All liquor store operators must drive sales, manage inventory, and provide exceptional service and product knowledge. But not many report to shareholders and a board of directors, announce quarterly earnings results, and file lengthy documents with financial regulators. Those are just some of Stephen Bebis’ responsibilities as president and CEO of Liquor Stores N.A., the largest publicly traded beverage alcohol retailer in North America.
Bebis oversees a network of more than 200 stores in Canada and 39 in the United States. In addition to its Liquor Depot, Liquor Barn, and Wine and Beyond chains in the Great White North, the Edmonton, Alberta–based company operates 22 Brown Jug units in Alaska, 15 Liquor Barn locations in Kentucky and two Joe Canal’s Discount Liquor Outlets in New Jersey. Liquor Stores N.A. reported total store sales of approximately $570 million in 2015, with $170 million coming from its U.S. division. The company employs about 1,000 workers in the United States, where its units average 20,000 square feet in size, with some superstores topping out at over 40,000 square feet.
Bebis joined Liquor Stores N.A. in 2013 with a stellar background in retail. He previously served as president and CEO of the specialty retailer Brookstone Inc.; founder, president and CEO of Canada’s Golf Town retail chain; chairman, president and CEO of Sports and Recreation Stores in Tampa, Florida; and president of Home Depot Canada. Since joining Liquor Stores N.A. three years ago, Bebis has shepherded the company’s “seven-point plan,” which has improved operations, driven expansion efforts and sought to mitigate the economic headwinds in markets impacted by the oil industry downturn. For his accomplishments as president and CEO of Liquor Stores N.A., Bebis has been named a 2016 Market Watch Leader.
Liquor Stores N.A.’s genesis dates back to the 1990s with the founding of Liquor Depot Corp., formed after the province of Alberta privatized its alcohol retail industry. In 2004, with about 50 stores, the company became a liquor store income trust—the first publicly traded beverage alcohol retailer in North America. Four years later, the business entered the United States when it acquired Alaska’s Brown Jug chain from 2000 Market Watch Leader Lowell Shin. In 2009, the company purchased the Liquor Barn stores in Kentucky from 1987 Leader Rob Rosenstein. In 2010, the business was converted from an income trust into Liquor Stores N.A., a dividend-paying corporation.
The company’s leadership team today includes executive vice president and COO Steve Rop, an alumnus of Total Wine & More, and senior vice president of general merchandise management Jason Fremstad, who was named a Market Watch Leader in 2013 during his tenure with Wal-Mart. “I’m proud of the team we’ve built,” Bebis says. “Without them, we wouldn’t be anywhere today.” While Bebis recognizes that the U.S. retail market for beverage alcohol differs from that of Canada, he says the company has been able to apply best practices from one market to the other.
Most recently, Liquor Stores N.A. has been exploring expansion opportunities in the United States, aiming to diversify its revenue base. Earlier this year, the company closed on its $15 million acquisition of a 51-percent stake in Birchfield Ventures. The operator owns the two-unit Joe Canal’s Discount Liquor Outlet in central New Jersey, and the deal gives Liquor Stores N.A. the right to acquire the remaining 49-percent interest. Further expansion in the northeastern United States is in the works. A new 20,000-square-foot store is scheduled to open in Norwalk, Connecticut, later this year, with a 17,000-square-foot unit slated for Berlin, Massachusetts, in early 2017.
“Now that we’re entering Massachusetts and Connecticut, we’ll be looking for other sites in those markets,” Bebis says, noting the relative economic health of the Northeast. “We’re also exploring other states. We’d like to grow throughout the country.” He notes that U.S. growth will be deliberate, at a pace of two to three additional stores a year.
