Retailer of the Year: Applejack Wine & Spirits: Jim Shpall and Alan Freis have built Applejack Wine & Spirits, Wheat Ridge, Co, into one of the largest beverage alcohol stores in the nation by focusing on every aspect of the business.

In the state of Colorado, an off-premise beverage alcohol retailer can only own and operate one store.

But what a store it can be.

Applejack Wine & Spirits, in Wheat Ridge, CO, is the largest volume single beverage alcohol store in the U.S. The store itself, about 100,000 square feet in size, including its warehouse space, fills an entire building in a shopping center. "People think the space must have once been a supermarket, but, no, we built it as the liquor store," explained Alan Freis, chairman. And Applejack has expanded three times, taking over the space of two other stores, since it first moved into the building in 1974.

Applejack carries over 16,000 SKUs. "If you can't find it at Applejack, you don't need it," said Jim Shpall, president and ceo.

In its advertising, Applejack bills itself as "America's Largest and Finest Wine & Spirits Supermarket," with the word "Finest" looking as if it has been penciled in. That's because Applejack is a superstore but also more than a superstore. The same operation that offers low prices also prides itself on its extensive selection--it carries one of the largest collections of single malts in the U.S., Shpall said. The store that people go to in order to stock up for a party is also the store that wine collectors visit for wines they can't find anywhere else.

On Applejack's "About Us" page of its website (www.applejack.com), the store's philosophy is described this way: "One of the best aspects of working at Applejack is helping our customers with their special needs ... There's nothing we like more than playing the sleuth and tracking down that obscure vintage; or pulling together a one-of-a-kind gift package for that once-in-a-lifetime occasion."

So, who is the Applejack customer? "My customer is anyone aged 21 to 99," declared Shpall. "We have something for everyone." Applejack is one of the largest buyers of French wines in the country. "We probably have more of the recent great Bordeaux vintages than anyone in the U.S.," said Shpall. However, the store is also the largest single seller of Coors.

This egalitarian attitude infuses Applejack. Though the store has its share of high-end wine collectors, doing a brisk business in, for example, Bordeaux futures, Applejack does not favor them over its more ordinary customers. "My good customer who buys three bottles of wine every week is just as important as the one who spends $15,000 at a crack," said Shpall. "All our customers are important." When Applejack obtains a sought-after wine, therefore, it sells it on a "first come, first serve" basis.

A DESTINATION STORE

Applejack is, on the one hand, a destination store. Shpall has one regular customer who travels to the store from St. Louis every few months. "People pass by many liquor stores on their way to us," said Freis. "They're coming for our selection, our pricing and our help."

On the other hand, the store is also ideally situated. Located in a shopping center in Wheat Ridge, Applejack is right off Interstate 70, the main route to Colorado's mountains. "We are one of the last exits out of Denver, about 45 minutes from the closest ski resort," explained Freis.

That the store is in such a prime location is lucky, happenstance. When the store was opened by its original owner, Herb Becker, in 1961, I-70 wasn't even there. Becker built his new shopping center and its liquor store in an area of apple orchards, hence the names: Applewood Village Shopping Center and Applejack Wine & Spirits.

Applejack is not the typical box-like superstore. "We don't look like Costco," said Shpall. The store, which went through a major remodeling five years ago, does not have high ceilings, and as a result of its many expansions, is actually full of nooks and crannies. Yet, it is not claustrophobic. Its main aisles, which Shpall refers to as its "avenue aisles," are wide enough for three to four shopping carts to fit abreast. The store's shelving is kept low, four-to-five feet high. "That's so you can always see and what you see is most of the selling space," said Shpall.

The goal of the remodeling, which took five months to complete, though the store remained open through it all, was "to make the store bright, clean, the opposite of the stereotypical liquor store," said Shpall. "We wanted to make it a consumer-friendly store, appealing to all demographics."

The inside of the store was entirely gutted, one section at a time. Even the direction of the aisles was changed, from east/west to north/south. "Everything from the floor to above the ceiling, including the telephone and computer wiring, was updated," said Shpall. "We put in all-new lighting, all-new shelving." Applejack also added four new registers, bringing it up to a total of 14 checkout lanes.

CONSTANTLY IMPROVING

Applejack is constantly improving, upgrading and rearranging its space. "We're always changing, not to confuse people, but to keep them interested," explained Shpall.

The layout of the store is designed to let customers shop, to let them see all that Applejack has to offer. "We want to sell customers what they came here for and we also want to sell them what they haven't come for," said Freis.

