PR liquor store ranks 37th in sales statewide; Akeley muni shows net loss
State Auditor Julie Blaha's office reported that the Rapids Spirits liquor store ranked 37th in sales and 65th in net profit as a percentage of sales among 190 municipal liquor operations statewide. Akeley's store placed 137th and 176th respectively.
Rapids Spirits Liquor Store sold its way into the top 40 in 2018, according to a state report about municipal liquor enterprises in 190 Minnesota cities. However, the same report had sobering news for Akeley.
The office of State Auditor Julie Blaha released their Analysis of Municipal Liquor Store Operations on Dec. 11.
Reporting about the year 2018, Blaha said, “While the number of liquor stores show decline, the profitability of those remaining stores is increasing. This suggests the strong local oversight model for municipal liquor stores is effective.”
Rapids Spirits, the municipal liquor store in Park Rapids (population 4,136), is off-sale only. Its 2018 gross sales of $3,126,948 ranked 37th out of 190 cities statewide. After subtracting the cost of sales, that’s a gross profit of $815,165 (26.1 percent).
Counting operating expenses of $566,367, Rapids Spirits had an operating income of $248,798. After $4,276 in other costs, its net profit was $253,074 (8.1 percent) – ranking 65th in the state by net profit as a percent of sales.
It also ranked first out of three off-sale-only stores in the Headwaters economic development region, outperforming stores in Bemidji and Bagley. However, its percent net profit was lower than three of the region’s on- and off-sale stores – Baudette, Nevis and Blackduck.
Store manager Scott Olson was ambivalent about the report, because it compares two different types of operations (on-sale and off-sale). Nevertheless, he said, “In 2018 we saw some positive growth in sales and also profit. We’re going to continue to try to be a leader in the area.”
Particularly, he said, the store hopes to find ways to fit “the new items that are constantly coming out … into the selection that we have at the store. There are new items coming just about daily, it seems like, and some of those are really taking off.”
The store’s 2019 numbers, Olson said, “are going to be similar to 2018,” which was “quite a growth year for us. The wet spring did put a little bit of a damper on the beginning of the year, and I think most retail establishments in our area … did see that.”
Akeley (pop. 451), which has an on- and off-sale operation, was one of 38 Minnesota cities that posted net losses in 2018. No comparison to the prior year was available, because Akeley’s muni failed to report its financial information in 2017.
According to the state auditor’s report, 37 of the 38 cities whose munis posted net losses in 2018 are located in Greater Minnesota, and 28 were on-sale operations. Five of those cities ended their liquor operations by the end of 2018.
Akeley’s liquor store ranked 137th of 190 stores in gross sales at $485,163, with gross profit of $208,400 (43 percent). However, after operating expenses totaling $231,201, it had an operating loss of $22,801.
Non-operating expenses of $1,752 and revenues of $538 completed the picture, leaving a net loss of $24,015. Ranked by net profit/loss as a percent of sales, Akeley came in 176th place statewide and seventh out of seven on- and off-sale stores in the Headwaters region at 4.9 percent.
Store manager Lacey Hitchcock commented, “Things are moving in the right direction. We have new staff in the city hall. I don’t know what the current numbers are for this month, but we were running in the $50,000 (range) ahead for the year for 2019. So, things are looking up and looking good.”
Nevis (pop. 416) has an on-and-off sale liquor operation. Its gross sales of $707,455 ranked 104th out of 190 cities statewide, with a gross profit of $318,151 (45 percent).
Ranked by net profit as a percent of sales, the Nevis muni ranked 46th statewide with a net profit of $63,894 (9 percent). It also ranked second out of seven on- and off-sale stores in the Headwaters region, only trailing Baudette (11.7 percent).
“Overall, I’m happy with the way that 2018 went,” said manager Kilee Weaver. “Obviously, there’s room for improvement. There always is. But we’ve made some strong growth over the last few years, and I hope that it continues to go that way.”
Menahga (pop. 1,341), with an on- and off-sale liquor operation, ranked 91st out of 190 cities in gross sales at $892,228, with a gross profit of $318,454 (35.7 percent).
Ranked by net profit as a percent of sales, Menahga’s municipal liquor store placed 83rd statewide and fifth out of 13 on- and off-sale stores in the North Central region. It reported a net profit of $60,198 (6.7 percent).
Store manager Renata Parks declined to comment.
During 2018, Minnesota’s munis posted a 23rd consecutive year of record sales, totaling $360.2 million. Total sales in 2018 increased by $11.3 million (3.2 percent) over 2017.
Despite a steady downward trend in the number of municipal liquor stores during the last 10 years, their combined net profit statewide was $29 million in 2018, an increase of $5.9 million (25.6 percent) over 2017.
Net profits for on-sale operations totaled $3.5 million, a $1.2 million (50.4) increase on the year. Off-sale operations made net profits totaling $25.5 million, a $4.7 million (22.8 percent) increase.
Operating expenses for all municipal liquor operations statewide totaled $78.7 million in 2018, a $464,000 (0.6 percent) increase over the amount reported in 2017.
The 19 municipal liquor stores in the Metro Area accounted for 35 percent of total sales and 37.9 percent of net profits in 2018, averaging $3.2 million in sales compared to average sales of $1.3 for all Greater Minnesota operations.
Statewide, municipal liquor stores transferred out $21.7 million more than they transferred in, supporting other budget accounts in their cities. This included $14.3 million in net transfers out for Greater Minnesota cities.
Gross sales statewide among municipal liquor stores that were open throughout 2018 ranged from $128,000 in Elmore to $15.3 million in Lakeville. Net profits/losses ranged from a $61,407 loss in Frazee to a $2.7 million profit in Lakeville.
Compared to 2017, 134 cities’ municipal liquor operations increased their net profits in 2018, while 53 showed decreases – 49 of them in Greater Minnesota.
Of the 190 cities discussed in the report, 93 had on- and off-sale operations in 2018 and 97 had off-sale only.
Blaha’s office recommends that city officials compare their operations to cities with the same type of operations, looking for ways to improve efficiency and to keep their prices competitive.
They also noted that on-sale operations generally have much higher operating expenses than off-sale.