PROOF POSITIVE

The New Hampshire State Liquor Commission continues to modernize and expand its operations, both as a marketer of wine and spirits and as the enforcement and licensing authority.


Driving north into New Hampshire in early October, you’re struck by the incredible colors of the landscape. The annual changing of the foliage draws many tourists to the state, and if they’re traveling on the major highways, they’re likely to encounter some New Hampshire State Liquor Stores, long renowned for some of the most competitive prices in the Northeast.

 
Chairman John W. Byrne (center) and
Commissioners Miriam F. Luce and
Anthony C. Maiola paid a recent visit to
the state’s newest superstore, Store #76.


With a mandate from the State Legislature to exercise adequate enforcement and control over the sale of beverage alcohol while at the same time maximizing revenues, New Hampshire has evolved into one of the most aggressive marketers and merchandisers of beverage alcohol products in the country. And under the stewardship of chairman John W. Byrne and commissioners Anthony C. Maiola and Miriam F. Luce, the New Hampshire Liquor Commission (NHLC) continues to modernize and expand its operations. The five so-called “highway superstores,” which cater to visitors as well as New Hampshire residents, are prime examples.


Take the newest, and most ambitious of them, Store # 76, the Hampton superstore, located right off I-95 which runs along the eastern border of the state. Open less than two years, the 16,000-square-foot operation produced $12.5 million last year, second among the state’s 72 stores. This new store’s performance is on track to eclipse the $13.2 million produced by the tremendously successful Portsmouth Circle superstore, located about 10 miles north, also plainly visible from the interstate.


The NHLC’s progressive approach to marketing is crystallized in the Hampton store. It carries about 3,600 SKUs, affording consumers a wide selection of products to choose from. It was one of the first of New Hampshire’s stores to institute an innovative category management program that has been so successful that it has been expanded to all the stores in the state system. It is a jewel in the system’s growing “specialty wine program,” and boasts one of the largest selections of domestic and imported wines.


The store also focuses on a consumer-friendly presentation, with wide aisles and plenty of shopping carts. There are lots of shelf talkers, large attractive displays and other merchandising aides throughout the store. For instance, there is a computer kiosk placed beside the centrally-located wine section. The kiosk is available to consumers who have questions about wine or other products, and it also offers food pairing suggestions.


And always, there are the extremely competitive prices, driven in part by the state’s tax-free status (no sales tax, no alcohol excise tax) as well as cost savings that result from no wholesaler markup. And the everyday low prices are buttressed by an aggressive — and creative — program of price discounts that at one time or another seems to touch on just about every product category in inventory.


These and other significant efforts have paid off.


“I’m proud of what we’ve accomplished this past year,” said Chairman Byrne. “For fiscal year 1997, statewide sales were up $16.8 million. Our efficiency remained lean; we held the line on costs. Our profits are an incredible 21.8% of sales. And we gave an additional $4-$5 million in revenue to the state.”


Byrne admits to having had no previous hands-on experience in the beverage alcohol industry when he was appointed to his position two years ago. What he did have was a long tenure on a management team that worked with Fortune 500 companies, supervising mergers and acquisitions for multinational conglomerates, as well as experience interfacing with lots of government agencies in the process.


“When I was offered the job, no direct agenda was given to me,” Byrne said, “other than the understanding that the Liquor Commission is a vital revenue producer within state government. I viewed it as if I were running a $200 million-a-year business.”


The NHLC functions as retailer, wholesaler, enforcement agent and bailment warehouser, and employs 304 full-time employees who are augmented by a part-time staff of 433 throughout the system. The 72 state stores are divided into nine operating sections, each with a supervisor, who reports up the chain of command from John D. Bunnell, director of store management, to James M. Gustave, administrator of marketing and sales, to Commissioners Maiola, Luce and Chairman Byrne.


Byrne noted that the NHLC already had a well-deserved reputation as a highly efficient, highly competitive organization that delivers products to consumers for good prices. “We wanted to keep that, but we also wanted to continue to be competitive in the future. The efficiencies were already in place; the system was functioning fine when I took over.”


Appointed four years ago, Commissioner Luce emphasized that, given the sometimes restrictive parameters, “the employees operate tremendously well.”


Byrne agreed. “Our state employees are very hardworking. The volume of sales that they produce with the size of the staff is amazing.”


But, he said, in order to keep growing, you can’t stand still; you have to be proactive in your approach. Thus, for the past two years the NHLC has focused on a variety of strategies:


 


* Investing in store improvement. “We’ve re-tooled older stores to make them sparkling clean,” said Byrne. “We’ve redone the floors, invested in new racking and other things to physically upgrade the stores, making it a more comfortable and inviting shopping experience for our consumers.”


* Enhancing the product presentation. “We partnered with suppliers to create a more effective shelf management system. We were approached by Brown-Forman and they’ve assisted us in a major undertaking to reset the shelves in all our spirits departments,” Byrne said. The resets are based on sales performance for a given store location and the figures are constantly updated. The ROI (Return On Investment) has become an important criteria for the state.


John Bunnell, director of store management, noted that “we’re now looking at the gross profit generated by the sale of a particular product. In addition, we’re examining the number of turns a product has as well as its shelf fill. Before, a product that needed only one facing might have four; now we’re more in tune with the number of facings needed by a product.”


