PART ONE – A TALK WITH DARRYL ROSEN
WSD had the chance to sit down with Darryl Rosen, the former president of Chicago retailer Sam’s Wines and Spirits. Since selling the business to Arbor Capital, a Chicago based private equity firm in May, Darryl has written a book called “Surviving the Middle Miles – 26.2 Ways to Cross the Finish Line with Your Customers” and written several articles and given many speeches on improving industry relations and business practices. Darryl had a lot of interesting things to say about the industry, so let’s take a look at Part One of the interview as you, dear reader, are a fly on the wall.
Wine & Spirits Daily: Give us some background on Sam’s Wines and Spirits and your leadership in the company.
Darryl Rosen: I was the president of Sam’s before selling the business last year. Sam’s was started by my grandfather, and he did – maybe 40, 50 years ago; nobody really knows for sure. And my dad was involved with the business for a long time. His name is Fred. I came on the business full-time in 1990, when we were one store, and we grew the company from there. When we sold the company we had three stores – big stores.
WSD: Right. Well, how’s the wine and spirits business changed since you’ve been in it?
Darryl: Well, the major change is the competition. There’s always consolidation – there’s always supplier and distributor consolidation; there are always things going on in those tiers, so that came and went over the years. In the 1990’s and early 2000’s there was a wave of consolidation but that has slowed for now. Not there are big multi-state wholesalers and it wasn’t like that when I got into the business. The biggest change from the retail perspectives is the competition. That competition has forced everybody to get better. You know the effect of Costco, and with the Costco’s of the world, I believe they’ve taken away the fringe for a lot of other retailers.
WSD: Interesting.
Darryl: If a wine drinker on a scale of one to ten, with ten being someone who knows the regions of Burgundy and one is someone who just likes to have a glass of white wine. If you rated people like that, it used to be that stores like Sam’s and other wine and liquor stores got a much bigger range from ten down to one.
And now, people who don’t know a lot about wines have so many other choices, and they have so many other places to go. I read a statistic once, I think from the Small Business Administration, that there’s four times as much retail space per capita as there was in 1970...So there’s been an explosion of retail and an explosion of choices. Customers I think have more choices than they ever have.
Another thing I think, not so much now but in the late 90’s and early 2000’s, money wasn’t so tight. It was a lot easier to get a loan to open up a business. And around Chicago, you see all these little wine stores now. They’re all over the place; like gas stations! I know there’s a chain, I think it’s called Wine Styles.
WSD: Yes.
Darryl: They’re in Glenview and multiple locations. It just didn’t used to be like that. So many options.
WSD: Were you involved at all with the HB 429 legislation in Illinois? Basically, the controversy hinges on the fact that in-state retailers are allowed to ship to consumers in Illinois, but out-of-state retailers are not given the same advantage.
Darryl: No, I was out by then. Traditionally, retailers don’t want to get involved in that fight because the way that the laws are constructed right now with the compliance and the monitoring, I think a lot of retailers try to fly under the radar. Traditionally, retailers do not want to get involved. It’s the little guys (the wineries) that spearhead the effort where there’s a real constitutional question as to why somebody in Texas can’t get a bottle of wine from somebody in California. Something that’s not available in Texas.
I think it’s a great constitutional argument, and I always thought, from day one that there would be compromises in the system at some point. I don’t know when, but so that one would be able to get a bottle of wine from somewhere else. And having it shipped, that will never affect retailers. I think it’ll be a long, long day before retailers have that ability – you know, the ability to ship around at will.
WSD: To ship directly to consumers?
Darryl: Yeah. I just don’t see it happening. For one, retailers are not cohesive. You understand how the laws are written in this business. They’ve been around for a long time and the distributors are adamant about protecting underage drinking and protection of taxes and things like that and I just don’t see the laws changing.
That’s another problem with the shipping laws. You’re saying something to me and I was a retailer in Illinois and I’m not sure that was correct, or it just – it’s not, it’s not framed that way. There was some talk about retailers in Illinois that they weren’t going to be able to deliver within Illinois and nobody even paid attention.
WSD: Right. Okay.
Darryl: I don’t see instant shipping being affected, but like I said, I don’t see there being a time when people will be able to ship around. And everybody talked about that Granholm decision, and all that did was make it more restrictive, not less restrictive. I’ve got to tell you Megan, as a retailer, a lot of that stuff I didn’t pay attention to. It was just maddening, and I didn’t – and there was so much else to do that a lot of times we’d concentrate on other things.
It’s a big deal when you’re shipping to a state and then it becomes a felony to do it; that’s a big deal. I had different things going on. I think I had a case with Florida once, and you get ‘cease and desist’ letters every once in a while, and I didn’t like that. I didn’t like having to say ‘Forget it, I’m not going to ship there’ because then you lose a lot of customers in that state.
WSD: A second ago, you were talking about one of the big things you’ve seen change in the business is consolidation. How is consolidation at retail specifically affecting the wine and spirits business?
Darryl: Well, you have an 800-pound gorilla like Costco that’s a great company and makes a lot of money; it could make a lot more if the prices were higher, but it’s very tightly run and the leader of the company wants to make that certain gross margin. As a result, the prices are really low. But the difference between Costco and Sam’s Club or Costco and Wal-Mart, and I’ll say this carefully, more affluent people, the kinds of people that buy wine for $10 a bottle and higher, are going to go to Costco.
Another thing I saw in Chicago was that Costco is kind of a cool place to go for young people, and I presume even though I have no way of knowing this statistically, but those people who were between 21 and 29 years old, for example, they would go to Costco. They would go to Costco and see the brands they know like Heineken and Miller and Absolut and things like that, and they would buy it there. And as people get busier and there are more demands on everybody’s time, people have more email to read and more people to talk to, you want to knock a stop off once in a while.
