When comparing its three smaller units in bustling Chicago to its five larger stores in the Windy City’s highly affluent suburbs, the question of where the Garfield’s Beverage retail chain does better business may seem like a trick. But in fact, Garfield’s garners its best profits in the big city, even though it has fewer retail locations there. The stores within Chicago’s city limits benefit from fatter margins and a more steady, dependable stream of customers.
Bruce and David Garfield, the father-and-son team who own Garfield’s, are in the middle of an expansion program that has fine-tuned this city/suburb formula. David, chairman and CEO of the chain, says Chicago’s dense neighborhoods keep competition to a minimum. “We aren’t surrounded by big-box retail stores in Chicago like we are in every suburb,” he says. “Our competition is mostly smaller independents. We’re able to operate with smaller stores that require less inventory and fewer workers and are far easier to manage. Best of all, city shoppers prioritize convenience rather than price. That means we can take bigger mark-ups.”
That’s a common-sense insight, and accounts in part for David’s ambitious plan to seek out more store opportunities in Chicago in coming years. His executive team is currently negotiating with city officials for a site in the trendy Old Town neighborhood and is plotting similar locations elsewhere. For their business acumen in growing a franchise across decades, Bruce and David Garfield have been named 2022 Market Watch Leaders.
The split-pricing strategy doesn’t come without challenges. It’s something that other retailers in Chicago, including the 45-store Binny’s Beverage Depot chain, have also wrestled with as they institute targeted pricing in one submarket after another. Both Garfield’s and Binny’s still advertise in newspapers, and they both depend heavily on their websites and email communications to offer consistent messages on price, among other things.
At Garfield’s, the solution ends up being fairly seamless. Customers can access the website but can’t see a full inventory list until they identify their preferred destination store. Only after that box is checked does the adjusted pricing pop into view. That’s no small matter, as Garfield’s, which carries 20,000 active SKUs, must enter many of the prices manually.
But the efforts are worthwhile. David estimates that Garfield’s get 36% gross margins on wine in Chicago, compared with 31% in the suburbs. In spirits, the city mark-up is around 28% while the suburbs are at 25%. The differences add up for a company that registered $30 million in sales in 2021. That sales total may sound impressive for a mid-tier independent, but the Garfields are acutely aware that they’re outflanked in volume by a large parade of rivals, from Binny’s to Costco to Trader Joe’s. The state of Illinois is very pro-competition, meaning that wholesalers have permission to structure preferred pricing according to volume and retailers can sell below cost at will.
“Illinois is wide open,” says Bruce, who joined his father, Norman, at the business full-time in 1974 just out of college. “Illinois is the toughest state to survive as a retailer. It’s always been that way.” David agrees with that view and advances it a step. “To acquire better pricing we need to be much bigger,” he says. “That’s one reason we’re looking to open more stores.”
The story of Garfield’s dates back more than 70 years. The company got its start in 1951 when Norman Garfield, a former salesman for the Chicago department store Goldblatt’s and the son of Russian immigrants, acquired a place called Cicero Cut-Rate Liquors. Bruce went to work at the store full-time after getting a psychology degree at Northeastern Illinois University. His brother, Bennett, joined the company in 1979 after college at Northern Illinois University. The family bought a store on Central Avenue in Chicago and later closed the Cicero location, yet organization was on their minds. In 1993 Bruce and Bennett formed Cardinal Liquors as a co-operative buying group and recruited other retailers to sign on in order to get the best possible wholesale pricing.
Norman retired in 1998 and David joined on in 2000. He became manager of the Crystal Lake store at the age of 21, when he was barely legal to sell its products. “I knew all along that this was what I wanted to do with my life,” says David, who got his start in high school carrying boxes and running the cash register. “I knew early on that retail is hard work, but I also knew that I didn’t want to work for anybody else but my father.”
The duo insist that they never argue. “I might not agree with every decision made, but I’m willing to sit back and let David make the major decisions now,” says Bruce, who spends much of each winter at a second home in Sarasota, Florida. For a long while Bruce ran the retail side of Cardinal Liquors while Bennett oversaw the marketing group, also called Cardinal. Bennett eventually cashed out in 2018, selling the group to Armanetti. Today he’s retired and separated from the retail business.
Garfield’s has expanded rapidly in the last ten years, entering suburban areas Norridge and Palatine, as well as relocating the Crystal Lake shop, which at 15,000 square feet (the chain’s biggest) has a bar inside for more extensive tastings. The company’s Chicago growth began with a location acquired in the Wicker Park/Bucktown neighborhood in 2016, followed by in the Wicker Park South neighborhood in 2018, and one in West Lakeview in 2020. The city locations range from 2,800 to 5,000 square feet.
