Staying ahead of the game: how Frugal MacDoogal remains a top destination despite industry shifts.
However, many things have changed in the 30+ years Sonnenberg has been part of the industry. The days of retailers simply being able to open their doors each morning waiting for customers to arrive and offering the same products as everyone else are long gone. Diverse product lines, increased competition and unanticipated legislative changes all have forced retailers to up their game and fight to hold onto their place in a more competitive market than ever before.
Because of Sonnenberg's business savvy and his ability to forecast how future changes will impact his business, he's managed to stay a step ahead of the competition and maintain Frugal MacDoogal's position as a top beverage retail destination.
ROLLING WITH THE PUNCHES
Sonnenberg, who previously held an on-premise license before entering the retail side of the industry, has always been a bit of a trendsetter. He opened the first Frugal MacDoogal location in 1983 in Nashville, Tennessee, in an era when the concept of a big-box liquor store was virtually unheard of After several years, Sonnenberg was ready to expand the Frugal MacDoogal brand. However, Tennessee law does not allow package store chains, so Sonnenburg set his sight on other states. He ultimately opened a second Frugal MacDoogal location in Fort Mill, South Carolina, in 1990. A second South Carolina store opened in Columbia in 2004.
Over the years, Sonnenberg has witnessed many shifts in the industry, and he's learned to stay on top of the changing tides in order to remain as competitive as possible.
"I've seen some remarkable things," he recalls. "It used to be that we had two or three brands accounting for 80% of any particular category. These days at any given time, we have 35-40 craft gins alone. We see that the consumer has very different expectations compared to the consumer of years past. Also, through the evolution of technology, consumers and retailers have access to a plethora of information, which requires retailers to be more informed and invested in the industry."
With the boom of areas such as the craft beer industry and a focus on education, consumers are now more aware of product offerings and distinctions than ever before. Although Sonnenberg's chain of Frugal MacDoogal stores is spread out over multiple states and cities, he is quick to point out that none of the locations are identical in terms of appearance or product selections.
"Two of our stores are physically larger than the other, but more importantly, the demographics of each store is very different," he says.
In Nashville, Sonnenberg remembers a time when customers would commute more than 50 miles to visit his store. However, the city has experienced dramatic growth over the past several decades, especially in the downtown area where Frugal MacDoogal is located. With such growth came additional retail competition. Population shifts included a boom of Millennials, and Sonnenberg says that a large portion of his consumer base now consists of young professionals who spend a significant portion of their income on lifestyle and entertainment options. This consumer base also happens to be well-educated about the beverage industry, and they deliberately seek out retailers that offer the latest product selections and additional information about the items on store shelves, particularly in the fine wine and craft beer segments.
Conversely, while one of Sonnenberg's South Carolina stores is located in a booming geographical area, the other is set in a less affluent location, meaning that products at each store are tailored to suit each target customer's budget.
"You sell what the customer wants--that's the bottom line," Sonnenberg says. "We also bill ourselves as a low-price leader, and we need to continue to be a leader in that area no matter what"
He also notes that it's more difficult to hold consumers' interest and keep them engaged than it was in years past.
"Before, we used to try and make the stores exciting and offer entertainment as part of the shopping experience," Sonnenberg reflects. "Now you need to use social media to keep customers engaged. It's become less about entertainment and more about giving them meaningful product information and a tasting experience."
Frugal MacDoogal has long since recognized the value of investing in social media, which is a challenging undertaking for brick-and-mortar stores that don't have the added advantage of selling online. Sonnenberg has staff members who work closely with an external social media specialist to generate content designed to engage customers and draw them into the stores. He encourages other retailers to invest in this technology by bringing in the expertise of outside professionals in order to take full advantage of social media's reach and metrics.
Sonnenberg is also very committed to providing consumer education about products through events like in-store tastings and activities. As a result, he also dedicates time to developing educational opportunities for his approximately 50 employees, who can take advantage of beer festivals, winery trips and other activities designed to deepen their knowledge about beverage products and the industry.
Another unique opportunity afforded to Frugal MacDoogal staff members is the chance to participate in an employee stock option plan. The program, which launched two years ago, essentially makes every employee an owner in the business.
"They get rewarded and it's an incentive for them as a stockholder to go a little farther in their work each day," Sonnenberg explains. "It's just one example of our strategy to empower staff as much as we can."
