Founder of Massively Successful Kansas City Based Retail Liquor Giant Lukas Liquors, Launches Good Spirits Distilling.
A lifelong entrepreneur in the alcohol business, Harry Lukas worked in retail as a teenager and later in wholesale while in his 20’s. In 1987 he launched his first store, Lukas Wine & Spirits in Overland Park, an affluent suburb of Kansas City – and has since never looked back.
Over the past 35 years his reputation as one of the savviest purveyors of beer, wine and alcohol in the United States, continued to grow by leaps and bounds. Harry and his team opened their second store in 1994, a third store in 1999 and finally a fourth store in Colorado – by far the largest liquor store in the Denver area.
With 18,000 square feet under air, like all of the Lukas Liquor stores, Denver is no mom-n-pop operation. They call them ‘Super-Stores.’ After our visit to the flagship Overland Park store, we can wholeheartedly agree they are indeed Super.
Lone Tree, Colorado Super Store
During 2015 in what can only be described, as a bid to outdo themselves, Lukas built their state-of-the-art flagship store, spanning more than 50,000 square feet with 24-foot ceilings. One would need binoculars to see from one end to the other. Spotless and organized to maximize sales, it carries a mind-boggling 8,500 SKUs across beer, wine, spirits, hard seltzers and the country’s largest selection of the ready-to-drink and ready-to-serve products.
The behemoth Overland Park superstore was built across from its previous 30,000-square-foot space. Those who have been there call it a monument to drinks. It ranks among the biggest stores in the United States. Not only can you find your favorite there, but you can also spend hours discovering new favorites – many which you didn’t even know existed.
Just imagine a selection of 259 Tequilas. Trying them all (one a month) would take nearly 21 years! They also have 2,000 different beers, meaning it would take you 12 years, to try three new, and different six-packs every week. And even better, your choice of over 6,000 wines, with certified Sommeliers on staff, to help customers find the perfect bottle in any price range. If you’re the type that limits yourself to just one bottle a night, get started now, because that’ll take about 17 years!
Overland Park, Kansas Super Store
In a recent magazine article Lukas stated, “In the Kansas City market, there are Sam’s Club, Walmart and Costco locations, and we compete easily with all of them on price, and in selection.” Expanding is the best investment decision I could make. A store like mine will give any competitor pause before deciding to come here.”
While many businesses had setbacks during the pandemic, sales for liquor stores, boosted by regulatory changes which permitted on-line sales, as well as being deliverable, created a boom for business. According to Nielsen data for the week ending March 14 (2020), off-premises (i.e., grocery and liquor store) sales were up 27.6 percent for wine, 26.4 for spirits, and 14 percent for beer, cider, and malt beverages (compared to previous year’s pre-pandemic sales for the same week).
1 Minute Video Tour of Overland Pak Super Store
From March to September of 2020, during the height of the pandemic, liquor store sales were $41.9 billion, representing an $80 billion annual run rate.
For online alcohol delivery startups, the future arrived ahead of schedule. Online rating app and ordering platform Vivino saw its biggest sales ever, with 300 percent growth internationally in terms of value of merchandise sold. Drizly saw sales shoot up 300 percent from earlier in 2000. New Drizly orders were also larger than usual with consumers spending 25 to 50 percent more per purchase. Drizly doesn’t sell alcohol itself but works with more than 180 U.S. retailers in 30 states, that use their own delivery couriers.
Lukas commented, “We always thought delivery was the future, and we spent a ton of capital investing infrastructure to do it.” They have been reaping the benefits ever since.
While we don’t have access to the revenues generated from the four stores, we do know that typical margins at liquor stores for wine range from 23 to 25% on average and spirits are around 15 percent. Since its founding, it’s fair to guess that aggregated chain-wide sales were well above $100 million, making Harry and his team very, very happy and justified in proclaiming “mission accomplished.”
Mission Accomplished. What’s Next?
Having conquered the retail aspect of the liquor business, Harry Lukas transferred his interest to his team in 2019 and pondered what he could next scale up to greatness? The opportunity came in the form of a local distiller Good Spirits Distilling (a contract distiller and bottler) and related Sunnye Ridge Imports (an importer). He had been following the progress this Artisanal (aka small) booze purveyor since its founding.
He thought why not? Over the last 35 years he has seen 1000’s of brands come and go and 100’s of brands come out of nowhere and go onto greatness. Names such as Tito’s Vodka, Casa Amigos, Fireball, Angels Envy, and more – with the majority of the success stories later being acquired – collectively into the $10’s of billions.
Being on the front lines for so long, Lukas has a second sense, let’s call it ‘inherent by experience’ in knowing what brand is going to work big, which will be mediocre yet profitable, and what simply won’t work. He has as the saying goes “seen it all.” Regardless of price range, either a value or a premium brand and across all types – be it Whiskey, Vodka, Rum or Tequila.
