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Municipal liquor stores sales up, profits down

Nisswa's liquor sales stood out on the list, with $3,512,358 in sales and a net profit of $302,039. Although this year's figure is down slightly from the previous year's profits—$338,684—it's nearly six times the profits in 2008, which were $51,792 between Spirits of Nisswa and Ye Olde Pickle Factory (or simply "The Pickle"), Nisswa's two municipal stores. Spirits of Nisswa is an off-sale store, whereas Ye Olde Pickle Factory is a bar and restaurant. BrainerdDispatch.com Illustration

ST. PAUL—Minnesota's city-owned liquor stores produced record 2016 sales for the 21st straight year, but higher costs kept profits down.

The state auditor reported Tuesday stores listed $344 million in sales, up $7 million over 2015.

Nisswa's liquor sales stood out on the list, with $3,512,358 in sales and a net profit of $302,039. Although this year's figure is down slightly from the previous year's profits—$338,684—it's nearly six times the profits in 2008, which were $51,792 between Spirits of Nisswa and Ye Olde Pickle Factory (or simply "The Pickle"), Nisswa's two municipal stores. Spirits of Nisswa is an off-sale store, whereas Ye Olde Pickle Factory is a bar and restaurant.

Nisswa punched above its weight when it comes to city size. The city's 2016 population was 2,033, but it had profits comparable to the city of Bemidji, which has 15,119 people living in it and made $713,240 in net profit. That means that even though Nisswa is about 13 percent of Bemidji's population, it made the equivalent of 42 percent of Bemidji's liquor profits. Nisswa makes up for its smaller size with its significant tourism draw that creates a bustling atmosphere with busy streets and a large tourist population with hundreds of thousands of visitors in the summer months.

Bemidji, on the other hand while it also draws visitors and shoppers across the region as a micropolitan it also has a four-year university and a downtown business district.

Aitkin's liquor store made $1,009,194 and made a net profit of $63,001. Isle got $858,072 in gross income and $57,017 in net profit.

Nisswa's dip in profits blends with a statewide trend in which profits fell more than 16 percent over the past five years. Forty-five Minnesota cities reported their stores showed net losses last year, which was 11 more than in 2015. All but one of them are in greater Minnesota.

The report from Auditor Rebecca Otto's office said Twin Cities stores are much larger and more profitable than ones in greater Minnesota, but just 19 of the 195 cities that run liquor stores are in the Twin Cities.

Otto's office recommends city officials compare their stores' statistics in the report to other comparable communities.

A key area to compare is operating expenses, the costs to keep a store running. The auditor's report shows in 2016 those expenses increased 8 percent, to $78 million. Liquor stores operating bars experienced a bigger increase in expenses, and were more likely to post operating losses.

Net profits for greater Minnesota stores averaged $89,000, compared to $155,000 for Twin Cities stores.

Even with profit problems in many stores, statewide they transferred nearly $19 million to city bank accounts. That was 1 percent less than in 2015.

"City officials who are responsible for the operation of municipal liquor establishments should make certain that the operations are managed appropriately and do not have a negative financial impact on the city," the report stated, noting state law requires cities to host public hearings if their stores report a net loss in two of the past three years.

Given information in the report, 32 cities should host public hearings, Otto's office said: Audubon, Barnesville, Boyd, Butterfield, Cleveland, Clontarf, Conger, Cromwell, Dalton, Dawson, De Graff, Ellendale, Elmore, Flensburg, Frazee, Hanley Falls, Howard Lake, Ivanhoe, Littlefork, Mahnomen, Okabena, Parkers Prairie, Proctor, Remer, Round Lake, Sherburn, Sleepy Eye, Walnut Grove, Waverly, Wells, West Concord and Williams.

High costs and lack of profits has cut the number of liquor stories since 2007 from 241 to 228 (some cities have more than one store).

The Brainerd Dispatch's Zach Kayser contributed to this story.

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