Bemidji City Council City seeks methods to increase liquor profits
The Bemidji City Council is looking to reduce costs and increase profits at its two municipal liquor stores.
At a work session on Monday, representatives from the Minnesota Municipal Beverage Association offered the council a few suggestions.
Bemidji operates two municipal liquor stores: Lakeside Liquor along Paul Bunyan Drive South and Bemidji Discount Liquor, along Paul Bunyan Drive Northwest.
On Aug. 18, Gary Buysse, liquor operations manager in Rogers, Minn., and Paul Kaspszak, MMBA executive director, met with Dan Bahr, manager of the Bemidji municipal liquor stores, to discuss options.
In a letter sent to Bemidji City Manager John Chattin, Buysse and Kaspszak made several recommendations.
- Request for proposals for a new credit card processing rate.
- Continue to increase mark-ups on several categories.
- Reduce normal inventory levels.
- Change the physical location of products in the cooler and on shelves.
- Reduce personnel expenses by reducing employee hours of low customer activity.
- Consider selling energy drinks.
According to the MMBA, the city's financial reports from 2003-07 show a relatively stable sales level, and its gross profit level has been consistently good. However, expenses have been increasing and as a result, net sales percentages have lowered.
Earlier this year the city requested bids from two companies in order to lower its credit card processing rate.
"Credit card sales now make up 40 percent of our sales," said Bahr. Cards that are keyed in by a teller cost the liquor stores more money than if they are swiped, he said.
"We dropped our costs by half through the bidding process," said councilor Greg Negard. "The bidding process is a lot of work, but it's worth it." The city plans to bid for rate proposals on a more regular basis.
The MMBA also suggested the council reduce its stores' inventory.
According to Bahr, the north store carries about $300,000 worth of inventory and roughly $200,000 at the south store. There's no need to carry that much anymore, said Bahr.
"It's a constant dance," said Kaspszak. "New products are the lifeblood of the industry -out with the old, in with the new. It's more of an art than a science."
The MMBA letter recommended the city consider selling energy drinks, which are currently not sold in its liquor stores. However, adopting this suggestion gets a little complicated.
According to Kaspszak, the purpose of municipal liquor operations is to "control the sale of alcohol."
"Controlling the sale of alcohol means reflecting a community attitude," said Kaspszak. "If the community believes that energy drinks leads to bad behavior and decides the city stores should not carry it, the city will have to accept its potential financial loss."
The council closed the discussion and made no vote to adopt any of the suggestions at this time.
"It's important we consider these suggestions," said Mayor Richard Lehmann. "Anything we can save is a heck of a lot better than spending it."