Approaching his 50th year in business as a retailer, Jim James still sees plenty of opportunity for expansion. The owner of Indianapolis-based 21st Amendment, James has grown his chain of liquor stores into one of the most successful drinks retailers in Indiana—one of the most competitive markets in the country. The 16-unit chain has endured in a market where it goes up against national grocery and drug store chains, and it remains well-positioned as it nears its golden anniversary.
James opened the original 21st Amendment store, which was just 2,500 square feet in size, in 1971. More locations quickly followed, and by the mid-1980s, 21st Amendment was operating 16 stores and had reached sales of roughly $13 million. In 1999, seeing growing demand for premium wines, James purchased the one-unit Wine Gallery store, setting the foundation for 21st Amendment’s commitment to the wine category. “We’ve changed our focus over the years,” says president and CFO Lou Anne Brennan, who joined 21st Amendment in 1984 as controller and became president in 2018. The company has added and sold stores over the years, and while early stores were modest in size, the current model is far bigger in scale. “We want to be at 8,000-10,000 square feet per store,” Brennan says.
Today, annual revenue at 21st Amendment is at $38 million. Spirits and beer each account for 40% of sales, with wine at 15% and miscellaneous items, such as accessories, snacks, and tobacco, accounting for the remainder. But Brennan notes that at some 21st Amendment stores—particularly the larger, more modern locations—spirits, beer, and wine sales are more evenly split. “We’re moving in that direction,” she says.
21st Amendment’s successes and challenges over the years have been defined, in part, by Indiana’s controversial beverage alcohol retail regulations. A law that allows only liquor stores to sell cold beer for takeout sales, for example, has buttressed some of its locations. As a result, Brennan notes, the company skews heavy on beer. But both she and James are well aware that major grocery, drug, and convenience store chains will continue fighting to have the law changed. “That’s one of the reasons we want to emphasize wine and not be as dependent on beer,” Brennan adds.
The ability to sell cold beer doesn’t erase all the competition from the giant retail chains, James says. “The problem we have is that grocery stores with pharmacies are permitted to sell spirits, wine, and beer,” he explains. “Groceries that don’t have pharmacies can sell only wine and beer. And drug stores can sell all three products.” Yet liquor license fees for the grocery and drug store chains are a fraction of those charged to package stores, he adds. Moreover, the state’s liquor stores face tight restrictions on the miscellaneous products they can offer. “We can sell warm Cokes, but we can’t sell cold Cokes,” James notes. “We can sell warm water and ice cubes, but we can’t sell chilled water. These laws are very antiquated and need to be recodified.”
The repeal of Indiana’s Sunday sales ban two years ago, meanwhile, has been a “catastrophe,” James says. “Saturday and Monday sales have shrunk,” he explains, and any gains attributed to the change haven’t made up for the increased overhead. “This was strictly a grocery store ploy,” he adds, noting that those stores were already open on Sundays and had staffing in place. “We had to add 60 jobs to accommodate Sunday sales,” says James. 21st Amendment employs about 150 workers, and key employees include Mike McElwee, vice president of operations, and Chris McDaniel, vice president of sales.
In recent years, 21st Amendment has sought to add units in high-traffic areas of Indianapolis and its suburbs, including malls and locations adjacent to grocery stores. Around a half-dozen stores feature fine wine rooms and beer caves, including the location in Westfield, just north of Indianapolis, which opened about five years ago. That store has become a template for future units and features a banquet room for public and private events, as well as an employee training program. To keep inventories well-stocked and to take advantage of quantity discount purchases from wholesalers, 21st Amendment operates a 30,000-square-foot warehouse that has a temperature-controlled wine room.
Spirits sales at 21st Amendment are growing, Brennan says, and the chain stocks some 2,200 spirits SKUs. Top-selling brands include Tito’s vodka ($17 a 750-ml.), Fireball cinnamon flavored whisky ($14), and Crown Royal Peach flavored whisky ($37). While blends and Irish whiskey are performing well, Bourbon is on fire, according to Brennan. Top-trending Bourbons at 21st Amendment include Basil Hayden’s ($32) and Horse Soldier ($40). “Any small batch does well—if we can get it,” she adds. Tequila is also seeing growth, driven by labels like Patrón Silver ($38) and Don Julio Blanco ($40).
