of $81.4 million. Net transfers out from Minnesota cities’ liquor store funds totaled $21.3 million in 2020, a 2.7% increase from 2019.

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