ABC stores stock booze on sales potential, not taste

It was lunchtime on a Tuesday, but the meeting room in a Richmond office building seemed set for a soiree.

A fifth of double rye whiskey stood at the head of one long table. A few bottles down, something called “shine” beckoned from a jug.

There were vodkas flavored with bacon, basil and gummy bears and one, made in Mississippi, was covered with images of cats. There were cordials and cognacs. Schnapps and tequilas. Holiday gift sets with jiggers and flasks. And Windex-blue kamikazes screaming to be tossed.

In all, more than 300 bottles of booze, wine and mixers lined three long tables in a windowless room at Virginia’s Alcoholic Beverage Control headquarters – the last leg in the “listing” process that determines which spirits are sold in state-controlled stores and ultimately what you can quaff in the commonwealth.

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Database: What is the best-selling liquor in Virginia?

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The biannual process involves dozens of pitches from vendors and vintners, masses of data, the frayed nerves of purveyors and piles of paperwork. It’s the process at the core of a state agency that in fiscal year 2011 generated net profits of nearly $121 million, with $53.3 million going to the general fund and $65.4 million to the state mental health agency. It’s a process that some say favors the big guys and limits what Virginians can drink.

The process ends here in this roomful of booze, where there are no napkins, no shakers, no ice.

That’s because, said W. Curtis Coleburn, chief operating officer of the Virginia Department of Alcoholic Beverage Control, “We never list anything based on its taste.”

Virginia depends on the revenue generated from ABC dispensaries, which have, since the first state store opened in 1934, evolved into self-service venues with aisles and aisles of stock tailored to the demographics of each of the state’s 335 stores.

In South Hampton Roads and on the Peninsula, for instance, vodka is king – sales of imported vodka rank first in the region, followed by domestic vodka. Flavored vodkas, such as Firefly Sweet Tea vodka, have proved especially popular in the Virginia Beach-Norfolk district.

Compare that with Northern Virginia, where tonier tastes mean that imported vodka and Scotch whisky are the two highest-grossing drinks.

And finally – the drinkers in the western part of the state, who prefer straight bourbon whiskey. While that doesn’t even crack our region’s top five types of alcohol, it’s the highest seller in Richmond and Staunton/Waynesboro, and it’s second highest in Lynchburg.

The current catalog of state-approved products lists nearly 3,000 items, from a 90-cent nip of Whitetail Whiskey to a $2,235.90 bottle of Remy Martin Louis XIII cognac. It’s all stored in a 300,000-square-foot warehouse in Richmond, just off Interstate 64.

Gross sales for fiscal 2011 – from July 2010 through June 2011 – were a record $692.7 million. Net profits totaled $120.7 million, and more than half of that was funneled to the state Department of Behavioral Health and Developmental Services for care, treatment, study and rehabilitation of alcoholics.

Like the stores, the listing process also has evolved, although pitches from salesmen and purveyors are at the core.

“It has changed a lot with respect to being more objective and more fact-based today, instead of just somebody’s gut feeling or who the broker is,” said Coleburn, who has been with ABC for 17 years.

In the most recent cycle, Coleburn and his staff of wholesale and retail specialists spent a string of July days hearing pitches for 335 products – 142 of them holiday items, including a snow-globe-like bottle of rum with coconut flakes suspended in the spirits.

At those meetings, each prescheduled pitch is limited to 15 minutes. Touts generally include pricing, sales data, and marketing and advertising budgets and plans. Sales reps also might note celebrity endorsements, brands tied to famous figures like Junior Johnson, a retired moonshiner who rose to NASCAR fame, or even mentions in rap songs.

ABC’s retail-wholesale staff considers all that, plus how the category – such as flavored vodka, cordials or whipped cream-flavored products – is performing, pricing in comparison to similar products, sales trends in other states and seasonal or holiday appeal. Poor performers can be “delisted” and lose their place on the shelves.

The mission is to maximize sales, which maximizes revenue to the state, which marks up each bottle anywhere from 49 to 93 percent, depending on size and proof. Add to that a 20 percent state tax.

Occasionally at the meetings, ABC staffers sample the wares, mostly ready-to-drink products meant to be consumed straight from a bottle.

“I’m known as the gin guy.” Coleburn said. “I’m constantly on the search for new botanicals. If there’s a new gin, I may very well take a sip to see what it’s like.”

But sales potential, not flavor, dominates ABC’s selection matrix.

Virginia Beach distiller Chris Richeson is a self-described “listing survivor.” He’s been to bat at Richmond several times and emerged with a 3-1 record.

The first time, he arrived with no sales data, just tens of thousands of dollars invested in building a distillery, securing state and federal permits and developing and packaging his Spirits of the Blue Ridge vodka.

“All that did not matter if they did not accept the bottle,” Richeson said. “Without a marketplace, what good is it?”

Virginia offers two tiers of acceptance – space on store shelves or inclusion on the “special order” list, products that consumers can order from Richmond.

“You can’t build a business on that,” Richeson said of the latter.

He prepped for judgment day by memorizing the names and faces of ABC retail section staffers online. Richeson has one of the few distilleries in the state, and he hammered the “homegrown” angle and his marketing plan in the presentation.

