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Florida’s ABC Fine Wine And Spirits Adapts To Changing Landscape In Securing Future Growth

July 29, 2011

Orlando, Florida-based ABC Fine Wine & Spirits is the largest independent beverage alcohol retailer in the state. The 150-unit company dominated the Florida market until six years ago, when competition intensified from multi-state players like Total Wine & More and the Publix supermarket chain. But ABC has since adapted to the new retail landscape with aggressive pricing and a massive modernization plan that includes a new store design concept. Thirty ABC units will have been updated by this year’s holiday season. According to reliable industry sources, total revenues of the privately held ABC reached approximately $475 million last year. Shanken News Daily recently interviewed Charles Bailes, who is ABC’s chairman and CEO, and his brother Jess, who is executive vice president, to get an update on progress.

SND: Florida has been one of the hardest-hit states in the economic downturn. How have you responded?

Jess: From the mid 1990s until around 2006, we kind of had it our way here in Florida, because the liquor channels were fairly weak. Walgreen’s was getting out of the beverage alcohol business across the country, and at one point they had around 340 stores in Florida. They now have about 130, so we benefited from that. Albertsons was relatively high-priced, though of course they’ve since sold half of their stores to Publix. (Albertsons sold 49 Florida stores to Publix in 2008.) But on the spirits side, we dominated the channels from the mid-1990s through the mid-2000s. Of course, it was a good time for everyone. But in 2005, Total Wine & More entered the market. Total Wine now has about 17 stores in Florida, while Publix has around 130 stores that sell liquor. Publix is a very well run company and a very strong competitor. People sometimes look at somebody else’s business and think, ‘wow, these people must just be making a fortune.’ But then they get into it and realize that the spirits side can be pretty difficult.

SND: It seems like the landscape really changed under you.

Jess: No question. The perfect storm that gave us a tailwind during the 1990s and 2000s really hit us in the face in the late 2000s, along with the economy. But the good news is that the market has settled down. When a new competitor like Total Wine & More comes in, it shakes up the pricing pretty well. With a company like Publix, you have to let them settle in until you understand how they go to market and where their pricing is. So we made some necessary changes, and we’re showing some pretty good signs of life. We’ve had to ramp up our private label business. That really wasn’t by choice. Total Wine has a lot of control labels, and that’s how they can sell national brands so cheaply. So our mix is improving, and with the new concept stores and our current strategy, I think the plan is working.

SND: What are the most notable trends in your market?

Charles: Thankfully, high-end spirits are back in play. That’s what was really disturbing to a lot of suppliers when the recession hit—that people were trading down a shelf or two. There was concern about what would happen when things started to improve. Would shoppers go back to the top shelf? From what we can see so far, the answer is yes. They’re migrating back up a shelf or so, but they’re still watching prices very closely. That’s why you have to stay on top of what the competitive prices are and make sure you’re priced accordingly. We’ve hired a full-time analyst for the first time in our history. I’m really excited about that, because analyzing the market and making decisions based on that analysis is one of the most important things I do. Now I’ll have some help.

SND: So which spirits categories are performing well for you?

Charles: Somebody jokingly told me recently that we should just open a vodka store. We’re not so far from that, because vodka is our largest category by far and still growing faster than anything else. Tequila has grown but now has flattened again, but vodka continues to show amazing energy. Our scale really gives us an advantage, because we’re able to stock all the new products, whether they be flavored vodka extensions or new brands like Skinnygirl Margarita—which is doing so well that we can’t keep it on the shelf.

SND: You mentioned your private label business. Are you being more aggressive with that now?

Charles: We’ve always been in the proprietary business, and we’ve never flaunted it or degraded the national brands to sell it—that’s not our style. We’re not going to limit the facings of a national brand so we can sell more of ours. But we do have some strong brands that we’ve had for years. We’re the only retailer in Florida that sells some of them. Others we’ve developed and own the label, and our goal there is to always put value in the package. You can recommend a product and people might buy it once, but if it’s not good value, they won’t buy it a second time. So we don’t put anything on the shelf that’s not good value. There’s a big difference between the old private labels and what we call proprietary brands. ABC Vodka is a private label that’s a must-have. When its sales are up, that’s not a good thing. That means the economy is in the tank—and boy, did its sales go up in recent years, which was something we hated to see. We don’t make any money on it and don’t push it. It sits on the bottom shelf and sells itself. We concentrate on what we call the waist-high-and-above price range.

SND: Which brands does ABC sell exclusively in Florida?

Charles: One example is Wiser’s, a Canadian whisky and a national brand we’ve had exclusively in Florida for 30 or 40 years. And we do a very nice business on it and have a great relationship with the Wiser’s people (Corby Distillers). Other examples are Old Charter (from Sazerac), which does very well for us. We also have W.L. Weller Bourbon (from Sazerac’s Buffalo Trace Distillery) exclusively in Florida. There’s some give-and-take there, but we’re putting the marketing money behind it. A distiller has to look at how they’ll do in a broader market versus a relationship market like this.

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