How Applejack Grew its Alcohol Retail Business During the Pandemic

Jim Shpall made a deal with his father-in-law in 1994. He would join the family business — Applejack Wine & Spirits in Wheat Ridge, CO — to see how he liked it. If beverage alcohol retail was not to Shpall’s taste, then he could return to practicing law, and his wife’s father would sell Applejack upon retirement. 

“Twenty-seven years later, I’m still here,” Shpall says. 

He later bought out his father-in-law. This represented the third passing of the torch for a business founded in 1961 by Herb Becker. (Next year, Applejack will turn 60.) Back in the ‘60s, the interstate highway, I-70, that runs past Applejack did not yet exist. But the store does remain today in the original shopping center where it first opened.

Becker in 1980 sold to Alan Freis, Shpall’s father in law. In recent years Shpall has brought in new partners for the business, which in Wheat Ridge counts nearly 17,000 SKUs across 100,000-plus sq feet of retail space. 

A change in Colorado law in 2016 allowed Applejack to open a new, second location, in Thornton, CO. At just under 30,000 sq feet, it contains 15,000 SKUs.

“I’ve enjoyed having the ability to work with great people, and it’s stayed exciting because it’s ever-changing,” Shpall says. “And it’s given me the chance to create a lot of opportunities for a lot of people. I really felt this through the pandemic.”

A change in Colorado law in 2016 allowed Applejack to open a new, second location, in Thornton, CO. At just under 30,000 sq feet, it contains 15,000 SKUs.Pandemic Response

Before the Covid-19 outbreak, Applejack held a holiday party attended by nearly 100 employees. In this packed room, Shpall asked everyone to look around at one another. “I said, ‘These are the people whose lives we touch, along with their families,” Shpall recalls. “There’s a real obligation beyond yourself to succeed for everybody.”

This was more than platitude. The pandemic proved it for Applejack. After Covid-19 reached Colorado, the business increased their workforce by 40%. Many new hires included bar and restaurant employees laid off by on-premise closures, as well as caterers and ex-brewery staff.

“Even part-time employees we had who told us they were going to lose their full-time jobs, we made them full-time,” explains Elizabeth Gregg, general manager. 

Like other retailers, Applejack has experienced increased sales during the pandemic. But this is “somewhat of a false narrative,” Shpall says, “because we’re also seen a significant rise in costs. We went from being a business where people walked in and bought, to one with curbside and delivery and other options where you don’t walk in.”

Gregg estimates that the store has had to change 90% of its procedures due to the pandemic. When the crisis first hit in March, Applejack management made the decision to close the store for two weeks — despite being deemed essential — and pivot to pickup and delivery only.

“We felt that we had to protect our employees and our community,” Shpall says. “And we didn’t raise our prices [during the March retail rush]. We actually lowered our margins, because we’re sensitive to what’s going on in our economic community.”

“We feel a real obligation to look out for the physical, emotional and economic wellbeing of our employees and the community,” he adds. “To those whom much is given, much is required.”

When the pandemic first hit in March, Applejack management made the decision to close the store for two weeks — despite being deemed essential — and pivot to pickup and delivery only.Opening a New Store

Complicating matters, the pandemic struck while Applejack was expanding. 

Change in Colorado law allowed beverage alcohol retailers a second license in 2017. Applejack started construction on its new Thornton site in late 2019. Months later, Covid arrived.

Applejack faced a difficult decision. Let up on the gas? After all, uncertainty ran high in these early days of the crisis. Predicting even the near-term future was practically impossible. But the company did not blink. Shpall pushed the project forward. 

The new store opened Aug. 26 — a month ahead of schedule.

“There’s no such thing as a grand opening in the middle of a pandemic,” Shpall says. “We didn’t want big crowds. Instead, we had more of an organic opening that let people know we where here and that they could come in.”

This required a layered, modern marketing approach. 