Liquor Stores N.A.’s expansion into new states should help cushion the impact of struggling economies in its established markets. “Alaska’s been hurt,” Bebis says, pointing out the effect of the oil industry’s downturn on the state. Because of lower oil and gas prices, unemployment is on the rise and Alaska has cut back on the annual dividend it provides to residents. “It’s a very challenging market for us,” Bebis adds. Seventeen of the company’s 22 Alaska stores are located in Anchorage, the state’s largest city. While Kentucky is now coming out of the recession, he concedes that it has faced troubles as well. “Kentucky has been a difficult market,” he explains. “It really got battered in the financial crisis.” The company’s Liquor Barn stores are located throughout the Bluegrass State, including in Lexington and Louisville. In addition to beverage alcohol, the stores sell specialty foods and party goods.
Varying state laws have provided an education for Bebis and his team. “The legalities for this industry are very different than in Canada,” he says, pointing to nuances like Kentucky’s wet and dry counties and differing state shipping regulations. “All of these complications are very demanding. We have a separate team just to keep track of them.”
Deep Product Selection
Liquor Stores N.A. doesn’t disclose its sales breakdown, but according to Bebis, “It roughly mirrors the national average.” The company lists over 2,000 spirits SKUs, ranging in price from under $20 to more than $1,000 a 750-ml. bottle. “Our Bourbon business has been very strong, and we’re particularly proud of the selection in our Kentucky stores,” Bebis says. In addition, he notes that Irish whiskey, Tequila, Cognac and craft spirits have been thriving.
Bebis estimates that the company offers around 5,000 wine SKUs in its smaller locations and up to 6,000 wines in its large-format stores. “The largest volume is in the $11-to-$15 range, but the fastest growing segment is the over-$25 category,” he says. “Rosé growth has been amazing—at multiple price points. We also continue to see great progress with blends, sparkling wines and Italian wines.”
The major domestic brands account for the bulk of Liquor Stores N.A.’s beer sales, but Bebis says craft offerings represent the biggest growth area, followed by imports. The U.S. stores offer more than 1,000 beer SKUs, with six-packs of 12-ounce bottles or cans generally priced from $6 to $8.
Liquor Stores N.A. also offers a “Preferred Selection” of exclusive wines and spirits. More than 100 products are marketed under the label, with wines ranging from $11 to $20 a 750-ml. bottle and spirits priced at $25 to $40 a 750-ml. bottle. These offerings include the newly launched Flatboat Bourbon ($25), produced by Sazerac Co.’s Barton 1792 Distillery. While Bebis says consumer response to the exclusive products has been positive, brands remain paramount. “We’re all about selling brands, and we focus on developing our relationships and partnerships with all the top wineries, distilleries and breweries,” he explains. “The exclusive labels simply complement the established brands.”
In the last few years, Liquor Stores N.A. has ramped up its focus on staff education. Today, all staff are required to complete online training via the company’s in-house Liquor Stores University. Staff seminars on topics ranging from Bordeaux to whiskey are also offered, and store managers and other staff members are encouraged to visit wineries and distilleries.
As at other drinks retailers, digital marketing has become increasingly important to Liquor Stores N.A. Bebis explains that while the U.S. concepts receive radio and print support at certain times of the year, digital media offers greater opportunities. “It allows us to talk directly to our customers,” he notes. The company’s Celebration Club loyalty program notifies members about limited releases, exclusive offers and in-store events. Consumer response has been strong, and Bebis reports more than 250,000 members have enrolled in the program in North America.
Online sales in the United States have been more challenging for the company. Both Alaska and Kentucky prohibit selling beverage alcohol via the Internet, although customers in both states can place orders online and pick them up at a local store. But the U.S. stores frequently hold in-store tasting events for customers—some free and others that require a fee. Many of those events are conducted in coordination with distributors, winemakers, brewers and distillers.
Despite the market’s challenges, Bebis is optimistic that Liquor Stores N.A. will continue to increase its footprint in the U.S. market. With little growth expected in the Canadian market in the short term, he notes that other opportunities look attractive. He’s not ruling out growth elsewhere in the country, in addition to further expansion in the Northeast. “We’re looking to buy small businesses that are in transition,” Bebis says. “Advancing in the United States is very important for us.”