With locations also in suburban Barrington and Prospect Heights currently, Garfield’s has grown in the past 20 years from two stores and $12 million in annual sales to the current eight stores and $30 million in revenue.
A Modern Take
After the Cut-Rate name was dropped decades ago, the company became Cardinal Liquors. But joint advertising and promotions left customers confused as the company upgraded its stores beyond the condition of most other coop members. “Customers assumed that we were all one company with the same owner. But the other stores weren’t as nice as ours,” David says. “We had to make a change.” The change came in the form of a new name alongside the opening of a new store in the upscale suburb of Barrington in 2015. After much debate, the Garfield name won out. A big newspaper ad campaign introduced the fresh brand—originally Garfield’s Beverage Warehouse and more recently reduced to just Garfield’s Beverage. Only this year has the company stepped away from its once-heavy print ad program in favor of social media outreach on Instagram, Facebook, and TikTok. “We found print ads only appealed to older people looking for deals,” Bruce says.
The company makes a point of displaying virtually all of its 20,000 products on its web site. It gets 38% of its sales from spirits, and 28% each from wine and beer. A small food department of mostly cheeses garners 2% of sales and tobacco and cigars comprise another 2%, with mixers and miscellaneous goods making up the final 2%. The company’s VIP Wine Club charges members nothing to enroll and offers $5 in rewards for every $500 spent. The Garfields also maintain an email list of 65,000 customers, who get regular promotional blasts.
Salespeople working the floor stress that customers today are focused on what they call hyper-local products. At the Barrington store, for instance, beer manager Gabriel Perez reveals that a big seller recently has been P3 Pilsner ($10 a 4-pack of 16-ounce cans) made by Phase Three Brewing in Lake Zurich, along with Chicago-based Half Acre Beer Co.’s Daisy Cutter Pale Ale ($23 a 12-pack of 12-ounce cans). In the import section, there are surprises: the German-made Jever Pilsner ($11 a 6-pack of 11.2-ounce. bottles) started as a little-noticed hand sell and has now established itself as an ongoing favorite of customers, according to Perez. Among national brands, Miller Lite ($11 a 12-pack of 12-ounce bottles) handily outsells all else. There are more than 1,200 beer labels in all and 33 cooler doors in the Barrington store. In the growing hard seltzer category, Wisconsin-made Untitled Art Strawberry Kiwi ($16 a 6-pack of 12-ounce cans) sells well, Perez reports, though he adds that beer consumers are no longer committed to just one label. “Brand loyalty in the beer department these days is mostly all gone,” he says.
In spirits, it’s all about Bourbon at Garfield’s. Salespeople say that customers have recently discovered obscure names like Smoke Wagon from Nevada H&C Distilling ($35 a 750-ml.). On the local front, shoppers seek out suburban Evanston, Illinois-based F.E.W. Spirits’ Bourbon ($40) and Chicago-based Koval Distillery Bourbon ($60). In the Tequila arena, Fortaleza Blanco ($60) has gotten so popular that it’s often out of stock. In vodka, a Tito’s lookalike called Steel Dust 1843 ($15), also made in Texas, is developing a following.
Andrew Springer, wine manager at the Barrington store, explains that his corporate bosses mandate a certain selection at all Garfield’s locations. But he’s allowed to program at least 50% of the store’s wine assortment himself. “They recognize that at the store level we know our customers’ tastes,” he says. His greatest influence on selection, he adds, comes in deciding on labels priced at $50 and more. He’s a big booster of the 2018 Oakville Winery Cabernet Sauvignon from Napa Valley ($50 a 750-ml.). “It really over-delivers at that price,” he says.
There are big-deal labels like the 2010 Lokoya Cabernet Sauvignon from Mount Veeder ($450 a 750-ml.), but Springer explains that he sees heavy volume lately in bargain-priced Sauvignon Blancs from New Zealand, such as the 2020 Oyster Bay ($15; on sale at $12). A big rosé section is notable for the 2021 Whispering Angel from Chateau d’Esclans ($20). Overall, the troubled economy hasn’t noticeably changed shopping patterns yet, according to Springer. “People continue to buy the wines they like,” he says.
That’s good news to management. The Garfields reveal that they have the capital to finance expansion right now. “We have found a decent merchandising recipe that seems to work for us,” David says, noting that he was once hoping to open one to two new stores a year. Now, he’s not sure he can meet that schedule due to challenges in finding the right real estate. “In the city, properties are owned by investment companies willing to wait to get their asking prices, which are sometimes absurd,” he adds.
Looking forward, David and his father have high hopes for a prospective fourth generation of Garfield’s coming along—David’s 14-year-old son and 12-year-old daughter. When asked about their futures in retailing, David admits he’s unsure, but he knows his 70-year-old father isn’t ready to retire yet. On cold days he can be found snowplowing walks around the stores. “The family is still very involved here,” David says.