Some municipal liquor stores thriving, others failing in Minnesota lakes country
PARKERS PRAIRIE, Minn. — Many municipal liquor stores in the lakes country of western Minnesota can be defined by one of two narratives: record profit or defeating loss.
The Minnesota Auditor's Office recently released a list detailing the most and least profitable municipal liquor stores in the state, ranking them by their net profit or loss as a percentage of their sales in 2018.
In the top 25 of the most profitable were stores in Ogema, Perham, Fergus Falls, Pelican Rapids and Detroit Lakes.
On the other hand, four stores in the five-county lakes region joined 34 others statewide in losing money and were in the bottom 25 among the 233 municipal stores in 190 Minnesota cities.
Ending in the red were stores in Mahnomen, Wolf Lake, Frazee and Ada.
However, the picture is brighter than a few years ago in Clay, Otter Tail, Becker, Mahnomen and Norman counties.
According to reports by the auditor's office, 10 of 25 municipal liquor stores in the region lost money in 2016. The 2018 report shows four stores rebounded into the black in the towns of Barnesville, Hitterdal, Elizabeth and Dalton.
In another bright spot and adding to a 3.2% increase in sales and a 25% increase in net profits across the state were those lakes country towns in the top 25 that sell in the millions each year and earn large net profits.
Among the top stores were those in Detroit Lakes, which totaled $7.1 million in sales with $868,452 in net profit; Fergus Falls, $6.1 million in sales with $768,269 in net profit; Perham, $3.4 million in sales with $511,831 in net profit; and Pelican Rapids, $1.39 million in sales with $172,118 in net profit. All had profit margins above 10% of sales.
Those four joined municipal stores across the state which reported a 23rd consecutive year of record sales in 2018, totaling $360.2 million, which was an $11.3 million increase over 2017. Net profits hit $29 million, up $5.9 million from the previous year.
However, for some lakes country liquor stores, a few in towns of about 150 people, the circumstances of their successes or troubles are about as varied as the different kinds of liquor and beer found on their shelves.
Showing that a small town bar and liquor store can succeed is Ogema, which ranked No. 2 statewide on the list of the most profitable stores that remain open. The town about 20 miles north of Detroit Lakes was ranked only behind Spring Lake Park, a Twin Cities suburb.
Betty Ann King, who manages the "little bar" in the town of about 180 people, said it has a strong local following and an "awesome crew of workers" that gave it a 20.7% net profit as a percent of sales.
King, who was almost too busy with many customers to talk in a phone interview Friday night, said the small town's many events help bring in customers. Many stop as they travel along U.S. Highway 59 on their way to the nearby Shooting Star Casino in Mahnomen.
Ogema City Treasurer Mary Vasecka said the bar is "getting kind of old, but people seem to like it the way it is." Thus, she said, they don't have a lot of maintenance costs.
Vasecka also pointed to why many cities enjoy operating the liquor stores. She said by transferring some of the profits to the town's general fund, it helps to keep down property taxes.
She said much of the revenue from the Ogema liquor store goes toward maintaining the city's sewer system.
On the other end of the spectrum, the Ada off-sale liquor store lost $42,351 in 2018 and was ranked almost last in profitability. But there's a reason for that, according to City Administrator Ashley Larson.
The city has a long history of making money on the liquor store. But she said in May of 2018 the City Council decided to close the on-sale part of their operation because a private restaurant and bar had opened in the growing town of 1,670 people and they didn't want to be in competition.
The store underwent about a six-month remodeling to transition to only off-sale, leaving only about 100 square feet open to sell liquor, cutting into sales substantially.
However, with the new store now operating, Larson said they are offering a "ton of new products" and that "things are going really, really well." She expects profitability to return.
Two other operations in lakes country, however, closed because of losses.
It's part of a 10-year statewide decline in the number of municipal stores — a drop from 242 in 2009 to 223 in 2018. In lakes country, Erhard and Parkers Prairie are two victims of what the auditor's office said is either a lack of profitability, high insurance costs or competition shutting down some of the operations.
The St. Paul Pioneer Press contributed to this report.