WSD: Thanks Darryl. Stay tuned for part two tomorrow...
To view Darryl’s website, go to www.darrylrosen.com
Wine & Spirits Daily: Give us some background on Sam’s Wines and Spirits and your leadership in the company.
Darryl Rosen: I was the president of Sam’s before selling the business last year. Sam’s was started by my grandfather, and he did – maybe 40, 50 years ago; nobody really knows for sure. And my dad was involved with the business for a long time. His name is Fred. I came on the business full-time in 1990, when we were one store, and we grew the company from there. When we sold the company we had three stores – big stores.
WSD: Right. Well, how’s the wine and spirits business changed since you’ve been in it?
Darryl: Well, the major change is the competition. There’s always consolidation – there’s always supplier and distributor consolidation; there are always things going on in those tiers, so that came and went over the years. In the 1990’s and early 2000’s there was a wave of consolidation but that has slowed for now. Not there are big multi-state wholesalers and it wasn’t like that when I got into the business. The biggest change from the retail perspectives is the competition. That competition has forced everybody to get better. You know the effect of Costco, and with the Costco’s of the world, I believe they’ve taken away the fringe for a lot of other retailers.
WSD: Interesting.
Darryl: If a wine drinker on a scale of one to ten, with ten being someone who knows the regions of Burgundy and one is someone who just likes to have a glass of white wine. If you rated people like that, it used to be that stores like Sam’s and other wine and liquor stores got a much bigger range from ten down to one.
And now, people who don’t know a lot about wines have so many other choices, and they have so many other places to go. I read a statistic once, I think from the Small Business Administration, that there’s four times as much retail space per capita as there was in 1970...So there’s been an explosion of retail and an explosion of choices. Customers I think have more choices than they ever have.
Another thing I think, not so much now but in the late 90’s and early 2000’s, money wasn’t so tight. It was a lot easier to get a loan to open up a business. And around Chicago, you see all these little wine stores now. They’re all over the place; like gas stations! I know there’s a chain, I think it’s called Wine Styles.
WSD: Yes.
Darryl: They’re in Glenview and multiple locations. It just didn’t used to be like that. So many options.
WSD: Were you involved at all with the HB 429 legislation in Illinois? Basically, the controversy hinges on the fact that in-state retailers are allowed to ship to consumers in Illinois, but out-of-state retailers are not given the same advantage.
Darryl: No, I was out by then. Traditionally, retailers don’t want to get involved in that fight because the way that the laws are constructed right now with the compliance and the monitoring, I think a lot of retailers try to fly under the radar. Traditionally, retailers do not want to get involved. It’s the little guys (the wineries) that spearhead the effort where there’s a real constitutional question as to why somebody in Texas can’t get a bottle of wine from somebody in California. Something that’s not available in Texas.
I think it’s a great constitutional argument, and I always thought, from day one that there would be compromises in the system at some point. I don’t know when, but so that one would be able to get a bottle of wine from somewhere else. And having it shipped, that will never affect retailers. I think it’ll be a long, long day before retailers have that ability – you know, the ability to ship around at will.
WSD: To ship directly to consumers?
Darryl: Yeah. I just don’t see it happening. For one, retailers are not cohesive. You understand how the laws are written in this business. They’ve been around for a long time and the distributors are adamant about protecting underage drinking and protection of taxes and things like that and I just don’t see the laws changing.
That’s another problem with the shipping laws. You’re saying something to me and I was a retailer in Illinois and I’m not sure that was correct, or it just – it’s not, it’s not framed that way. There was some talk about retailers in Illinois that they weren’t going to be able to deliver within Illinois and nobody even paid attention.
WSD: Right. Okay.
Darryl: I don’t see instant shipping being affected, but like I said, I don’t see there being a time when people will be able to ship around. And everybody talked about that Granholm decision, and all that did was make it more restrictive, not less restrictive. I’ve got to tell you Megan, as a retailer, a lot of that stuff I didn’t pay attention to. It was just maddening, and I didn’t – and there was so much else to do that a lot of times we’d concentrate on other things.
It’s a big deal when you’re shipping to a state and then it becomes a felony to do it; that’s a big deal. I had different things going on. I think I had a case with Florida once, and you get ‘cease and desist’ letters every once in a while, and I didn’t like that. I didn’t like having to say ‘Forget it, I’m not going to ship there’ because then you lose a lot of customers in that state.
WSD: A second ago, you were talking about one of the big things you’ve seen change in the business is consolidation. How is consolidation at retail specifically affecting the wine and spirits business?
Darryl: Well, you have an 800-pound gorilla like Costco that’s a great company and makes a lot of money; it could make a lot more if the prices were higher, but it’s very tightly run and the leader of the company wants to make that certain gross margin. As a result, the prices are really low. But the difference between Costco and Sam’s Club or Costco and Wal-Mart, and I’ll say this carefully, more affluent people, the kinds of people that buy wine for $10 a bottle and higher, are going to go to Costco.
Another thing I saw in Chicago was that Costco is kind of a cool place to go for young people, and I presume even though I have no way of knowing this statistically, but those people who were between 21 and 29 years old, for example, they would go to Costco. They would go to Costco and see the brands they know like Heineken and Miller and Absolut and things like that, and they would buy it there. And as people get busier and there are more demands on everybody’s time, people have more email to read and more people to talk to, you want to knock a stop off once in a while.
WSD: Thanks Darryl. Stay tuned for part two tomorrow...
To view Darryl’s website, go to www.darrylrosen.com
posted at 1:56 PM
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