Sonnenberg's desire to be as informed as possible helped him coordinate some extensive planning in advance of a new law that went into effect last year. Until then, Frugal MacDoogal's 18,000-square-foot Nashville location actually consisted of two separate stores with different entrances. It was constructed that way because Tennessee state law prohibited the sale of wine and spirits in supermarkets and also banned the sale of beer in liquor stores. As a result, the Nashville location was split into a wine and liquor store and a second party store that offered beer, snacks, soft drinks, glassware, gifts, and other items.
However, as of July 1, 2016, a new state law permitted the sale of wine in Tennessee grocery stores. While this change made it easier for consumers to pick up a bottle of wine at the same location where they purchase their food, it posed a huge challenge for beverage retailers who were already struggling to remain competitive. When Sonnenberg realized that the new law would put his business at an extreme disadvantage once it went into effect, he decided to do something about it.
"This change has had enormous repercussions in the marketplace, but we used it as an opportunity to contemporize out interior in terms of aesthetics and function," Sonnenberg states. "We knew we had to take advantage of the chance to retail under one roof?'
For three months prior to the new regulation's implementation, Sonnenberg's Nashville store was under construction. The undertaking was both extensive and expensive because Sonnenberg opted for the store to remain open the entire time during the renovations.
In order for that to happen, he had to pay a premium for contractors to begin work at 11 p.m. each evening after the store closed, work all through the night, and have the store operational again by 8 a.m. the following morning. Some of the many changes made to the store include removal of the drop ceiling, updates to the HVAC systems, removal of partition walls between the retail wine and liquor stores, installation of a single store entrance and automated doors and the addition of a growler station with 24 taps.
Sonnenberg says that even though his customers were inconvenienced during the many months the store was under construction, consumer reaction to the renovated space has been overwhelmingly positive. Despite the large-scale renovations, however, Frugal MacDoogal's Nashville location hasn't generated a significant boost in overall revenue.
"We are confident it was money well-spent, and we are very happy with the results of the renovation itself" he states. "Retailers are often hesitant to invest in this kind of capital expenditure without being sure of the reward. In our case, we are seeing increases in some aspects of the business, but wine sales have inevitably declined as a result of the new legislation. We've had to find more esoteric products for our customers to maintain their interest. The competition makes it necessary to find other profit centers."
Even though the Nashville location's sales aren't what Sonnenberg would like them to be, he thinks the store is in a much better position now than it would be had the renovations not taken place last year.
With so many changes to legislation affecting the beverage alcohol industry, retailers need to stay on top of things to ensure they understand proposed changes and how their business may be impacted. Sonnenberg urges retailers to be active members of industry associations and maintain constant awareness of potential regulation changes.
"More than ever before, the political consequences of proposed legislation and the need to remain involved is critical," Sonnenberg stresses. "Remember that we are a privileged license, and everything the legislation does affects us. It is essential to remain politically engaged. Otherwise we end up shouldering the costs with no benefit."
In addition to being politically active, Sonnenberg also thinks it's vital for retailers to maintain an active presence in the community and to remember the importance of giving back. For the past several years, the Tennessee store has collaborated with the National Hockey League's Nashville Predators team on an annual event for approximately 1,250 donors who enjoy an evening of fine wines, beer and liquors paired with a formal dinner served on the covered ice rink at Bridgestone Arena. Guests can also bid on various auctions, and all proceeds benefit the Nashville Predators Foundation. Frugal MacDoogal also partners closely with the Nashville Zoo on charitable events, as Sonnenberg strongly supports the organization's commitment to children and education.
So what's next for the Frugal MacDoogal chain? Sonnenberg doesn't refute the idea of additional expansions.
"We will expand if the opportunity arises," he says. "Maybe in Tennessee, or possibly out of state. My primary focus right now is to transition many of my responsibilities to the management team so I can play more of a strategic role and have less of a hand in daily operations."
Until then, rest assured that Sonnenberg will still be at the helm of Frugal MacDoogal, all but guaranteeing that it will be a successful retail chain for decades to come. BD
MELISSA NIKSIC is a freelance writer and marketing communications strategist from Chicago, IL. Her work has appeared in Chicago's Daily Herald newspaper, Time Out Chicago, Suburban Life newspapers, and various magazines. She is also the author of several children's books. Follow her @MelissaNiksic.
Caption: Each location has a different style and product selection to fit its local market.
Caption: There are three Furgal MacDoogal stores in TN and SC.
Caption: Charles Sonnenberg (front) has been in the business for more than 3G years.
Caption: The 18,000 square foot Nashville store was extensively renovated over three months.