Like other leading retailers, 21st Amendment has partnered with distilleries on private barrels. The company has teamed up with the likes of Maker’s Mark, Larceny, and WhistlePig on special releases, which retail between $40 and $100 a 750-ml. “And we’ve got more coming,” James adds.
21st Amendment stocks about 3,600 beer SKUs, generally priced at $7-$15 a 6-pack of 12-ounce bottles or cans. Top-selling brands include Yuengling ($9), Modelo Especial ($10), and Corona Extra ($10), and hard seltzers like White Claw and Truly (both $10) also perform well. Popular local craft brews include 3 Floyds Brewing Co.’s Zombie Dust pale ale ($15) and Sun King Brewing’s Osiris pale ale ($10 a 4-pack of 16-ounce cans). Due to the chain’s strong sales of cold beer, stores feature walls of cooler doors. The newer locations offer up to 25 cooler doors, as well as a walk-in beer cave.
Enhanced Wine Focus
With wine playing a small but growing role in 21st Amendment’s sales, Chris McDaniel joined the chain in 2018 with a specific focus on wine. A former distributor, McDaniel handles all wine buying and oversees corporate marketing. He’s already established a team of six wine professionals—all of whom are either certified sommeliers or have received the WSET Level 3 award—who are assigned to the chain’s top wine locations. “With the addition of the wine directors, we’ve been able to focus on educating customers,” McDaniel says. “If a customer asks for a Pinot Noir or Chardonnay suggestion, we might show them a good Burgundy or Chablis.” The move has resulted in increased sales of French and Italian wines, he notes.
Overall, 21st Amendment offers 2,600 wine SKUs. Top-selling labels include Kendall-Jackson Vintner’s Reserve Chardonnay ($9 a 750-ml.) and Veuve Clicquot Yellow Label Brut Champagne ($40). “We’re known for offering premium products at a great price,” McDaniel says of the chain’s wine selection, noting that wines priced at around $15 are the sweet spot. Hot varietals at 21st Amendment include Sauvignon Blanc, Cabernet Sauvignon, and Pinot Noir from the Northwest. “Rosé growth is out of control,” McDaniel says. “We’re selling it year-round.” To merchandise, most stores feature a “90-Point Wall,” comprising about 70 different high-scoring wines, all priced below $20. “It’s gone extremely well,” McDaniel says. “We’ve seen tremendous growth in the brands that we put on these walls.”
To further promote its wine, spirits, and beer selections, 21st Amendment offers a full calendar of complimentary in-store events, including “Wine of the Week” and “Frosty Friday” beer tastings, coupled with price discounts on the featured products. “They’ve been well received by our customers,” McDaniel says, noting that popular events include a recent summer luau and the chain’s annual Champagne and Bourbon tastings in the winter months.
The chain relies on a mix of traditional and electronic advertising to reach its customers. “Throughout the year, we send out email blasts to about 30,000 customers, and utilize social media,” Brennan says. The chain’s launch of a new website and app on April 1 was fortuitous as retailers in the state were required to shift to curbside pickup only one week later, at the beginning of the Covid-19 outbreak. (The restriction was lifted statewide by the end of May.) E-commerce has “quickly changed the way we operate,” Brennan notes, with online and app purchases now accounting for 10% of company sales. Next up, 21st Amendment plans to launch its own delivery program, she reveals.
With a heightened emphasis on wine, larger stores, and engaging marketing efforts, leadership at 21st Amendment believes the chain is prepared to take on any and all future challenges. According to James, two new stores—one in Indianapolis and one in Zionsville—are expected to open within the next year. Beyond that, he says, “We’re definitely going to build more stores, hopefully two more in 2021.” Indeed, for this retailer, the most effective way to take on the competition is to build up its arsenal and stand out from the crowd.