Getting the liquor mix right

IT may seem a simple, or rather obvious, business strategy but Patrick Stephenson puts much of his success with the Liberty Liquors chain down to communication and marketing.

In 2001 Mr Stephenson sold Liberty Liquors, one of Australia’s largest independent liquor chains, to Woolworths for a figure reported to be between $60 million and $70 million.

All up there were 48 stores employing 360 people through a mix of Liberty Liquor branded stores and discount shop Big Bomber.

Mr Stephenson, who bought his first store in 1980, said he managed to grow the business initially by picking up on a trend in the market for wine education.

“Back then there was a great interest in learning about wine and the whole population was very interested in being educated,” he said.

Mr Stephenson said he sourced good wine deals but also developed a monthly newsletter that was part of the businesses success.

“We had a long-running newsletter with a panel that had been with us 18 years consisting of wine makers and general consumers and staff. It was one of the key elements to our success,” he said.

“It was done with no influence from us; we didn’t tell them what to try but what the panel selected we would run with.

“It gained consumer confidence in us and that’s such an important thing. I think it takes about three years to develop but it’s really important.”

Mr Stephenson also had a knack for knowing how to play hard in the retail game.

“About 60 per cent to 70 per cent of purchases are impulse so we would stock the beer right at the back so you would be tempted by every other product that had higher margins and hope you would get some,” he said.

“There’s an art to retailing.”

Mr Stephenson said getting access to good liquor deals in the early days was pretty easy, but as the chains got bigger it became more difficult.

“They would get things stitched up because they would spend so much more money. They would get a deal but make sure no-one else got the same discount, so it was pretty unfair,” he told WA Business News.

But that didn’t stop Mr Stephenson from finding a way to compete.

“We knew to compete against that we had to be smarter and use smaller wholesalers,” he said.

“The thing about wine is it is like the fashion industry and you can change people’s habits. It’s far better to sell that than beer or spirits where people are brand conscious. But if you show people and describe new wines you can gain customers.”

Mr Stephenson also said employing, retaining, and training staff was part of Liberty Liquor’s success.

“We knew our business was run through our staff.

“They needed to be conscious of margins and the costs and we educated them on all aspects so they were business owners in their own rights.

“We shared everything with them and we had bonus schemes,” he said.

“Our staff often became the biggest complainers if we discounted too heavily because it affected their bonuses.

“You have to pay attention to your staff and make sure they are trained, enthusiastic and are part of the business, because they make a difference. 

“We also had sophisticated computer systems, which was essen-tial because we had more than 4,500 different products that needed tracking.”

And pricing those products was even more important.

“We ran everything through a budget and constantly monitored margins. You had to get the mix right or you could have something at cost plus 3 per cent, only there are the overheads, which meant you could be down 12 per cent,” Mr Stephenson said.

He said the 1997 east coast expansion, through a $7 million acquisition, was among the business’s most challenging times.

“I spent a lot of time travelling,” he said.

“Making it work meant getting the right people in and having the right reporting mechanisms.”

PATRICK STEPHENSON

• Monitor everything and have good attention to detail.
• Pay attention to staff and provide good training.
• Be aware of legislation and the pitfalls of leases.
• Advertising is important to remain top of mind and get the brand into the market place. 
• Continually find new ways to compete.
• Invest in technology to monitor and control stock.

BEST SELLERS*

BOFFINS

• The Phaidon Atlas of  Contemporary World Architecture 
• The Fabric of the Cosmos (Brian Greene) 
• The First 90 Days: Critical Success Strategies for Leaders at All Levels (Michael Watkins) 
• Strategy Maps (Robert S Kaplan and David P Norton)
• Sense of Place: A Response to an Environment – The Swan Coastal Plain, WA (George Seddon)

*  Top 5 2004

BEST SELLERS*

RICK HART

• Dishwashers
• Side-by-side fridges
• Cooking packs
• Plasma televisions
• European upright stoves
• Front-load washers
• Air-conditioners
• Frost-free fridges
• Canopy rangehoods
• Widescreen televisions

* Top 10 categories 2004