Ministers are investigating whether a ban on alcohol sales in dairies and convenience stores has unduly impeded other retailers taking on the two big supermarket chains
Convenience stores have welcomed a Government review that will consider letting them resume selling beer and wine, 10 years after a legal crackdown intended to stop the proliferation of easy-to-access booze outlets.
The Night 'n Day chain – which with 57 stores is New Zealand's biggest grocery chain after Foodstuffs and Woolworths – says it would welcome the opportunity to responsibly sell alcohol at up to 25 of its bigger stores around the country. Until a 2012 law change, managing director Matthew Lane says 85 percent of its stores were licensed to sell alcohol.
But the prospect of loosening alcohol sales rules is greeted with trepidation by health watchdogs such as the Auckland Regional Public Health Service and Alcohol Healthwatch.
"We oppose any relaxation to our weak liquor laws, particularly any amendment that would result in increased alcohol availability in communities," says Dr Nicki Jackson, the executive director of Alcohol Healthwatch.
The Government's plans to review liquor sales, first reported by Newsroom, are expected to tighten lax advertising and sponsorship rules that, for instance, have allowed the Highlanders to run promotions in schools donned in big Speights-branded gear. "We want to ensure alcohol regulation in New Zealand is fit for purpose and operates effectively," Justice Minister Kris Faafoi says.
The review coincides with a Commerce Commission report on supermarket competition, that finds that restrictions on smaller retailers, such as the ban on them selling alcohol, is preventing them taking on the big supermarkets and offering shoppers competitive grocery ranges and prices.
Today, Finance Minister Grant Robertson is in Australia where he will meet regional management of Costco – a US-based big box grocery chain that is expanding into Auckland this year, and targeting Christchurch next. Regulations have prevented even big, experienced retailers such as The Warehouse from selling alcohol.
Litres of alcohol beverages sold
The Sale and Supply of Alcohol Act, passed in 2012 with the backing of the big supermarket chains, is intended to ensure that the sale, supply, and consumption of alcohol is done safely and responsibly, and the harm caused by excessive or inappropriate drinking is minimised.
Previously, small retailers such as dairies and convenience stores could apply for licences to sell beer and wine, but not since 2012. Night 'n Day took the case for its central Christchurch and flagship Dunedin stores all the way to the High Court, but was unsuccessful. Only three of its biggest stores (Hampden, Arrowtown and Kawarau) have alcohol licences, mostly because they're the only grocery stores in their communities.
In almost all other convenience stores and dairies around New Zealand, the once-prominent wine and beer fridges have been removed.
Now, Cabinet has noted the next review of the Sale and Supply of Alcohol Act, to commence this Parliamentary term, will consider whether the impact of this Act unduly impedes entry or expansion by grocery retailers.
"By blocking that wholesale ability to obtain competitive prices they've removed the ability to compete in grocery, and that has left them as the beneficiaries of the alcohol licensing rules." – Matthew Lane, Night 'n Day
Commerce Minister David Clark says he will work with ministerial colleagues on recommendations relating to the sale of alcohol.
"Any changes would need to support the objective of the Act that the sale and supply of alcohol be undertaken safely and responsibly and to minimise the harm caused by excessive or inappropriate consumption of alcohol," he says in a Cabinet paper.
The Act largely limits off-licences to specialised liquor stores, supermarkets with a floor area of at least 1000 square metres, or grocery stores whose biggest chunk of revenue comes from selling food, drink and other household items.
Very few dairies and convenience stores now meet these criteria.
"A more level playing field that aligns restrictions at an appropriate level may improve their ability to compete effectively with the major grocery retailers for the provision of a main shop or a top-up shop." – Commerce Commission report
According to Matthew Lane, the supermarkets have been "the big beneficiaries from this law of unintended consequences".
"They have blocked wholesale to other retailers, and that channel is the only way to keep a viable grocery offering at competitive prices. So by blocking that wholesale ability to obtain competitive prices they've removed the ability to compete in grocery, and that has left them as the beneficiaries of the alcohol licensing rules.
"It's been very fortunate for them. I don't think it's been cynical. But they've controlled the grocery market in the past, and now they also control a majority of the alcohol market."
According to the Commerce Commission's report into grocery market competition this year, that's partly because consumers value having a wide range of products in one place, and partly because supermarkets' scale and supply chains allow them to sell both food and beverages for less. "Consumers seeking to purchase alcohol as part of their shopping basket might not consider shopping at grocery retailers that do not sell alcohol," the report says.
