The Grand Marais City Council met on Wednesday, October 31 and held a fairly quick meeting before escaping into the night with all of the other ghosts and goblins. Or in some cases, taking care of little candy-filled ghosts and goblins.
Chris LaVigne, liquor store manager, came before the council with a report about the liquor store. A 2017 auditor’s report indicated that there was six items that needed to be followed up on.
In that report the auditor suggested that the city council review the liquor store inventory counting and cost procedures. This review would allow evaluation of costing errors, counting errors, and theft as three possible explanations for significant changes in year-to-year profit margin.
Year-to-year gross profit has varied largely because of variation in liquor and wine purchases. A lot of the variation was due to journal entries adjustments made by the auditors to account for annual changes in inventory value.
One aspect of the report looked at 2014 and 2015, where the inventory valued decreased 35,001. The decrease in value was added to the 2015 expenses to balance the account.
When pricing product, LaVigne said his goal was a markup of 50 percent on wine and 30 percent on beer and liquor based on industry standards. The previous management before Chris became manager set the markups at 70/50.
“Rather than reduce pricing across the board, we have allowed markups to decrease as wholesale prices increase related to retail prices. This markup strategy is designed to provide revenue from a larger range of products by price and by higher volumes.”
As each item is delivered to the liquor store it is entered into the system by price and amount, said LaVigne, adding that the system tracks the average and the last price entered, as well as the retail price and markup percentage.
The staff reviewed the markup percentage on an ongoing basis, and adjusts prices periodically, said LaVigne.
As far as inventory, LaVigne said that “You kind of have to buy what’s selling, sales dictate that.” And he noted that if he had gotten a great buy on say, 50 cases of Barefoot beer, “Then I’m going to have a lot of Barefoot at the end of the year.”
At this time, there are 2,130 products in the system with an average markup of 57 percent and a median of 47 percent.
Councilor Kelly Swearingen asked about the high profit in 2015, and LaVigne answered that the summer weather was terrific and the fact that Grand Marais had been named “Coolest Small Town” was another contributing factor to sales.
As far as training for the job, Mayor Jay Arrowsmith-DeCoux said Chris was told three things: Don’t break any laws, sell stuff and keep good records. LaVigne promised his staff and he would work hard to improve record keeping.
“Our current practices create significant fluctuation in inventory. The past few audits have included questions about inventory process.” And then he described how checks on the system make it unlikely that theft is occurring.
“When a delivery is made, all products are listed on an invoice. The items are entered into the system where the inventory errors are automatically adjusted. Our system keeps a report of each delivery, which we can compare to the paper invoice to double-check that the inventory was accurately adjusted for each product purchased. “
Liquor store data
The operating revenue in 2014 was $1,913,648; 2015 it was $2,001,353; 2016 it was $2,098,920; and 2017 it was $2,136,102. The gross profit margin in 2014 was 33.15 percent; 2015 it was 28.31 percent; 2016 it was 35.05 percent; and 2017 it was 24.67 percent.
Until the audit report includes no comments on liquor inventory questions, staff will conduct a follow-up on new inventory procedures that will consist of a monthly report of inventory value. They will also do a monthly spot check of random liquor product inventory, and the staff will conduct a complete physical inventory monthly from November through January, and then perform a quarterly report if no significant deviations are detected.
LaVigne promised to come before the council in November and December with an update on sales and procedures.
Update on Sawtooth Bluff Master Plan
Cook County Land Commissioner /Parks and Trails Lisa Kerr came before the council with an introduction to the final draft of the Sawtooth Bluff Regional Park Master Plan.
The joint city/county owned 640- acre property is being developed as a “destination regional park.”
Kerr gave a rundown on the various attempts to create a usage for this property over the last 50 years. She asked the council to review the master plan and she would be back in front of them in a month for a final approval. She will also appear before the county board in a month for the same final approval of the plans.
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