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Surdyk’s On The State Of The Minnesota Market

August 1, 2016

The Surdyk family, which has been selling beverage alcohol in the Minneapolis market since 1934, is in the midst of a transition to a fourth generation of leadership as Jim Surdyk, CEO since 1988, cedes more day-to-day responsibility to his three children—triplets Melissa, Taylor and Molly, age 30. SND recently sat down with Jim Surdyk and family, as well as general manager Steven Wilk, at Surdyk’s, the single-unit 12,000-square-foot store on Minneapolis’s northeast side, to discuss the local retailing scene.

SND: How is business these days?

SURDYK: Overall sales were actually down 2.5% last year. Years ago, we had familiar competitors like Haskell’s, MGM, Chicago Lake and France 44. But now there are many more convenience stores, and people also are taking growlers home from taprooms. Total Wine & More has put up six stores in the past two years. So the pie gets divided more narrowly each year.

SND: You’ve been renowned for your wine selection. But are wine sales now hurting?

SURDYK: Wine was down nearly 5% for us last year. Chardonnay has been slipping for a long time, while Sauvignon Blanc is huge now and sucking sales away from Chardonnay. Viognier is also doing very well—a varietal that people had never heard of around here 10 years ago. Boxed wines have exploded, taking over our jug business. The problem is that the price for a 3-liter Black Box ought to be $21.99 every day and $17.99 on sale, but Total has been selling it at $14.99. So we have it at $14.99, which is pennies above our wholesale cost, although it does fly out of here at that price. Our average wine bottle retailed at $12.12 last year, up slightly. People used to wait for the seasonal wine sales to stock up and then buy five or six cases at a time. But after Total entered the market with everyday low prices, people have no longer felt the need to do that. So now they buy one case instead of multiple cases. Our customer count is still good, but our ring isn’t as high as it once was.

SND: How is beer doing?

SURDYK: Beer is up 8% for us in the past year, and craft sales are exploding. Of our top 20 beers, 14 are made in Minnesota. Our best seller is Surly Brewing’s Furious IPA. They just opened a $35 million brewery on University Avenue in Minneapolis. Their beers retail at $10.99 a four-pack. Our challenge is that we have 1,600 SKUs of beer and we don’t know where to put them all. Still, that’s better than the old days when we made 25 cents on each case of Miller we sold. We receive more calls from people asking for hard-to-find beers than we do for wines. Fifteen years ago, we never got any beer calls.

SND: Is craft important to your spirits business?

SURDYK: Yes. Our spirits sales were up 2% last year, with Bourbon and whiskey being our biggest gainers. We’re selling Roknar Rye at $33 from Far North Spirits in Minnesota, and wheat and single malts priced at $40 a half-bottle from 11 Wells in St. Paul (operating out of the old Hamm’s Brewery complex). Jack Daniel’s, Jim Beam and Maker’s Mark are still the foundation of our whiskey business in volume terms, but our margin comes chiefly from craft products. National brands that used to get three facings on the shelf now might get one or two. Tequila is still up-and-coming, and mezcal is totally untapped around here. We have something called Local Roots Wednesdays at Surdyk’s, when Minnesota-made beers and spirits are discounted 10% and wine 20%. As a longtime retailer here, we feel an obligation to highlight local products.

SND: You’re a Drizly delivery house, and are also partnered with Amazon Prime Now. How’s the delivery piece going?

SURDYK: We also work with a local company called Bite Squad, and we do our own deliveries. Delivery services add a point or two to our sales and give us more exposure. But our latest thinking is that if delivery service is going to get bigger, it might as well be our own. So we’re putting more effort behind doing our own deliveries. We’re banking on it being 5% of our sales some day. There is huge potential.

SND: Do you have any ambitions to build a second store?

SURDYK: Not at all. I’d rather have one good store than two bad ones.

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