By Paul F. Vang "It just about flunked me out of school," Don Cornett says of his entry into the liquor business, 30 years ago, in Lexington, Kentucky.
Cornett was just 23 and, in January 1976, was starting his last semester at the University of Kentucky at Lexington. "It was an interesting time to get in," he recalls.
Kentucky liquor prices, at the time, were controlled by a Fair Trade law, mandating a one-third markup on off-premise liquor prices. The State issued the Beverage Guide, which for most retailers was "The Bible,' and the minimum price quoted in the bible set the retail price everywhere.
"There were a lot of little mom and pop stores in the area. A typical small store would gross around $300,000-$500,000 a year. When you bought a liquor store you were, basically, just buying yourself a job. With the guaranteed markup, and if you were careful about expenses, you were almost guaranteed a profit. IBM had a typewriter plant in Lexington and a lot of IBM retirees liked to buy these stores for a retirement job."
For Don, it was, literally, a small start in the business. That first store had just 400 square feet of store space, plus another 400 square feet for a stockroom and cooler. He was his own janitor and window washer.
"When a customer came in and asked for a product, I could usually turn around and just pull it off the shelf," he says.
Chuckling about his age when he went into business, he recalls that often, "I'd ask younger customers for an ID, and they'd look at me and ask if I was old enough to be selling to them."
While it was a good time for Don to get into the package store business, what with little or no price competition, and lots of small neighborhood businesses dominating the market, things were about to change in a big way.
"One retailer challenged the state' Fair Trade laws and finally broke it in 1983," Cornett remembers.
With a more open market, larger merchandisers moved into the marketplace, like Liquor Barns, a Kentucky chain of stores becoming a dominant player. With large retailers taking a larger piece of the pie, a lot of those mom 'n' pop stores folded.
"Back in 1983 there were 100 liquor retailers in Lexington. Now there are about 40," Cornett says. "We still have some of those corner stores, especially in some of our ethnic communities."
Lexington, incidentally, is a city of 300,000, with a history going back to Revolutionary War times. It' home to the University of Kentucky, as well as several other institutions of higher learning.
On a historical note, Cornett explains that a lot of drug stores acquired liquor licenses back during the Prohibition era.
"While liquor was generally unavailable, it could be purchased for medicinal purposes. So, if a doctor wrote a prescription for whiskey, you could get the prescription filled at one of those drug stores that had a liquor license."
In the 1980s, when many of the small stores started going under, drug store chains were able to pick up a lot of off-
premise licenses for a bargain price.
While Cornett still considers himself a small liquor retailer, he has kept up with changing times.
"You wanted to have better stores--something bright and clean," he said of survival in the new scheme of things. "Just prior to the end of the Fair Trade laws I was able to take over an adjoining storefront that doubled my retail space from 400 to 800 square feet."
About the same time he entered the computer age when he purchased an early version of a personal computer.
"It didn't even have a hard drive--we operated it by switching floppy disks. 'Point of sale' software didn't even exist. Still, I started creating my own bible."
Next, he was able to buy a used system, complete with retail management software and a 10 megabyte hard drive, from a competitor that had gone out of business.
"I was using a light pen to scan product. It was pretty high tech for the time. The only problem was that the computer would crash 10 to 20 times a day. I'd just be getting warmed up and I'd have to go and restart the computer.
"I was finally able to contact the software maker for help. They had the answers, though I had to buy a new, upgraded system."
After reflecting on those difficult beginnings with primitive computer systems, Cornett adds, "Now things work too good," referring to scanners that pick up product bar codes before the customer has even put his purchase on the checkout counter.
After those humble beginnings in the retail business and those now seemingly crude experiments with computerization behind him, Cornett felt it was time to expand his business, buying a second store in 1986. Currently, operating under the umbrella of DC Spirit Companies, Inc., Cornett operates two off-premise stores in Lexington--Tate' Creek Liquors, a 4,500 square foot store, and Leestown Road Liquors, a 3,000 square foot store.
While these stores are a major step up from that tiny little storefront of 30 years ago, he still considers himself a small retailer. "I'm competing, after all, with 23,000 square foot stores."
Cornett began seeing a need for some kind of trade association in the 1980s, following the demise of Fair Trade rules.
"It was a tough time; without guaranteed profit margins, a lot of small operators were closing their doors. A bunch of us younger operators, just trying to survive, got together to form a co-op to get some improved purchasing power and better advertising.
"The wholesalers didn't like us, so they started giving the same deals to non-co-op members as they'd give us, so we kind of lost our teeth.