"The spirits are across the store from the beer," explained Shpall. "The vodka is at the very back of the store. We want people to walk; we want people to shop."

Likewise, the wines are arranged by region, but within those regions, they are arranged alphabetically. "That way, a $50 bottle might be next to a $10 bottle which is next to a $100 bottle," explained Shpall.

This works especially well in wines, Shpall explained, because consumers are open to trying new wines. "People often buy two cases of wine and all 24 bottles are different," he said. "That's a newer phenomena: there are so many good wines out there, with new ones becoming available all the time. The wine environment is that people want to try new things. They may know what region they want and they may have a price in mind but, after that, they are open to suggestion. It's a very fluid market."

As a privately owned company, Applejack does not release exact sales figures. However, Shpall did report that 50% of the store's sales are in wine, 25% in spirits, 20% in beer with the remaining 5% coming from the sale of alcohol-related items such as mixers and glassware. Colorado retailers are prohibited from selling anything, such as food, that is not directly related to the use of beverage alcohol.

Not only does wine represent half of the store's sales, it also accounts for approximately 10,000 of the store's products. And little wonder for the focus. "Wine sales have been growing exponentially," said Shpall, "while spirits sales have shown some growth and beer sales have remained steady."

Because customers are willing to experiment in wines, a retailer's marketing efforts can have an extraordinary effect. "If you put two similar wines next to each other on the shelf, but one has a shelf talker, you're going to sell much more of that wine," said Shpall. "People are hungry for information."

SPIRITS: A BRAND BUSINESS

Spirits are a fundamentally different market from wine, Shpall feels. Brands are much more important. "A spirits buyer who drinks Dewar's is not necessarily going to switch," he said. "It's like when I went to buy my children a recording of Beethoven's Ninth. There were a million different ones. What I ended up doing was, I went to a display, saw a recording brand I knew was good and bought that one. Easy." At Applejack, some of the "powerhouse" spirit brands include Absolut, Grey Goose, Stoli, Ketel One, Smirnoff and Bacardi, according to Shpall.

When it comes to marketing, point-of-sale materials also work for spirits. "Our feeling is that it is the number of facings rather than the size [of the display] that is important," Shpall said.

Applejack carries well over 200 different beers. "We carry virtually every beer that is available in Colorado," said Shpall. "Fat Tire is our biggest craft beer, but they're all doing well."

Applejack, with a staff of approximately 80 full- and part-time people, prides itself on its customer service. The secret, Shpall believes, is to hire for personality. "You either have that or you don't," he explained. "We can teach you about wine."

There's a lot to learn--and Applejack immerses its new hires immediately. "It's very hands-on," said Shpall. "They're tasting, they're talking about wine. They're stocking the wine shelves and learning the names of wines that way. They're invited to selected tastings and given articles to read."

The Applejack way seems to work. "An enormous number of our alumni work for wholesalers and suppliers now," said Shpall.

ADVERTISING LARGE

Applejack has never been afraid to break new ground. It was the first beverage alcohol operation in its market to run full-page newspaper ads, listing thousands of its products. It started those ads in the 1980s. "Prior to that, all the stores did these little one-column ads," explained Shpall, "but Alan, knowing that Colorado has the highest rate of newspaper readership in the country, took out these massive, massive ads." And Applejack began advertising, not once a week, but twice, on Mondays and Thursdays.

"Now, people have come to expect these ads and look for them," said Freis. "It's a way for them to test us: 'Do they have X?'" Applejack also advertises on radio and television.

Currently, Applejack is looking for ways to harness the power of the Internet, both through increased use of its website and through e-mail marketing.

Shpall sees the website as an informational device for customers, though he does not rule out the possibility, of selling product through it in the future. Applejack has just begun posting its newsletter and offering special promotions through it's website.

Applejack is currently implementing a plan to do more direct marketing via e-mail. "Right now, we're not doing this as well as we would like, but we plan to be up to speed in 2005," said Shpall.

Applejack is also moving to take advantage of a change in Colorado law. In-store tastings are now legal in the state. Currently, the store is in the process of making sure it fulfills all the law's requirements, such as the certification of the employees involved.

Applejack, entering its 43rd year, continues to shine. What's the Applejack secret to success? Continuous innovation. "We focus on everything --seriously," concluded Shpall.

ALL IN THE FAMILY

When Herb Becker, founder of Applejack, decided to retire, he did not exactly put the store up for sale.

