Utah plans to purge 900 items from liquor inventory. ‘This could be devastating,’ business owners say.

(Leah Hogsten | The Salt Lake Tribune) Utah products are on display at the liquor and wine store in Syracuse, on Monday, March 11, 2019.

They are the “cash cows” in Utah’s state-run liquor stores — high-volume items that bring in millions of dollars a year.

Barton Vodka leads the herd with nearly 280,000 bottles sold last year and sales of more than $3.1 million. Jack Daniel’s whiskey is another, with nearly 86,000 bottles purchased and $2.4 million in sales.

The list goes on.

But for every inexpensive or well-known national brand the state can milk for big money, there are hundreds of other spirits and wines that are less lucrative.

The Utah Department of Alcoholic Beverage Control removes, or “delists,” some of those less profitable items from the inventory each month, to make way for new products that might deliver more money.

But in the coming weeks, the DABC will make an unusually large purge, clearing more than 900 labels — or 16% — of its inventory, said purchasing specialist Rob Southworth.

“Even though sales are booming," he said, “there are many items that are not selling, and we need to replace them with new items that potentially could generate more revenue for the DABC.”

He said the products on the chopping block — including everything from the well-known Hendrick’s Gin to a “boutique” $12 Pinot Noir — have "minimal sales, which shows that our customers are not very interested in those products or categories.”

During April, the agency sent letters to suppliers and producers telling them which items no longer will be stocked based on a computer algorithm used by the liquor agency.

The mass expulsion has created a flurry of anxiety in Utah’s liquor community, already reeling from the temporary closures of restaurants and bars due to the coronavirus pandemic.

Delisting is part of any ongoing retail process, and liquor brokers and producers say they have no problem with it — as long as the process is fair and truly eliminates the dead weight in the system.

But this upcoming flush cuts deep into the stock of regional and local items, as well as innovative and award-winning bottles from around the globe.

These products may not have mass appeal, but they have followings among a growing number of savvy consumers. Many Utahns in recent years have traveled to other parts of the country — or world — or are simply interested in learning and drinking products made on a smaller scale.

Large, mass-produced national brands are mostly absent from the expungement list and — for that reason — the cuts are being referred to as the "Walmarting’ of the liquor stores.

“The effect," said Tracey Thompson, owner of Vine Lore, a Salt Lake City liquor brokerage, “could be devastating to the selection of fine wines and craft spirits available to Utah consumers.”

‘Only game in town’

If there was another retail option where Utah consumers had access to these boutique products, the delisting process might cause less heartburn, Thompson said. But the state’s monopoly on liquor purchasing and sales doesn’t allow for that.

"The state needs to continue to offer a comprehensive selection of varietals and regions that include small and mid-sized producers,” she said, “because they are the only game in town.”

In March, Southworth held an online meeting with brokers and producers to explain why the agency had targeted 923 of the system’s 5,655 items for expulsion. He said some could be reinstated, but it is up to the suppliers and brokers to show the state that items have been classified incorrectly or that supply chain issues have affected sales numbers.

Customers might not notice anything is different because store employees regularly “refresh selection," said Southworth. Delisted items are usually discounted and moved “to a more noticeable area of the store to help clear them from the system.”

Small-business owners say the delisting problem stems from the DABC’s retail technology system, called Symphony, which tracks consumer buying and spending patterns to determine what products are placed on liquor store shelves.

Kristen Cox, executive director of the Governor’s Office of Management and Budget, has championed the system as a way to improve efficiencies for the often-criticized liquor agency as well as other state departments.

In 2017, three liquor stores — Foothill Drive in Salt Lake City, Holladay and West Valley City — piloted Symphony and shortly thereafter the program went systemwide.

“It relies on sales data from our cash registers,” Southworth said, “and provides performance metrics and indicators to assist us in our efforts to provide an appropriate selection of products and efficient inventory levels for our customers.”

When the agency decides to delist an item, Southworth explained, it looks at several numbers, including: sales per store per day; dollar sales in a 12-month period; unit sales in a 12-month period; current sales and category trends; and profits generated in a 12-month period.

Brokers and producers say those numbers are perfectly fine to track as long as products were evenly distributed throughout the stores. But large national brands often are given general distribution throughout the state’s 47 liquor stores, while lesser-known products are placed in only a handful stores.

And boutique products, which would likely have more success in urban or suburban wine stores, are placed in rural areas, where brokers say they know from the get-go they aren’t likely to sell.

It’s an issue that has been happening for some time.

‘Walmart model’

Last August, Steve Conlin co-owner of Ogden’s Own Distillery, complained to the state liquor commission about the setup, saying the system needs some “human intervention” to ensure that businesses get their products on the shelves in a timely and fair way.

“I cannot sell," he said, “what is not available to people.”

One Utah broker, who asked that his name not be published for fear of reprisal, said the DABC’s reliance on computer algorithms — without some exceptions for small brands — is similar to giant chains killing independent booksellers.

“They’re choking the life out of the system,” he said, noting that years ago the selection at the state’s wine stores had more depth and breadth. And the availability of a broad range of products helped restaurants — and Utah’s tourism industry — flourish.

“The state," he said, "is now moving to the Walmart model.”