Afterward, he had no inkling of which way it would go.

“They play good poker,” Richeson said.

In the end, his 750-milliliter bottle of Blue Ridge was approved and now has a place on store shelves amid the premium brands. He returned to successfully pitch a honeysuckle-peach flavored vodka and his Chick’s Beach rum but was denied space for sample-sized bottles of bottles of Blue Ridge.

Big names like Smirnoff and Bacardi, with high demand and mammoth marketing budgets, have a strong shot at shelf space. But in-state producers like Richeson have something of a home-court advantage.

“We feel something of an obligation,” Coleburn said. “If we don’t sell Virginia products, who will?”

That doesn’t guarantee success, though.

When Darrell Perry of Virginia Beach offered up his Tropical Shotz gelatin shooter kits in January 2010, the verdict was no.

ABC notifies vendors of its decision four to six weeks after the pitch but does not divulge the reasons. Perry, who attended the meeting, guesses that his salesman might have been overexuberant. He scored at a later meeting and now has two flavors on the shelves: margarita and sex on the beach.

Susan Martinson of Richmond pitched her premium, all-natural Keep it Simple Syrup to the board in 2008. When members inquired whether she could supply stores with the product that she was then making at home in her state-approved kitchen, she sensed her fate.

In between the big guys and the little guys are midsized outfits like Caffo Beverages, a family- owned company based in Italy that specializes in after-dinner spirits including sambuca, limoncello and grappa.

Caffo’s national sales manager, Larry Sachs, has more than three decades in the business and has pitched to many of the country’s 18 states that control liquor sales, including Virginia, where he’s never been successful.

It’s tough in other control states, too, he said, which have similar systems for selecting stock. The process, he believes, tilts toward big companies with big advertising budgets that he cannot compete with.

“I’m not saying that the system is corrupt,” Sachs said. “I’m saying that the system is really geared to larger suppliers.”

Vendors can appeal listing decisions, something that rarely happens in Virginia. Sachs doesn’t currently plan to pitch his limoncellos, amarettos and amaros – among Italy’s most popular – to Virginia.

“I fish where the fish are,” he said.

The mission of ABC is three-fold: to provide public safety, to be a reliable source of state revenue and to provide excellent customer service.

In the most recent customer survey in 2009, nearly half of the respondents said they “always” find what they are looking for at Virginia’s ABC stores. Another 37 percent find what they are looking for “most of the time.”

Eleven percent rated the selection as “fair or poor.”

“Product availability is a top priority for ABC,” said ABC spokeswoman Jennifer Farinholt.

Don’t see something on the shelves? The manager can have any listed item sent to your preferred store, free of charge.

If it’s not on store shelves, but it’s a “special order” item, it can be bought by calling Richmond.

Strike out there, and the staff can attempt to find a source within the continental United States. Then customers can order the product by the case, or sometimes in lesser quantities, but there’s an additional 5 percent markup.

Striking out, but still thirsty? You’ll have to travel; residents can bring in 1 gallon of spirits from out of state, a provision that remains unchanged from a 1934 law that went into effect after the repeal of Prohibition.

That process hardly puts the customer first, said Paul Danaher of Portsmouth, who bristles at the system.

He’s given up on getting a bottle of his favorite brand of kirschwasser, a cherry brandy that he planned to put in and serve with a cheese fondue. It’s easily found online, an option off-limits to law-abiding Virginians. ABC offers another brand of kirschwasser “which I find inferior,” Danaher said.

His idea to give his wife a bottle of Bas-Armagnac brandy from the year of her birth also has been dashed, he said, because it’s not on the list.

“It’s not driven by consumer choice,” Danaher said. “It’s driven by an intolerable monopoly.”

At the August listing meeting, Commissioner Sandra C. Canada and Chairman J. Neal Insley, the sole members of the governor- appointed ABC Control Board, threaded their way around the room filled with booze.

ABC staff members were ready with recommendations, and the board members were guided by Neilann Brown, special order catalog product specialist, who toted a thick sheaf of notes.

They paused at a bottle of Cupcake Vodka.

“These are selling very, very well,” Brown said. “It’s a new product from the wine guys.”

Besides brand recognition, she noted the $2 million advertising budget.

The group passed by oddball products that were not recommended for store shelves – vodka dispensed from a fire extinguisher, a Maryland spirit with a pinup girl on the label.

The bottle of High West double rye from a Utah distiller wedged its foot in the door.

“Rye is on the upswing,” Brown said. “We’ll put it in the special order catalog to see if indeed it will sell.”

In all, 244 of the 335 products that were pitched this summer were approved by the board and are showing up on store shelves.

The jug of shine didn’t make the cut; the cat-centric vodka and the snow-globe rum did. So did Susan Martinson’s all-natural, spearmint-infused simple syrup.

In August, three years after her first pitch, she returned to ABC headquarters armed with tasting spoons and a manufacturer lined up to make her Keep it Simple Syrup. It hits the shelves statewide later this week.

Lorraine Eaton, (757) 446-2697, lorraine.eaton@pilotonline.com

Pilot data editor Meghan Hoyer contributed additional research.