“We used a lot of programmatic digital communications,” says Tracy McInnes, Applejack CMO. “We did a pretty extensive outdoor buy. Email, radio, social, programmatic — we tried to reach each consumer in an individual way. We were slightly all over the place, but it was a very integrated communication plan, rolled out with lots of different tactics.”

McInnes achieved strong success from Applejack’s digital spend, which drove lots of online traffic. Also effective were outdoor billboards in North Denver. “They were very basic,” she says. “They just announced the new store and why it was important.”

The Thornton store is meant to serve to northern part of Colorado, along the I-25 corridor. Thanks to prior state law that limited licensees to a single location, Shpall “had been planning the store since 1994.”

“It was everything,” he adds. “The spacing. The aisles. The lighting. Having a warm feeling in the store — the whole western side of the new store is windows that look into the mountains. The ceilings are tall, 25 to 30 feet. Also it was about reimagining how to do a beer cooler.”

The new cooler has a serpentine layout. Alcoves let customers enter to see what’s in the cooler, without getting cold, or in anyone’s way. Walk into this alcove and you are surrounded on three sides by beer.

Much of the creative layout sprouted from the mind of Gregg. Her past career includes time in Macy’s and cosmetics departments. Using a diverse retail perspective, she redesigned the checkout wrap-stands to be more ergonomic for both cashiers and customers. Same with the desk at the customer service center.

“I also built a tasting bar into that desk,” Gregg says. “I call that my fishing hole — a spot to engage and delight the customer.”

“I spent a good amount of time just fiddling with the shelves,” she adds, “getting the height and the lighting just right.” 

Altogether, the result is a store that stands out from its competitors.

“Elizabeth really gets the consumer experience,” Shpall says. “People walk into the new store and say, ‘wow’.”

Even the outdoor layout, the façade, looks different.

“A lot of customers told us that they thought this was going to be an ice skating rink or pool complex,” Gregg says. “Overall, the store really was a team effort. We spent three years on this project.”

“A lot of customers told us that they thought this was going to be an ice skating rink or pool complex,” says Elizabeth Gregg, general manager, of the new Thornton location. Expansion, Challenges, Charity

Continued growth is in the future. The Colorado law that permitted a second store in 2017 also allows for a third location in 2021. Applejack has already begun considering another new site. 

Problem is, that same state law that promoted expansion also brought more challenges from competition. Where beverage alcohol retailers were allotted one additional store in 2017, grocers could open five new liquor stores. In 2021, retailers again get one more, but grocers receive three.

After 15 years, retailers can have another four stores. For grocers, the number is unlimited.

“Laws in Colorado are inequitable and difficult to understand,” says Shpall. “I hope the inequity with the law will get addressed. How do we compete with grocers who have unlimited stores?”

In the meantime, Applejack will continue to benefit from the Thornton location.

“This is a great area, a growing area,” Shpall says. “Colorado is an interesting state in that the population is continuing to extend along the front range of the Rocky Mountains. That’s where the growth is. And we’re in this business for the long term. This area will continue to grow, and we want to service it with incredible customer service and prices.”

“‘Long term’ means a lot of things,” he adds. “It doesn’t just mean that we’ll be in business, but that we’ll continue contributing to the community in a meaningful way.”

This includes an upcoming charity event built around allocated whiskeys. Like other retailers, Applejack will run a fundraiser raffle for the right to buy these red-hot spirits. The beneficiary is We Don’t Waste, a nonprofit that provides food for underfunded communities — especially those without grocery stores.

Hopefuls can obtain additional raffle tickets for every $100 they spend in the store during a month-long period. 

“This rewards good customers,” explains Keelan Mulligan, beer manager. “Almost every other way we’ve tried to handle the allocated whiskeys — including special dinners or selling only to good customers — has received a lot of backlash. But having a charity involved, while still rewarding customers, has been pretty successful for us.”

Applejack had to change 90% of its procedures due to the pandemicAlcohol Trends at Applejack

Applejack has experienced many of the category trends common with other retailers this year. For instance, the business has seen continued interest in its store pick, single barrel whiskeys.

