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Colorado Retailer Molly’s Spirits In Expansion Mode

December 13, 2019

Colorado’s beverage alcohol landscape has shifted significantly since Lakeside-based Molly’s Spirits launched in December 2014. Off-premise licensees can now apply for a second license and grow their businesses to a total of four stores by 2027. And as of this year, grocery and convenience stores previously licensed to sell low-alcohol beer (3.2% alcohol) can now sell full-strength beer, creating stiff competition for traditional off-premise stores. A relative newcomer to the business, Molly’s Spirits CEO Rufus Nagel has expertly navigated these changes.

Nagel’s background in Silicon Valley tech and Denver commercial real estate made him an unlikely candidate to open a large-scale, high-volume store in a crowded market dominated by established players. He studied the industry, talked to local retailers, and hired managers with decades of experience. Molly’s emerged as a wine, spirits, and beer destination, and revenue grew from $10 million in 2015 to $23 million in 2018. For his business acumen and community leadership, Nagel was recently named a 2019 Market Watch Leader.

Since the beginning of this year, the greatest challenge for every Colorado retailer has been beer; its sales determine whether a store will thrive or shutter. Nagel has handled this challenge well. After the law changed on January 1, Molly’s first-quarter beer sales declined 7% compared to first-quarter beer sales in 2018. In contrast, Nagel reports other large-scale destination retailers experienced declines of 15%-20%, while some small stores’ beer sales plummeted 30%-40%. “Molly’s has become even more of a destination store since grocery stores began selling beer, and our average basket size for 2019 is up almost 10% compared to 2018,” Nagel says. “We’re losing the $20 customers, but increasing our $100 customers.” In response to recent changes, the company sharpened its focus on unique beers and in-house expertise—in fact, the beer manager, Tony Doria, is a Cicerone.

After clearing the beer hurdle, Nagel began to plan a second unit 21 miles away in Greenwood Village, opened in November. Both stores are in suburban shopping centers off interstate highways, with the second location situated near eateries, a natural grocer, office buildings, and an outdoor concert venue. “A store has to have a compelling location,” Nagel says. “There are 18 restaurants in this mall, and the location next to a grocer without a liquor license is key.”

The original and new locations are of similar size—28,000 and 25,000 square feet, respectively. Like the first store, the second will have about 18,000 SKUs and an uncluttered, open feel. Whereas the original store has a steampunk theme and a Victorian-era mural of the Molly character, the new store will have a mid-century modern theme and a Jetsons-esque Molly mural. “It’s a huge challenge to make the new store the same, yet different,” says Nagel, adding that the new location has a more mature demographic.

Technology powers every aspect of the company’s operations. Nagel leverages his technology background to enhance the shopping experience, reduce labor costs, track trends, and reset the store. The original store features 17 digital screens and MarginMate electronic shelf labels, which track inventory and enable managers to seamlessly update prices for any item. The second store will have a wireless version of the same equipment, as well as screens displaying video content that tells the products’ stories.

Customers can order Molly’s products through delivery service Drizly, with purchases delivered by store-branded hybrid cars. “Both stores will be hubs for Drizly, and the new store will result in increased coverage for the delivery service,” says Nagel. Customers are also able to order from the Molly’s website for either delivery or streamlined in-store pickup. And in 2020, the company plans to launch a mobile shopping app. Market Watch has more on Molly’s and the Colorado retail landscape.—Angel Antin

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