The report acknowledged public policy reasons for restricting the types of businesses licensed to sell alcohol, to restrict alcohol-related harm. "Nevertheless, the alcohol licensing laws described above may make it difficult for some existing or prospective retailers to offer a full range of products that consumers wish to buy. This includes dairies and convenience stores, as well as other existing retailers seeking to expand into grocery products," it says.
"A more level playing field that aligns restrictions at an appropriate level may improve their ability to compete effectively with the major grocery retailers for the provision of a main shop or a top-up shop."
In the Commerce Commission market study, both Night 'n' Day and The Warehouse Group argued for the removal of legislative barriers that prevent new entrants from selling a full range of products that are available from the two major grocers – specifically, health-related products and alcohol. "The major grocers’ ability to sell these products to the exclusion of new entrants creates an uneven playing field," The Warehouse submitted.
"Price competition between outlets also drives greater quantities of alcohol being purchased. So we must not extend the types of businesses that are eligible to sell our most harmful drug." – Dr Nicki Jackson, Alcohol Healthwatch
Nicki Jackson remains sceptical of loosening the rules.
"Almost 10 years ago we shut the door on convenience stores and dairies being eligible to sell alcohol, for good reason," she says.
"These are premises that are often situated in suburban areas, resulting in high accessibility and normalisation of alcohol, open late into the night, and can have high numbers of children that frequent them on their way to and from school."
Last year, Alcohol Healthwatch published a report showing the cheapest alcohol prices across Auckland were at the supermarkets – far cheaper than nearby liquor stores, or pubs and bars. In supermarkets, cask wine was the cheapest (at 77c per standard drink), followed by bottled red wine (85c). The cheapest spirits and RTDs were available in liquor stores for $1.20 or less per standard drink. Cheap beers, wines and ciders were often sold using price-based promotions – bottled wine could be purchased for 81c per standard drink in multi-buy promotions.
It was the lower prices at supermarkets that prompted questions when the Sale and Supply of Alcohol Act was passed in 2012. Labour MP Charles Chauvel told Parliament, at third reading, that the evidence heard in the select committee showed problem drinkers were buying cheap wine in supermarkets. "That is what people use to pre-load before they go out on the town and buy from on-licences. It is an area where we have to get more serious and where very little will be done by this legislation to make a change."
His colleague Lianne Dalziel, who is now mayor of Christchurch, said the real winners were the private interests that were able to continue "sell dirt-cheap alcohol" through supermarkets, driving down the cost of takeaway alcohol that was drunk away from supervised premises. "As soon as somebody walks out the door with the bottle of whatever, the host responsibility goes out the door with them," she told Parliament.
Now, Statistics NZ figures show the total volume of alcoholic beverages available for consumption was just short of 500 million litres last year. But the demon drink is in the detail. While beer and wine sales have dropped for the past couple of years, the sales of spirits have been rising steadily since 2014 – a massive 12 percent to 100 million litres, last year alone. There's no secret that the big rise is in pre-mixed RTDs, which are popular with younger drinkers.
IRI Worldwide, which has up-to-date figures on sales from all the supermarkets except Four Square, has crunched the numbers for Newsroom. What they reveal is that although alcohol sales volumes have dropped slightly at supermarkets (they're not allowed to sell spirits) their revenues are continuing to rise. That's because inflation is hitting beer and wine, just like everything else.
Divided by the numbers of people aged 18 years and over, Stats NZ says New Zealanders are now averaging two standard drinks a day.
"The more convenient alcohol is to buy, the more harm," Jackson says. "Price competition between outlets also drives greater quantities of alcohol being purchased. So we must not extend the types of businesses that are eligible to sell our most harmful drug."
But Lane says three of the biggest Night 'n Day stores have been granted alcohol licences, and they have shown they have good controls and are priced at a higher point than the supermarkets. He is not arguing for wholesale change to off-licence rules – just to tweak them to define "grocery store" by the range of food and household products, rather than its revenues.
"I'm certainly not advocating to open up to every dairy," he adds.
Furthermore, the supermarket chains are far and away the biggest sellers of alcohol – for instance, Foodstuffs owns the Liquorland and Henry's liquor chains, as well at New World, Pak'nSave, Four Square and other licensed grocery stores.
For those concerned about the ease of access to low-priced alcohol, he argues the biggest concern is the supermarkets – not the prospect of convenience stores entering the market.