"We next decided we needed a state-wide organization to give us some lobbying power. This would mean we'd need a good lobbyist and a lot of money," Cornett recollects.
While local retailers recognized a need for organization, there were a lot of false starts. "We had a lot of competing interests, and it seemed we had to keep reorganizing to address specific issues."
For example, there was a move to ban drive-up windows at package stores. "We formed a group that stopped that," he says.
"I decided I needed help and tried to find a national association, and went to a convention of the National Liquor Store Association in Atlantic City," Cornett says. "I was really green--didn't know anybody."
The following year the convention was scheduled for Las Vegas. It turned out that Caesar' Palace, the convention hotel, had booked a big prize fight for the same time as the convention and wanted the rooms. "They bought us out and gave us another week and really treated us well. I wound up with this fantastic room--it was as big as my first house. The room next to me had a grand piano. It got me excited about going to conventions... Of course they're not all that good."
Continuing on the convention topic, Cornett says, "For some years I just went to conventions. Then, after I got a little more familiar with the organizations, I finally asked for some help in building a stronger state association." He was frustrated with the existing association. "We had a small board of 12 members and it seemed they were more concerned with their own self-interest than in helping the industry."
Two associations currently represent Kentucky' off-premise retailers. Don Cornett is the president of the Kentucky Association of Beverage Retailers.
"We're the mom and pop and small store owners," he says. "They're people who run their own stores and it' hard for them to take time off to go to meetings. They're the people who are looking for help and guidance."
The other organization is less formal, calling their group "The Coalition," made up of "the Agreeing Partners," and dominated by the state' largest retailers, such as the Liquor Barns.
As president of the Kentucky Association of Beverage Retailers, Cornett is also a member of The Coalition, so sits on both boards. While the associations' interests don't always coincide, he notes that they use the same lobbyists, which is a real benefit.
As a member of ABL' board, Cornett is modest about his contributions to the organization. "I don't know as I bring as much to the table as I bring back home." Still, he brings a unique perspective of a retailer association based in a Bible Belt state, with many distillers, yet with a number of "dry' counties.
"We're one of several states with a number of dry areas. Texas is one of them, too, but they're a lot different than Kentucky, because there are a lot of big stores and chains operating in Texas."
If, as one congressman noted, "All politics is local," Kentucky is certainly a case in point. Cornett chuckles as he starts telling stories about Kentucky liquor politics. Occasionally, there are elections in dry counties to determine if the people want to legalize liquor sales. "When we have elections, it' one of the times the liquor stores and the preachers get together. Liquor stores in adjoining "wet' counties funnel campaign money to the preachers to campaign against change. They'll both deny it, of course," Cornett concludes with a smile, "but it happens, anyway."
A significant change in the last few years has been to allow package stores to offer tastings in the store, which Cornett says has really helped build wine sales in particular. It underlines a significant change from his early days in the business when all the merchandise was behind the counter and customers had to come in and ask for it.
"Now, customers browse around and we get a lot more "impulse' sales. I wish that, when Bailey' Irish Cream was introduced, we could have had tastings. I'm sure I could have sold 10 times as much as I did." As to the legislative changes enacted to allow tastings, "We had the support of all the wet counties, so it sailed right through."
In private life, Cornett is a single parent with three sons. The oldest is a Marine, currently serving in Okinawa, Japan. The youngest is a college student, still living at home. The middle son, Wesley, age 25, is working in the family business as an assistant manager.
Don and Wesley spend a lot of time talking about the intricacies of the liquor business, each bringing differing perspectives.
"Wes is always pushing me to be more progressive, especially in marketing," Cornett acknowledges. "I kind of have the mind-set of one of those old guys--kind of like the ones who went out of business years ago. He pushes; I hold back. We probably implement change a little slower than he'd like, but a little faster than I'd like. We're a good team. I like to bring Wes along to conventions and expose him to some national perspective."
While each of Cornett' stores has managers, he' open with them about some realities about the future: "I tell my managers to get along with Wes, because he'll be the owner some day."
Still, with managers in his stores and with Wesley learning the ropes, Don is at the point where he no longer has to spend those long hours in his stores as he did years ago.
"I like to play golf, especially on days that end in "Y.'"
He also has a pair of Harley Davidson motorcycles; one for quick trips around town, and another for longer rides, such as along Kentucky' Blue Ridge Parkway or motorcycle rallies in Florida.
"I tell people I'm actually semi-retired. I'm old enough to enjoy a slower pace."
Source: ABL Leader, January, 2006, published monthly by Continental Communications, 125 W. Granite St., Suite 102, Butte, MT 59701.