As many of you know, I’ve been following Apple Valley Liquor Store #3 since its planning stages and I have never been a fan of the thing at all. In fact, I find it to be a complete and utter waste of time and money. While that is apparent without any evidence, I have given several examples which show, without a doubt, just how much of a waste this “mine is bigger than yours” liquor store is including the liquor store operations are not putting any additional money into the general fund, its expensive beer signs and the fact that it wasn’t performing all that well back in Feburary of 2009.
Well, it’s been about six months and it was time to revisit this topic. Last month I requested updated financial information from the city and was told that breakdowns by store were not yet available but that I would get a copy once the budget planning documents were created for the council. Today I received the document and found exactly what I expected, that Apple Valley Liquor Store #3 is still not performing anywhere up to what the city and its staff believe it should have been. In fact, it’s performing so poorly that city staff expects it to start generating a loss in 2010.
Take a look at the Apple Valley Liquor Store budget information here (PDF). I have extracted the pertinent part and pasted it below for you:
As you can see, Apple Valley Liquor Store #3 operated way under 2009′s adopted council numbers. Their estimates were 95% of the actual total ($12,381 vs $270,431)! This is such a poor showing that they are now estimating that in 2010 the store will actually lose over $10,000. Now, while a neighboring city has been blaming the failures of their large capital expenditures on the economy, Apple Valley has no such ability as their two other liquor stores performed extremely well with the city expecting Liquor Store #1 to best its estimates by nearly 8.5% while Liquor Store #2 is on track to bring in 120% more income than expected.
Now, I want the Apple Valley City Council to explain to the public why they decided to spend $5 million on a store which was unnecessary and why they continue to keep it open when it’s expected to begin losing money. It’s time for Goodwin to eat crow and sell the building, for a loss, as it’s doing nothing positive for the city. This is proof that municipalities should not be in the liquor business as they are unable to create effective budgets or properly plan operations for a new store.
What do you think about Apple Valley Liquor Store #3′s financial woes? Do you think it’s right for this to continue operating at a huge loss when the other stores are beating their estimates by large margins? Whatever you think about Apple Valley Liquor Store #3 go ahead and share as I’d love to hear what you have to say.
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September 9th, 2009 at 10:46 am
This is EXACTLY why governments should not attempt to own or run businesses. I’m guessing no market research was done before this store was put into place to even see if there is demand in that particular region.
September 9th, 2009 at 10:56 am
I don’t know if this shows why they shouldn’t be allowed to run a business.. Store #1 and store #2 did rather well. Maybe make part of the liquor store license process include a % to the city?
I’m going to say I think its silly they run the liquor stores, and would love to see them get out completely, but they seem to actually do a good job at it with 2 of the stores, which surprises me some.
September 9th, 2009 at 11:01 am
mark,
1. They cannot budget properly (-95% and +120%?)
2. They built a $5 million store in an area that is not doing well (perhaps it’s the number of people who are upside down on their mortgages on homes which are ridiculously expensive–much like the store itself is now) just because they followed Target’s market research instead of doing their own.
3. They spent $25,000 on tacky beer signs including one that says “BEER CAVE”.
September 9th, 2009 at 11:25 am
I think its more of an example of why govt often fails at running a business. If this was a private business, cuts would be made to try to bring it back to profitablity. It would have been built for far less than $5,000,000, and nobody would have spent $25,000 on a beer sign, as there is no way it will recoup its cost in the form of increased sales.
When a private company sets out to do business, the goal is to make a profit. When the govt sets out to do something, the goal is to spend every penny in the budget, so as not to get thier budget reduced for the following year.
September 9th, 2009 at 11:51 am
I hope it closes. Then anyone who does shop there can go to the Lakeville liquor store down the road and help keep funds coming into the City of Lakeville. BTW…I live in Lakeville not Apple Valley. Ha ha..