This second sense would come in very handy, to put it lightly, as he introduces his own brands.
Another benefit: His connections up and down the food chain are unparalleled. He’s on first name basis with the CEO’s of every major distributor in the country (landing a distributor is the hardest part of launching a new brand) including Breakthru Beverage ($6 billion), Southern Glazer ($16 billion), Republic National ($6 billion), Young’s Market ($3 billion), and many more.
There are not many new brand owners, that we know of, that have the ability to call the upper management and have the call answered. In fact, it would be hard for most to reach even middle or regional management! Remember, for over two decades, they called him and not the other way around. If you were a brand distributor, it was absolutely required that you try to get on the shelves of Lukas Wine & Spirits.
Another benefit: His connections with the CEO’s at all the major brands. Again, on first name basis, including top management at Brown Foreman, Constellation Brands, Diageo, and Pernod Ricard. As well as the CEO’s of dozens smaller local distillers who were ‘given a chance’ by Harry to grace his shelves.
Finally, Lukas knows and has met hundreds of the best liquor salesmen in the country, who are needed to connect with liquor stores and consumers in a real and honest way. These are experts from their cores, with years of experience willing to work with something different that resonates with buyers.
While retail annual sales of alcoholic beverages are near $80 billion, the total market for alcoholic beverages (which includes restaurants and bar sales, aka on-premises) are near $225 billion.
So why not?
Good Spirits Distilling | Sunnye Ridge Imports
After making a decision to acquire a majority stake in Good Spirits Distilling (GSD) and Sunnye Ridge Imports (SRI) in Olathe, Kanas the Lukas team was quick to expand, upgrade and modernize.
We had a chance to visit the bottling plant shortly after visiting the Super Store, where in quick order they have expanded from an original plant size of 2,400 square feet, to two buildings encompassing an impressive 40,000 square feet and they’re just getting started. Yes, Lukas and his team are again moving at break-neck speed.
Good Spirits Distilling | Sunnye Ridge Imports Plant
In addition to acquiring adjacent properties valued at an estimated $9 million, Good Spirits is equipped with state-of-the-art spirits bottling equipment. This includes import containers, spirits blending containers, automated PET bottle expanders, automated canning line, automated bottle filling line, automated caping line and even an automated boxing line.
There are 12 bottling lines, two canning lines and six freeze pop lines.
They have two buildings, each 25,000 sq feet in size, and two buildings 10,000 and 8,500 sq feet in size. They also have 16,000 sq feet underground inn what they call the caves.
Estimated cost of the equipment in a conversation with management, was an additional $6 million.
This equipment enables Good Spirits to import Vodka (or any spirit) from a carefully vetted distiller, where it is added to a spirit’s blending container for flavoring/enhancement. The next step is creating bottles (or cans) to be filled on an automated filing line, which moves (on the same line) to automated capping process, then to automated labeling, where finally it is boxed. Once boxed 60 cases are shrink wrapped (automated), put on a pallet and then forklifted to the bay for truck pick-up.
SPIRTS ARRIVE IN 330 GALLON TOTES
Specialty like cognac comes in totes, while whereas bulk alcohol come in tankers, which are approximately 6,200 gallons in size.
There are over 100 distillers of alcohol in the United States, who sell to third parties like Good Spirits. The largest being MGP Ingredients (NASDAQ: MGPI) with sales near $700 million. Famous high-end ‘artisan’ brands such as Bulleit, High West, Sagamore Spirit, and Whistle Pig all source their whiskey from MGP and then blend and/or flavor-enhance at their own plant.
There is also a dozen ‘bulk alcohol suppliers’ in the country who act as a middleman, sourcing from their network of distilleries, getting the best prices (bulk/bulk pricing) and ensuring constant availability. This saves famous brands like Bulleit the cost of building and maintaining the own distillery. Some ‘artisan aficionados’ frown upon the practice (or of being called artisan), we believe the practice is pure genius.
PET BOTTLE BLOWERS
While Good Spirits purchases high-end glass bottles for its premium brands like Barracuda Rum, and Bull and Bear Whiskey, they make their own plastic bottles for their value brands like their wildly popular Jorvik Vodka which flies off the shelf at $9.99, for 1.75 liters. Seems low tech, but it was a thing to witness watching the rigid plastic tube, turn into a nice bottle after going under 700-degree heat and blown out. Automated of course.
BOTTLE AND CAN FILLERS
Watching this, for us was simply magical (see video below). Yes, it’s automated but we don’t take for granted being off a 1/8th of an inch would result in the Vodka pouring down the side of the bottle instead of inside the bottle. And filling an inch too low, or too high, would be – well a bad sign to the consumers. Like really?
Again, call us easy to impress – but how do they get the cap exactly where it needs to be and twisted, not too loose so it spills, nor too tight. We have trouble doing that by hand! The caps of course, are made in house.