Instead, he offered to sell it to one--and only one--person: Alan Freis.

"I was planning to take a job at another company and move to Minneapolis:' explained Freis, who had been working in the industry, as a sales rep for Seagram and as president of Midwest Beverage, a local wholesaler, since 1969.

But, then, Becker took Freis out to lunch. The two actually wrote out their deal on a napkin. Then, they shook hands.

"Herb had built this business. It was like his child," said Freis. It is an attitude that, as Becker had seen, Freis understood.

Since then, Freis has brought Jim Shpall, his son-in-law, who is an attorney and a Harvard graduate, into the business. "For a while, I said, 'No, no, no,'" remembered Shpall. "I was a practicing attorney. But then, I tried it, keeping my practice for a while, to see if I liked it. And that was over 10 years ago."

Today, the two men own Applejack together. Alan's title is chairman. "I'm here every day, working, but Jim's running it." he said. Jim Shpall is the president and ceo.

"It's worked out really well," said Freis. "I brought Jim into the business and now, he has children of his own. It continues to stay in the family."

A TESTIMONIAL

"Applejack is on the forefront of industry trends and does a remarkable job with customer service," said Thomas J. Flocco, president and chief executive officer, Jim Beam Brands Worldwide. "They are a strong business partner to Jim Beam Brands, and understand our business and our brands." Flocco is especially pleased with Applejack's recent handling of a new Beam product, Starbucks Coffee Liqueur.

THE HISTORY OF APPLEJACK

1961 Herb Becker opens Applejack Wine & Spirits in his new Applewood Village Shopping Center in Wheat Ridge, CO.

1974 The ever-growing Applejack moves to a new, larger location within the shopping center. This location has been enlarged three times since the move.

1980 Herb Becker retires and sells Applejack to Alan Freis.

1981 Freis begins running full-page newspaper ads twice a week.

1992 Applejack installs a new computer system, from Innovative Computer Solutions. (See "On the Technology Forefront".)

1993 Jim Shpall, an attorney and Alan Freis's son-in-law, agrees to come work at Applejack.

1999 Applejack is remodelled.

2005 Applejack plans to launch a new email-based marketing campaign.

2005 Applejack plans to take advantage of a change in Colorado law and hold in-store tastings.

2005 Applejack plans to upgrade its computer system.

2005 Applejack named Beverage Dynamics's Retailer of the Year.

ON THE TECHNOLOGY FOREFRONT

One Friday evening, back in 1992, Tony Pitale, president of Innovative Computer Solutions (ICS), a company based in Brielle, NJ, that specializes in computer systems for beverage alcohol stores, was reading a trade magazine.

In the magazine, Alan Freis, owner of Applejack in Colorado, was complaining about how he could not find a good computer system for his store.

Pitale nearly fell off his chair.

"The writer had asked [Freis] how much he was willing to pay for a computer system and he said up to $250,000," remembered Pitale.

Pitale picked up the phone. "Alan and I had about a twenty minute conversation," said Pitale. "Two weeks later, I was on a plane to Colorado and a week after that, I had a signed contract."

The system didn't cost a quarter of a million dollars. It cost under $100,000. "We gave him the system he wanted and we left $150,000 in his pocket," said Pitale.

Applejack has been an ICS client ever since.

And the operation was always up for trying to do more with its computer system. "We were their guinea pig" said Freis. "The system was good when we got it and since then, we've come up with a lot of ideas with them and most of them they were able to implement."

Applejack was, for example, the first ICS client to use a remote receipt printer in its warehouse. "The customer wants a case of something, the cashier rings it up and a receipt is printed in the warehouse," explained Pitale. "The case comes into the store on a conveyor belt and an employee with a handtruck brings it to the customer's car."

Applejack was also the first ICS to use its computer system to compute a discount on mixed cases.

And Applejack has a workstation in the store for vendor salespeople to use to input their orders into the Applejack system. That way, an Applejack employee doesn't have to do it. "The vendor is locked out of seeing other vendors' business, locked out of seeing any product except their own," explained Pitale.

And Applejack continues to remain on the forefront. "Jim [Shpall, Applejack's president and ceo] calls us on a frequent basis, with new ideas," said Pitale. And this year, Applejack will upgrade to the newest ICS system, called Vision. "It makes use of the newest technology," Pitale explained. "It has many more features with gift cards and credit card and debit card processing at the point of sale. It's a true client/server system."