Jonathan Blue jumped on technology early, and he’s seen that move pay off exponentially as Covid-19 has drastically impacted customer purchasing habits. Blue is chairman and managing director of Blue Equity LLC, which owns 20 retail stores in Kentucky. Two years ago, shortly after the Kentucky General Assembly passed legislation allowing liquor stores to deliver alcoholic beverages to customers, Blue Equity launched delivery apps for its 15 Liquor Barn locations and two Party Mart stores. The company’s three DEP’s Fine Wine & Spirits stores—purchased this past May—also now have similar apps.
“With our apps, within an hour, you have that product at your doorstep without ever speaking to a person,” Blue says. “We were the first in the state of Kentucky to offer delivery, and it’s been massively successful. Then with the pandemic, usage increased exponentially. It’s been a very, very big success story.”
The apps allow the stores to differentiate themselves from the competition, but the technology only tells part of the story. Under normal circumstances, the stores are highly experiential. For the company’s higher-profile “destination stores” in particular, “people still want the experience of browsing through a store, spending time and learning about SKUs,” Blue says. “And the tastings and events are still very valuable. We’re looking forward to those coming back, but in the meantime, delivery has been a great solution.”
For his forethought in adopting technology, his vast selection of alcoholic beverages, and his ability to create a highly engaging customer experience, Blue has been selected as a 2020 Market Watch Leader.
A Company Evolution
Blue Equity has investments in a broad range of businesses, from flooring to guns and ammunition to talent representation. Its first foray into beverage alcohol came on the supplier side in 2013, as an investor in Angel’s Envy Bourbon. Blue Equity sold its stake in the brand in 2015. That same year, the company purchased the two-location, Louisville-based Party Mart group, giving it a toehold in beverage alcohol retail. In 2017, Blue Equity took a bigger leap, acquiring the 15 Liquor Barn locations around the Bluegrass State—making Blue Equity Kentucky’s largest beverage alcohol retailer.
Then came the deal for the three-location DEP’s chain in northern Kentucky in May. That acquisition “checked all the boxes,” Blue says, noting that DEP’s strong consumer base, multiple stores, and location near Cincinnati. Blue Equity’s Liquor Barn locations are mainly located further south, clustered around the Louisville and Lexington markets.
The DEP’s deal brought Blue Equity’s total to 20 stores, ranging in size from 5,000 to 40,000 square feet. While selection varies based on size, the stores carry a total of more than 26,000 SKUs. All of the stores within the three chains—collectively run by nearly 400 employees—have similar strategies: strong representation in Bourbon, a broad range of SKUs as the company seeks to be “all things to all people,” and a robust customer service and experiential bent. Blue notes that despite the similarities among the stores, there are no immediate plans to merge under a single brand name.
Blue says he’s all-in on the retail sector, even as the coronavirus threatens to upend standard operating practices. “It’s a personal mission for us—we’re here to grow and here to stay,” Blue says. “I’m born and bred in Louisville with many generations before me. The reason we got into retail is that it allows us to get behind and support all brands and all different types in the sector. That’s why we love the business—we can really get behind some of the brands, especially in Kentucky with Bourbon.”
Indeed, the place where that breadth of selection is most apparent is in the Bourbon section. “There’s such a Bourbon boom right now, and we’re seen as the leader and the No.-1 destination,” Blue claims. He says he’s proud to represent his home state’s most prominent product and seeks to carry virtually every Bourbon label he can access. Spirits account for 46% of sales, and Bourbon makes up a good chunk of that volume. “Bourbon is an extremely heavy focus and the top-selling product,” he says. “We want to support the tiny craft distilleries as well as the largest distilleries. If you’re looking for a 375-ml. of rare Bourbon, there’s a very good chance you’re going to find it, and at a strong price. We also carry all the major brands.”
The company focuses heavily on private-barrel selections. “We were one of the original companies in the country doing barrel picks at distilleries,” Blue says. “We visit the distillery, many times with top customers, and select single-barrel products for the stores. We name these barrels individually and allocate them throughout the chain in order to facilitate as many customers as possible having a chance to purchase an incredible bottle that’s been hand-selected by our experts.”
Blue adds the stores’ reputations—especially within the world of Bourbon—pave the way for special notice. “If someone wants to launch a new Bourbon or any new product, they’re going to come to us first,” he says. “For example, we have a monthly release of high-demand Sazerac allocations that are available to the general public in most locations, all at standard retail pricing, unlike many other places.” Beyond Bourbon, Tequila is surging at his stores, Blue says. The company offers barrel picks for Tequila as well as Bourbon, and Blue raves about the quality of spirits coming from producers such as Patrón, Don Julio, and Corazón.