FROM EMPTY TO FILLED, CAPPED AND LABELED IN ONE MINUTE
WRAPPED AND READY TO SHIP
THE LINE UP
While very advanced and fully capable, knowing the business acumen of the Lukas team, we can confidently say they are only in the first inning. While they have a full portfolio of brands, we expect the Company to start, acquire and incubate many additional brands in the coming months and years.
The first outside brand they gained controlled of was Chateau St. Nicolas from NYSE listed Constellation Brands (STZ). While it didn’t offer sufficient potential for a company doing $8.3 billion in revenues, it was once the largest selling Holiday brand of all time.
St Nick was acquired by Constellation in 2006 when they acquired its parent company, California based wine-maker RH Phillips. RH Phillips was later closed in 2009 (Constellation kept the vineyard) and Chateau St Nick was lost in the shuffle. It is now in the hands of the very capable Lukas team and has the potential to be its lead brand in the coming Holiday season. At its peak, it was selling 10’s of thousands of cases.
What us excites most about their future of Good Spirits is the addition of ‘private label’ bottling for entrepreneurs and investors looking to start their own brand.
Quite simply anyone with sufficient funding for marketing, advertising and promotion, can sit down with the Lukas private label team and have their own brand bottled and boxed within 90 days. Their own brand meaning: bottle designed, label designed, spirits sourced, blended, bottled, labeled and boxed – ready for shipment in 90 days. All under one roof.
It has massive potential for celebrities and younger wealthy entrepreneurs, as well as experienced industry retirees from somewhere like — Constellation Brands, Diageo or even soft beverage executives from Coca Cola. Or executives from one of the many companies which were acquired and who were ‘encouraged’ to retire.
Here are some of the more notable brands in the Good Spirits line-up and portfolio.
Barracuda Cay Rum
Management was kind enough to send a ‘happy box’ a few weeks ago of the 8-, 12- and 18-year-old Rums. We know our Rums, and this is one of the best we ever tasted. We brought the 18-year-old Rum to a hoity toity celebrity event, and it was gone in one hour, despite our dispensing 1/4 shot tastings. Everyone raved about both its smoothness and flavor. The rest just kinda just disappeared in two weeks. And neat, not in Diet Coke.
Caribbean aged Rums are synonymous with old stories of heritage mystery and mystery.
Bull and Bear Kentucky Bourbon Whiskey
Bull and Bear is distilled in Kentucky and produced in the Good Spirits Distillery in Kansas. It is characterized by a high content of rye for a bourbon. It’s packaged in a beautiful custom-made embossed glassware that feels good in the hand.
Barrel aged for a minimum of 23 months it is smooth and exceptionally well balanced. Hints of charred oak and tobacco gives way to a slightly sweet corn flavor at mid-pallet that finishes with a taste of toasted black pepper.
Price and availability will make it a staple for any bourbon lovers’ collection.
Clear 10 Vodka
Clear 10 Vodka is the vision of three Midwest friends who decided local grains and naturally filtered water were the perfect recipe for an exquisitely smooth fresh vodka experience. The essence of Clear 10 Ultra-Premium Vodka comes from 100% Heartland corn, which is crafted the Good Spirits Distillery in small batches, and slow filtered 10 times.
The meticulous distilling process creates one of the most luxurious vodkas in the world, with an exceptional taste, clean finish and uncommon clarity.
Pronounced “Yorvik” it is distilled five times and has the smoothest finish of any value priced Vodka, we have ever tasted.
Hand made in small batches, and produced to exacting standards, it won a double gold medal at the prestigious 2018 Spirits Awards in California.
Aeroplano LX Tequila
Aeroplano is 100% Agave Tequila produced and bottles in Jalisco, Mexico.
Made from high quality Agave, this Tequila has won multiple awards over the past decade including the Consumers Choice Awards and Gold, Silver and Platinum awards at the Spirits Awards in California.
One of the smoothest and best tasting Tequila’s we have ever tried, and we’ve tried many.
Dizzy Three Espresso Vodka
If we have to pick a favorite, ahead of Barracuda Cay Rum, Clear 10 and Aeroplano Tequila, this has to be it. But then we like Espresso anything.
This Premium brand is the World’s first air-roasted expresso flavored vodka. First introduced in 2012 it has won a gold medal for the 50 Best List for flavored vodka in its debit year.
Five times distilled, it is blended with the highest quality coffee extract to create rich, velvety and smooth finish. We use it to make the best Espresso Martinis and it’s unlike anything we’ve tasted before.
The coffee comes from Kansas City’s connoisseur run “The Roasterie” and is blended at the Good Spirits Distillery. The idea was born from trending hand-crafted cocktail movement, with upscale bars producing house-infused spirits with the flavor of coffee.
#GSD, #Good Spirits Distilling