Added Chairman Byrne: “One thing is certain: You won’t ever see any open slots on our shelves anymore.”


A much wider selection in several product categories is also part of the overall approach. The inventory can be tailored to a specific store, and gross profits have actually increased as a result of trading the consumer up to higher-quality products, according to Byrne. “We are moving in product that the consumer wants, and we’re very aggressive in listing a lot of new products.” He added that, for example, the state’s offerings of single malt Scotch have gone from about 25 brands to about 75. And with the overall increase in the popularity of premium wine, the stores have increased their wine offerings, especially in light of the tremendously successful specialty wine program.

 Marrying Wine and Food…and Opera

Of the many elements that contribute to the New Hampshire Liquor Commission’s outstanding wine and food education program, special events are perhaps the most unique. In October 1997, for example, the Commission sponsored a benefit for the Historic Claremont Opera House, in Claremont, NH, which featured a lineup of wines poured by several brokers and a smorgasbord of food supplied by a number of local restaurants and caterers. Billed as a “Fun-Filled Epicurean Journey,” the event sold 280 tickets, and netted the Opera House approximately $3,000.


Sponsoring this fund-raiser has become an annual event over the past few years for the Liquor Commission, and it is just one of several events the Commission supports. In November, it sponsored a new fund-raiser for the New Hampshire Symphony Orchestra, in Manchester. And several more fund-raising events are scheduled for this year.


While supporting worthy community-centered events like these, the NHLC is also promoting its wine education initiative, which has played a positive part in expanding wine sales throughout the state.


* Initiating a new, state-of-the-art, computerized point-of-sale system. “We were given a $2.5 million capital appropriation from the State Legislature for 1997, to be used to replace our current statewide point-of-sale system,” said Byrne. “We are currently in the process of awarding a contract for a new state-of-the-art system to go into all 72 of our stores, linking all the cash registers to the individual store’s back offices and linking those to our main office and warehouses. We should be up and running by next year.” (see sidebar, page 22)


 


* Expanding marketing and merchandising programs. “We’ve become very aggressive in presenting point-of-sale and merchandising programs in-store. In any one of our stores, you might see not only a competitive price on the product, but also wonderful displays and a sweepstakes or a raffle going on. We’re providing a real exciting buying environment for consumers,” Byrne said.


For example, the stores feature a variety of rotating case discounts for wines at 10%, which can include up to an additional 10% discount when piggybacked with other wine category sales — such as a California wine sale — that might be running.


“Now we’ve hired Dave Maynard, a retired radio personality from the Boston area, to do radio spots for us, promoting the wine and food program, and as a spokesman for the Liquor Commission,” Byrne explained, adding that the campaign has been tremendously successful in educating consumers.


These are just a few of the marketing activities to which consumers, both in-state and out-of-state, are apparently responding. Total sales for the 1997 fiscal year, ending June 30, 1997, were up 7.59% compared to fiscal ’96, to nearly $240 million. Gross profits, including additional revenues — liquor licenses, for example — totaled just over $71 million, up from $66.7 million in fiscal year ’96.


The morale of the entire NHLC seems to be at an all-time high, and that has had a positive effect on the quality of the service. Commissioner Maiola has played a large part in this. “Following my appointment seven years ago, I made visiting every store in the state a priority of mine,” Maiola said. “Then, I instituted a plan to revitalize the stores, not only cosmetically, but in a way that would make them more efficient and with an eye for what the customer demands. The result is a more inviting atmosphere, with effective merchandising of inventory and a competent staff.”


Maiola proudly pointed to the latest store to open, Store #2 in Chesterfield. The store is only 2,200 square feet, but it is already doing “great business,” he said. “It’s unique in that it’s a converted house. It still has a fireplace, and we plan to do a lot of merchandising around that fireplace, especially for the holidays.”


Another of Maiola’s priorities has been to boost employee morale and address various concerns brought to his attention during his store visits. “We have overcome many obstacles together, and formed an excellent ongoing working relationship,” he said. “I am proud that we have such a competent and personable staff. Their success has helped increase profits to the state’s treasury,” he added.


Merchandising is one of Maiola’s specialties, and he confers often with James M. Gustave, administrator of marketing and sales.


“We try to cover all the bases,” said Gustave, who heads the marketing and sales efforts. “Philosophically, we like to merchandise products that we feel will attract both in-state consumers as well as people traveling through the state. Our special value items are often viewed as bargains by out-of-state consumers versus what they would pay in their home markets.”


In the past, the State Legislature mandated that 80% of the NHLC’s advertising budget must be spent outside of the state, but in the most recent legislative session, that regulation was discontinued. This allows Gustave and the other marketers more latitude in where to place their advertising dollars, which were also increased to $750,000 from $604,000. “We’re freer now to pursue a variety of other opportunities,” Gustave pointed out


He also emphasized that profitability played a large part in his marketing decisions. “Depending on the profit generated by a brand, we’ll give it a special space in the store — and often with very aggressive quantities on the floor. Naturally, we’d prefer to sell a large quantity of high-profit branded products.”


For example, while Kahl

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