“We’ve had success with single barrels from Knob Creek, Elijah Craig and Larceny,” says Mulligan. “I think it’s because consumers are getting something personal that’s new and fresh. It’s a newness game, outside of the rare game with the allocated whiskeys. We always want to have something new when consumers come in, and single barrels keeps that newness around easily.” 

Tequila remains “out of control right now,” Mulligan adds. However, this spike in consumer interest comes as the pandemic — disrupting production centers and wholesaler networks — makes obtaining Mexican products more difficult. Popular tequila is regularly out of stock.

To address this problem, Applejack began bringing in any tequila brands that taste good. Anything to meet the huge consumer demand.

Interestingly, mezcal has lagged behind. 

“We’re in a pickle with mezcal,” Mulligan says. “The industry keeps saying it’s hot, but we’re not seeing that trend here. Possibly it’s because of our demo. Most of the mezcal we sell are entry-level bottles, in the $30 to $50 range. We are trying to bring in more of those bottles to get people into the category.”

As with retailers nationwide in 2020, the lack of aluminum in America has caused issues. “There’s almost no portion of our store unaffected by the aluminum shortage,” Mulligan says. “High Noon has become a ghost. It’s become allocated at a time when we should be buying 100 cases at a time.”

The boom in consumers buying macro beer brands at the beginning of the pandemic has cooled off, reports Ian Hanson, beer buyer. “We’re back to regular shopping habits with beer,” he says. “Back to some of the newer and smaller breweries, back to the same level of variety.”

Hazy IPAs remain the dominant style in craft, buoyed by the variety of NEIPAs styles possible by mixing up hops and recipes. Which is not to declare the official demise of hoppier IPAs.

“West Coast IPA is a style for a reason,” Hanson says. “It’s never going away.”

He also has noticed an uptick in the number of breweries using the Norwegian kveik yeast strain.

Hard seltzer still flies off of the shelves, especially as many craft brewers in the beer Mecca that is Denver begin to release their own takes. 

Wine Manager David Anderson reports that national labels are doing well during the pandemic. Alternative packaging has also taken off, with boxed and canned wine constantly growing at Applejack. And rosé sales remain huge.

Out-of-stocks have also affected boxed wine — as they have elsewhere — with months-long back orders for Black Box and other popular products. Applejack will receive 50 cases of Black Box and sell out within 24 hours, Anderson says.

California wines retain customer interest. Bourbon barrel-aged wines are also starting to pique more curiosity among shoppers. 

Non-alcoholic products have also picked up momentum, Mulligan says. “For expensive as they are, Seedlip has sold okay.”

“We also have a large selection of non-alcoholic products from Lyre’s,” he adds, “and have had a lot of success there too.”

There has been a big expansion into non-alcoholic beer, Hanson says, with more craft options entering that space. “At first they were little more than ambers and wheat beers,” he adds. “Now we have non-alcoholic IPAs, hazy IPAs, stouts and more. Breweries are trying to expand their options. They’re having success with non-alcoholic beers that actually taste like beer.”The post How Applejack Grew its Alcohol Retail Business During the Pandemic first appeared on Beverage Dynamics.
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Author: Kyle Swartz

Timothy Kelly

Tim is the Founder & Master Distiller at Felene. He developed his passion for the spirits and hospitality business while growing-up and working in his family's restaurant and liquor store business. Tim’s passion for the epicurean lifestyle has found it’s latest manifestation in the Felene Distillery. Tim is a 5-time Gold Medal Award winning Distiller. He has won a Platinum medal at the Prestigious Los Angeles Spirits Awards and his signature vodka was named Best-in-Category by the American Distilling Institute. Mr. Kelly is also a prolific author and writer and his blog is filled with ideas, discoveries, observations and recommendations to help his readers enjoy life’s simple epicurean pleasures.

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