September 9th, 2009 at 1:03 pm
I don’t know if I agree with it, but I can see an argument being made that since AV has essentially made liquor sales a public service, they might be under some obligation to residents to provide some sort of equal coverage throughout the city. Providing convenient access to liquor in one part of the city but not another may not be in line with municipal objectives to provide convenient access to liquor for all. If that is the case, then all three stores should be judged for their cumulative profitability, not each store individually.
But yes, a better idea is to have privately owned liquor stores….
September 9th, 2009 at 1:14 pm
Government should not be in business competing with for-profit companies in the same market, period. Stay the hell out of it and let free enterprise rule.
September 9th, 2009 at 1:32 pm
Send everything via FedEx and UPS, Greg?
But as for this particular example, I agree. The only benefit municipal liquor stores provide are a revenue source for the city, and that doesn’t outweigh the negatives.
September 9th, 2009 at 1:33 pm
I guess for me the real issue is that we have this thing, it’s not going to go away–because the City Council (and especially the mayor) would never let their “green” flagship store die off after touting it as the best waste of funds ever. So, what can the city do to better manage it?
I want the city council to get the liquor operations manager to stand up, in front of the council–at a public meeting–and lay out what he plans to do to fix the problems that they are having at Liquor Store #3.
While it’s great that they are moving near expired inventory among stores (which from what I hear was prompted by the beer distributors, not the city) so that it would get sold as well as ridiculous sales that brought nearly no one into the store, there has to be a better way to get stuff to sell.
What do you think would work to jump start AVLS #3 so that we don’t see the fucking ridiculous $10,000 loss in 2010?
September 9th, 2009 at 3:54 pm
Dancing girls.
September 9th, 2009 at 9:37 pm
It’s fucked. Honestly I think most people know it cost $5 Mil to build and just won’t support it for that reason alone. Were they trying to fit into the whole Cobblestone “this is how you were meant to live” bullshit overpriced development or what?? Plus their prices are signifcantly way too high. I am almost exclusive to Rosemount Liquor now because they will take 10% off your tab if you show a Cub receipt from the same day.
September 9th, 2009 at 10:02 pm
I always loved that “This is how you were meant to live” sign. I thought it would have been perfect if somone would have spray painted a big old question mark at the end. This is how you were meant to live????? ;)
September 9th, 2009 at 10:08 pm
Lakeville makes fat cash off their booze stores. I think I read recently that they were having a record year because everyone wants to stay home and get drunk. I am all for free market and competition, but I have to admit that I like the 1.4 million in profits and 4% property tax reduction that they kick in. How can Lakeville be doing so well and AV be doing so bad??? I guess for starters don’t build an overpriced building in a gravel pit.
September 9th, 2009 at 11:31 pm
They have more problems than just store #3 losing money. The profits from store# 1 and #2 are dropping.
Gross revenues are rising less than their cost of goods sold while their expenses are rising.
This isn’t a good time to raise prices so they need to cut expenses. Their biggest expense is salaries. That is why unemployment is at 9%, all businesses are in the same boat.
I’m not advocating letting employees go but if it’s a private business, and you’re not spending other people’s money, you make the tough choices.
September 10th, 2009 at 4:36 am
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September 10th, 2009 at 9:07 am
Mark, Do you think stores #1 and #2 might be generating okay revenue because they have a monopoly on liquor sales in the city?
September 10th, 2009 at 9:15 am
They’re in a tough spot. If they closed up and sold of the building, land, and inventory, they’d probably take a loss on all of it that is much greater than what they’re projected to lose next year by still running the store, and possibly a few years into the future as well. They would have to be projecting really bad losses before that became a viable option.
Reducing hours and headcount could be looked at, and probably has, but there’s only so much that can be done there. There’s always going to be a mininum number of people needed to cover all of the shifts, plus customer service suffers when you do this, so even if you can make cuts, you have to be sure that it doesn’t also cut into your sales. A private business owner can work a 14-hour day and pay himself sub-minimum wage if he has to. The city obviously can’t do this.
I’m not familiar with their product mix, store layout, marketing, etc. so I don’t know what they could improve there, but I’m sure there’s something. It won’t get them to their sales goal, but it *might* be able to push them just into the black.
