Despite higher wages and inflation, sales and profits are up at EP Liquor

If the latest sales and profit numbers for city-run Eden Prairie Liquor were an alcoholic drink, they’d be slightly more like Dom Pérignon than a bargain-bin bubbly.

The state auditor’s latest report on municipal liquor stores across Minnesota showed profits overall declined more than 25% in 2022 compared to 2021 – the latest years for which statewide numbers are available – but the City of Eden Prairie’s off-sale liquor operation performed better than that: a 6.2% decline in profit.

Eden Prairie’s estimated numbers for 2023, provided by city officials last week, are more sparkling.

They show a 1.5% increase in profit last year compared to 2022. Estimated 2023 sales of $11,766,007 are also up over the previous year. That number is only a bit below the annual sales record of just over $12 million from roughly a decade ago, before Total Wine & More opened in Chanhassen. It’s also the highest sales number over the past six years of numbers reviewed by Eden Prairie Local News (EPLN).

Advertisement

The EPLN review of Eden Prairie Liquor’s 2018-23 performance also shows that:

• Liquor sales have increased slowly but steadily over the period, from $10,559,515 in 2018 to last year’s $11,766,007.
• Profits have been up and down – 2023’s profit was above numbers for 2018, 2019, and 2022 but below 2021 and the recent peak of $1,178,361 in 2020, when the pandemic had us drinking at home instead of at bars and restaurants.
• City officials continue to transfer most of the profits to their capital improvement program (CIP), funding items such as park playgrounds and trail maintenance. In five of the last six years, city officials have transferred $800,000 of liquor profits to the CIP; in 2020, the year when profit peaked, the amount transferred was $850,000.

While 2023 might not have produced historic numbers, “We were still positive on the year, which I feel was a great accomplishment considering the rumors in the industry that people had had a challenging year,” said Jaime Urbina, operations manager for Eden Prairie Liquor.

The challenges include rising costs on two fronts: increased wages to stay competitive with other employers, and higher wholesale prices of products due to inflation. Both were cited by the state auditor in reporting the overall profit decline for Minnesota liquor stores.

Urbina said that, as many employers countered pandemic-related shortages of part-time workers with wage increases in late 2021 and 2022, Eden Prairie Liquor followed suit, increasing pay by $3 to $5 per hour and the overall payroll by about 15%. “And that’s just to stay competitive in the market,” he added.

Advertisement

At the same time, the city off-sale liquor operation worked toward getting back to full staffing. Before September of last year, “we had struggled with finding employees, so we ran short in most stores,” Urbina said. Those shortages have now eased.

With three off-sale stores – near Cub Foods, Lunds/Byerly’s, and Kowalski’s Market – Eden Prairie Liquor has nine full-time employees and a part-time staff that ranges between 30 and 40 depending on the time of year.

Inflation was evident nearly every time Urbina purchased inventory. 

“We had never seen a year with so many price increases,” he said about 2023. “Typically, there will be two or three times per year where we’ll have a large number of price increases that everybody does at the same time. Last year, every single week you would get vendors and companies saying they were doing price increases on their products.

“We tried to do what we could to not transpose that to the customer, but obviously, there’s a lot that went up.” A portion of the wholesale price increases was absorbed by the liquor operation, affecting margins. They also tried to counter the higher expenses and improve profit margins by changing purchase techniques, Urbina added.

That balance between competitive prices and profitability remains an ongoing challenge for Eden Prairie Liquor. All of the surrounding communities except for Edina have privately owned liquor stores, including big-box chain stores like Total Wine.

“We try to stay as competitive as possible,” he said. “Unfortunately, when it comes to business models and buying power, there is a huge difference between how we can purchase something and how a large chain can purchase things.”

One of the biggest recent changes at Eden Prairie Liquor is the sale of beverages containing low-dose, hemp-derived THC. Last year, these beverages were 1.5% of total sales, around $173,000, making up for a decline in wine sales. Urbina thinks wine drinkers may be trying THC products instead.

Another change is the growth of ready-to-drink, pre-mixed cocktails, which became popular during the pandemic because visiting a bar or restaurant for cocktails was difficult. “Those are soaring for us,” said Urbina.

Overall last year, 35.2% of total sales came from hard liquor, thanks in part to those pre-mixed cocktails. No. 2 was beer at 32.3% of sales. 

The liquor landscape in Minnesota is unique. In addition to allowing municipalities to control liquor sales in their communities, Minnesota, in other ways, is more restrictive than many other states toward retail sales. For example, it prohibits most grocery, convenience, drug, and general merchandise stores from selling strong beer, wine, and spirits.

The City of Eden Prairie says on its website that its choice of municipal liquor over private liquor stores “not only allows for greater control over liquor being sold and consumed in the city, but also further diversifies the city’s revenue sources.”

The city owns the Den Road building that houses Eden Prairie Liquor near Cub Foods. Its two other stores are strip mall tenants. No changes in the number or size of liquor stores are imminent, Urbina said.