Wine makes up about 25% of sales at Blue Equity’s stores. Blue says the company’s wine buyers strive to carry a broad range, including some of the world’s most renowned labels. “We also have what Kentucky favors, which is a sweet red,” he says. “That’s what our customers enjoy, so we focus on those SKUs.”
The company takes a similar approach to beer and seltzers, which account for a combined 16% of sales. The latter is currently seeing a surge in demand. Local brands are prominent, although Blue notes that local brewers can sell directly to customers, which can limit demand in his stores. “We try to differentiate ourselves by having a variety of local brands as well as following the national trends,” he says, noting that the Northern Kentucky market, in particular, is focused on beer.
Blue says the overall selection in many of his stores is customized toward favored local brands. “For example, this includes myriad Bourbons and other whiskeys as well as some craft beers and specialty food items, like those given the distinguished ‘Kentucky Proud’ designation by the state of Kentucky and the department of agriculture,” he says. “We’re the largest Kentucky-owned independent chain, and want to continue to service our customers who seek out local brands that we are proud to support.” Blue adds that he tries to make sure his stores have something for everyone. “Our SKU count is probably the largest in the state,” he says. “You want to find something? You go to Liquor Barn, Party Mart, or DEP’s, and you’re going to find it.” Aside from beverage alcohol, cigars and tobacco make up for 9% of sales, and food and specialty products account for 4%.
The Customer Experience
The fallout from the Covid-19 pandemic changed operating strategies at the three chains, of course. Blue says sales surged during the state’s stay-at-home period, with many customers relying on the proprietary app for delivery. How customers purchase is now a moving target, but the stores—pre-pandemic, at least—all offer an exciting in-store experience for customers who choose to shop that way. Smaller “express” stores cater to local customers, and the company also has a handful of destination stores under the Liquor Barn name. These larger-format stores allow for a highly interactive experience.
“When you walk into one of our newer-format stores, you’ll first see a full-scale bar with all kinds of rare Scotches, Bourbons, and Tequilas by the pour,” Blue says. “It literally looks like a bar with TVs, but very upscale, including wine by the glass or bottle. You’ll see a tasting bar in the middle of the store for people who want to sample. And then you’ll see the rest of the store, which includes a classroom for tastings and virtual and in-person experiences, and then of course all the aisles and shelves. Also, several of the stores have delis with fresh deli meat and other foods.”
The stores were allowed to stay open as essential businesses this past spring, but the experiential features—the bars, tasting rooms, and delis—had to shut down. At press time, Blue Equity was on the verge of reopening tasting areas under new guidelines, including the use of signage designating “safe tastings;” plexiglass partitions between customers and servers; the use of single-use, sealed drinkware provided to each customer; and sanitation stations located near tasting counters.
Earlier this year, Blue Equity hired someone to develop a customer service training program for employees. That program is supplemented by wine-specific education provided by the company’s wine buyers, as well as education from an array of other sources. Blue says employees at all three chains must know how to offer customers a highly engaging experience—plus the knowledge to back it up. That said, Blue is considering shifting to a more tech-centric approach, in light of social distancing requirements, such as iPad information stations within the aisles to educate customers on beverage alcohol types, regions, and brands.
Blue Equity’s customer service approach, combined with technology like the app, is designed to differentiate the Liquor Barn, Party Mart, and DEP’s experience from the competition. Blue says his main rivals are grocery stores. But his stores have one key factor in their favor. “Our customers shop with the grocery competitors sometimes, but as good as they are, they’re size-restricted,” Blue says. “They’re in the grocery business while we’re in the wine, beer, and spirits business. They’re limited on size and SKU count. We’re unlimited—we concentrate on carrying what our customers want, when they want it. That’s a really important differentiator.”
Blue Equity’s strategies have paid off with burgeoning sales. In mid-2020 that the company was “digesting the acquisition we’ve done and looking for the next step,” Blue says. That could come as soon as later this year or early 2021, when Blue anticipates expanding his company’s retail presence by building new stores in underrepresented areas of the state. “We’re going to grow in Kentucky primarily—we’re loyal to our state and we care a lot about Kentuckians,” Blue says. “But at some point I’m sure we’ll look at other parts of the United States, as well as other parts of the world.”