A customer walks through the craft beer section at a Liquor Stores N.A. Ltd.-owned Liquor Depot in Edmonton on Tuesday.Jason Franson/The Canadian Press
Stephen Bebis is trying to reinvent liquor retailing, one Pinot Noir at a time.
Two years ago, the seasoned merchant took the helm at Edmonton-based Liquor Stores N.A. Ltd., which is North America's largest publicly traded booze retailer. The chain of more than 240 stores, which operates in Alberta, British Columbia, Kentucky and Alaska, was stalled as it faced more competitors, feeling the pressure to raise its game.
Today chief executive Mr. Bebis is counting on revitalizing the business with more offerings, remodelled stores, better distribution systems and aggressive expansion beyond its current jurisdictions, particularly in the United States.
He even made a pitch recently to an Ontario advisory panel led by former banker Ed Clark to allow the privatized chain to test its stores in that province. While the Liquor Stores bid to enter Ontario is unlikely to become a reality any time soon in the current political climate, Mr. Bebis remains undaunted.
"We think we have the right solutions – deeper selections, more competitive pricing," Mr. Bebis, whose stores are under an array of banners such as Liquor Depot and Liquor Barn, said in an interview. "If we put a store like this in Ontario, it would rock."
Mr. Bebis is staking Liquor Stores' fortunes on a more disciplined and updated retail model, which is already showing early signs of starting to pay off in an increasingly crowded market. And while Ontario may not be ready for his privatized liquor stores – the province is expected to soon announce it will give some supermarkets the green light to sell beer and wine – its stance isn't weakening his resolve to oversee his own liquor retail shakeup.
"The writing is on the wall – the competition is going to get more intense, not less," said David Ian Gray of retail specialist DIG360 Consulting in Vancouver.
Liquor Stores' latest financial results show that it's making headway. In fiscal 2014, Liquor Stores' profit jumped more than 12 per cent to $12.9-million (it incurred an impairment charge in 2013) while sales picked up 5 per cent to $694.2-million.
"The Alberta experience with independent liquor stores and specialty wine stores has been a win-win," said Michael Kehoe, broker/owner of Calgary-based retail adviser Fairfield Commercial Real Estate.
Other private retailers carry liquor in Alberta, including Costco, Loblaw and Sobeys, but regulations require the chains to sell it in a separate building. Even so, the province still collects its fair share of liquor revenues, Mr. Kehoe noted.
Mr. Bebis, who had founded and headed destination retailer Golf Town and, before that, the predecessor to Home Depot Canada, has drawn up an ambitious blueprint for Liquor Stores. It had been a savvy real estate operator, picking top locations, but its merchandising and marketing skills needed strengthening. Mr. Bebis is focusing his team on touting more items and negotiating more forcefully with suppliers for limited-time deals, while adding more warehouse space to stock the bulk purchases, he said.
To rev up profit margins, it launched a "preferred label" program to get suppliers to produce exclusive products just for Liquor Stores at lower prices, reducing the need for "middlemen" as his team deals directly with wineries, distilleries and breweries.
For example, Liquor Stores recently introduced a preferred label Pinot Noir called Covet for $19.99 a bottle – 20 per cent cheaper than one of the best-selling Pinot Noir national brands, he said. "Our merchants built the product from scratch with our winery partner," he said. It helps shore up the retailer's profit margins because of fewer marketing and other costs, he said. The retailer added about 50 preferred labels in 2014 and will have another 25 to 35 this year, he said, declining to provide their percentage of sales.
To boost customer service, he set up Liquor Stores University to train staff in product knowledge, selling skills and robbery prevention. Staff are given lessons to become wine, beer and spirits specialists and conduct tastings.
He's pouring money into upgrading the chain's information technology systems and building spacious, well-lit destination stores, borrowing from the Golf Town and Home Depot superstore playbook.
"You'll go to your local hardware store if you need something quickly," Mr. Bebis said. "But if you're doing a big project, you'll go to Home Depot." The same applies to his specialty liquor stores, he said.
Still, he acknowledged he has work to do, and that the full impact of his efforts won't be felt until 2016 and 2017. "We're well into it now but we still have a way's to go."
The slowing economy in Alberta as a result of sliding oil prices is a potential hurdle. But in sluggish times consumers "trade down" to less expensive booze rather than quit altogether, he said.
Liquor Stores still has its proponents such as Sheila Broughton, head of research at PI Financial in Vancouver, who is impressed with Mr. Bebis's new initiatives even though the investments will constrain margin gains in 2015. "The continuing trends of sales growth and improving margins is encouraging," she said.