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Matters of Substance

It's our loss

Tuesday, September 1, 2009

In the last Matters of Substance, we brought you the story of how the Cannons Creek community successfully opposed a liquor licence application.

Similar opposition by the small Christchurch community of Halswell has been less successful, but a strong statement by the Liquor Licensing Authority did send a warning shot across the alcohol industry’s bows. Lianne Dalziel was present at the Halswell hearing.


I sat in the back of Courtroom 2 of the Christchurch Environment Court on 5 December last year as members of the Halswell community fought a valiant defence against the incursion of yet another off-licence outlet into their small suburb.

It was not easy for the two members of the community who appeared in front of the Liquor Licensing Authority (LLA) representing those who had signed a petition opposing the outlet. They had to personalise their opposition to the suitability of the applicant, which was not something they wanted to do. He was their local supermarket operator and a nice enough man – but it was a matter of principle.

He already had an off-licence for the supermarket to sell wine and beer, and the proposed bottle store would be directly facing an existing hotel bottle store. It was ‘enough is enough’ for the residents’ association that organised the petition and argued that supermarkets, venturing into hard liquor and using their considerable purchasing power, would sell cut-price spirits and ready-to todrink spirits (RTDs) to young people. They also raised concerns about ‘lossleading’ – a retail industry practice wholly unsuited to the sale of liquor and already allegedly occurring with the sale of wine and beer in supermarkets.

During the hearing, the Licensing Sergeant examined the applicant about his stance on ‘loss-leading’, and I think, to his credit, he admitted he would do so if forced to by competition. It was the wrong answer in a legal sense, but the right answer in terms of exposing the serious challenge commercial imperatives make to the objectives of the Sale of Liquor Act.

Although Halswell did not win its fight against this licence – it was granted for a year, and I know the community will watch what happens when it opens – they did win this strong statement by the LLA about loss-leading:

“We believe that the retail initiative known as loss-leading (that is, advertising and selling goods at less than cost, in order not only to attract customers to the store, but in the process sell more products) needs to be looked at moreseriously by licensees. If a licensee uses liquor to loss-lead, then he or she is stimulating and not meeting demand.Where liquor is involved, it is not good enough for a licensee to say (as they do) that they have to continue with this business practice because of competition.

“Most licensees understand they are dealing with a drug and that they have a duty under the Act to help promote the reduction of liquor abuse. In our experience, loss-leading helps to promote the abuse of liquor. In future, examples of loss-leading by an offlicensee will be treated as an indication of lack of suitability.”

The retail industry has been at pains to deny the practice of loss-leading, but this decision has finally shaken it into action. Foodstuffs wrote to me advising that, in line with its new alcohol policy, it will not be selling alcohol products below cost – although I note they still think that is OK when it is to get rid of obsolete or short-dated stock. It is extraordinary to think it is only the threat of losing its licence to sell liquor that has seen this result.

It isn’t just loss-leading that is the problem. The industry has huge discounting opportunities, and the stories of the market power they bring to bear on smaller producers are legendary.

As the LLA has highlighted, the very object of the Sale of Liquor Act is undermined by loss-leading, and it is time it was prohibited in law. We wouldn’t have to do this if the supermarkets had been responsible, but they haven’t been. Everyone knows that bottle store owners cannot buy beer from wholesalers cheaper than they can from their local supermarket and that some wine labels are no longer stocked by boutique wine shops because they cannot compete with supermarket prices.

I had thought the proliferation of off-licences was the major problem until it was pointed out to me the quantities involved in supermarket sales and the reduction in prices that occurred as a result.

The community is demanding that Government take steps to reduce the harm caused by liquor, so now that we have this admission from the supermarkets, the ball is squarely in the Government’s court to resolve this once and for all.

  • Lianne Dalziel is the Member for Christchurch East and the Labour Party Spokesperson on Justice and Commerce.