One disadvantage municipal liquor stores have is that they can’t always get the better prices from distributors that the chains do. I wonder if there is any way they could join with the other municipal stores in the area in a partnership where they all purchase together and thus get a better bulk deal from their suppliers.
September 10th, 2009 at 9:55 am
jf,
From a quick and dirty search via road miles it would appear that AVLS #1 and #2 have distance advantages over the nearest liquor stores than #3 does.
AV1 -> Blue Max = 2.5 mi
AV2 -> Shenanigans = 2.2 mi
AV3 -> Lakeville Liquors = 1.6 mi
AV3 -> Shenanigans = 2.0 mi
That and the population density and traffic that center around AV1 and AV2 are much higher than AV3. Based on the landscape there and the plans for the future, I don’t see it changing much.
Apple Valley made the decision to place their store there solely on the fact that Target chose to put a SuperTarget there. Based on the discussions at the city council meetings by the city council members when this was in the planning stages, there was no other research done on the city’s part. Even when more homes go in there, they will not be as high density as what surrounds #2 and #3 and those stores are smaller–yet trounce what #3 will ever be able to do.
Tim, to answer your comment, it was Goodwin who said that if the property doesn’t live up to expectations that they would be able to easily recoup their losses by selling the building and land. Thank you for pointing out that it won’t happen–thus making Goodwin look like the jackass he is.
September 10th, 2009 at 10:13 am
It is a little startling to find a liquor store operating at a loss, south of the river no less.
September 10th, 2009 at 10:15 am
Bill,
Don’t forget that AV3 is only 1.4 miles from AV2.
I understand the distance advantages but it still doesn’t change the fact that the city has a monopoly on the business.
I guess I really agree with all your points about AV3. The store was certainly a “mine’s bigger than yours” play on the part of the city. The people behind it don’t have much to lose if the store fails. Let’s put it this way, it’s easier to invest other people’s money than your own.
September 10th, 2009 at 10:23 am
I want this waste of money to become the single biggest reason why Goodwin and Hamann-Roland should lose their seats in the next election.
Goodwin put all of his weight and honor behind this store and orated endlessly on false pretenses. He should be removed from office for wasting LARGE AMOUNTS of our money on something that is not going to work–ever.
Hamann-Roland continues to waste taxpayer dollars with large upfront costs of making buildings “Green” so that she can wander about touting that her city is so energy efficient. When you build in “energy saving measures” that will see no financial benefit in a store that is expected to lose money in the short term and may be forced to close in the near future, it’s a little ridiculous to build those things in and tell everyone how great they are.
September 10th, 2009 at 10:38 am
On the bright side, the liquor store, built for approx 1/4 of the cost of the PAC is loosing far less money than the PAC. The PAC looses more in a week than the liquor store will loose all next year.
September 10th, 2009 at 12:16 pm
me: Whats the name of that place in AV…you know the one that’s a couple miles away from the municipal liquor store in Apple Valley?
farva: Shenanigans?
September 10th, 2009 at 9:58 pm
Is that a Super Troopers semi-quote?
September 10th, 2009 at 10:10 pm
P-Funk, when I saw the Farva thing I figured that I had forgotten a quote from the movie I have basically memorized–glad I am not to be too ashamed :)
September 15th, 2009 at 8:37 am
i do see some construction going on just to the southeast of av3. so far one level, maybe more. an apartment bldg?? there’s already a strip mall 1/2 or more empty so i don’t think it’ll be a tanning, video or nails. maybe an annex to hold av3′s unsold product?? i guess only hr mary knows for sure.
bb
April 5th, 2010 at 6:57 pm
Well it might not make much money but man it’s green. Thanks to the Star Tribune for the laugh: http://www.startribune.com/lifestyle/taste/89614837.html
Let me know when it pays itself off (you know, $5 million) and then starts making real money then I’ll be proud of it.
April 6th, 2010 at 9:16 am
Haha, just noticed there was a Swanson running there. Being so proud of his government project, I guess he’s not related to Ron Swanson.
http://www.youtube.com/watch?v=6M7trfD7fSk