February 2016 Industry Snapshot
Changing the model from a destructive competition to a constructive 459 monopolies
The changes that Arkansas’ wine and spirits industry has experienced over the last two years and will continue to experience for the next two years are probably the most exciting of the last decade. The wine & spirits industry is slowly shifting towards a more open market where increased competition is forcing all players from retailers to wholesalers to step up each others’ game.
In 2015, we have witnessed new wet counties, new store openings with higher standards, new competition amongst wholesalers, smaller distributors emerging, and new product demands from consumers.
The driving force of this change is the generational shift that started over three years ago. With over 22% of the industry changing hands since 2013, the industry is bringing in a new breed of entrepreneurs. People are more enthused than ever before to own a liquor store, probably due to the rise in liquor store valuations and the hope for a new model. A recent example of this burst of interest is seen in the number of ABC applicants for Saline county licenses in 2015. There were 2 times the 21 offered permits compared to 1.3 times for Benton county’s offered licenses in 2013. A new business model, more profitable and more in tune with the consumers’ wishes, is taking hold in the state. We see such stores adopting the new model to experience great returns with an average increase of 20% in their gross profit margin as well as their annual sales increasing at least 10-15%. (more about the new model)
Resisting forces, hoping to maintain the status quo, continue to be active at slowing the process. However, what we take away from our last industry roundtable with liquor store/restaurant/private club owners, is that the market is demanding more distribution efficiencies and opportunities, more flexibility in the financing and storage capacity of product inventory, more products innovation, more marketing support, and overall a more level playing field.
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