Sleeping with the enemy

09 November, 2017

Over in Ireland a 300-strong group of independent off-licence owners has aligned itself with the health lobby in a bid to prevent supermarkets wiping them out.

The group has thrown its weight behind a bill that aims to usher in minimum unit pricing and structural separation of alcohol and food in-store, while it is also pushing for a ban on alcohol advertising. “We’re trying to avoid what has happened in the UK, where the Big Four have wiped everyone out,” says Gary O’Donovan, chair of the National Off-Licence Association. “We’re not at that stage yet.”

It has, however, been an exceptionally tumultuous decade for retailers over the Irish Sea. Rewind to 2008 and O’Donovan owned 15 thriving stores across County Cork, where the average price of a bottle of wine was €13. Ireland is not as mature a market for wine as the UK and O’Donovan and his peers had worked tirelessly to educate consumers about the benefits of trading up to quality wines, and they were finally starting to reap the rewards. Then the financial crisis hit and the Celtic Tiger was felled. 

Within 12 months, the average bottle price at O’Donovan’s stores had dropped to €7. “All the work we did for 20 years building it up, and then a recession just comes and knocks it down,” he says. “Among our members there were more than 100 store closures.”

He was forced to shut six of his stores and cut staff numbers dramatically in response to the economic downturn. The country’s economy is now showing the green shoots of recovery and the average bottle price has been clawed back up to €9.50 in O’Donovan’s stores, while he is set to open a 10th off-licence. 

But he and his colleagues at NOffLA believe they will soon be wiped off the market if steps are not taken to curtail the multiples’ approach to drinks retailing. “What has made it more competitive recently is Aldi and Lidl opening in places you never would have thought,” he says. “They have taken 20% [of the market] and the other big four are trying to get that back.” That has created the sort of race to the bottom that the UK trade is well versed in, and the independents say are being forced to take drastic measures, aligning themselves with the health lobby in a bid to preserve their future. 

The group “strongly supports” the Public Health (Alcohol) Bill, which has been under consideration by the Irish government since 2015 but has not yet been enacted. If passed, it will put a price of 10 cents per gram of alcohol sold on the market. This would mean a beer containing two units (20g of alcohol) would cost Irish drinkers a minimum of €2. A 12% abv bottle of wine would have to cost a minimum of €7.10, while a 70cl bottle of 37.5% abv vodka would have a minimum price of €20.71. 

“NOffLA welcomes the introduction of minimum unit pricing to raise the floor price of drinks that are too often used by mixed-traders and supermarkets to increase footfall to their premises,” it says. “NOffLA has consistently and strongly advocated a meaningfully high level of MUP in order to make a real impact on the prevalence of ultra-cheap alcohol.”

Another part of the bill concerns compulsory health labelling on drinks requiring grams, calorie count, health warnings and a link to a public health website on alcohol containers – measures the drinks industry has been keen to promote in the UK. 

STRUCTURAL SEPARATION

The parts of the bill that particularly appeal to the Irish off-licence owners, apart from MUP, are structural separation, prohibition of price-based promotions and general restrictions on promotions.

From a retail perspective, NOffLA believes that the structural separation of alcohol from other products in mixed-retailing outlets “is a fundamental step in reducing dangerous alcohol consumption by removing the existing practice of calculated placement of alcohol beside groceries and the exposure of children under the age of 18 to alcohol”. In Ireland it is illegal for anyone under the age of 18 to set foot in an
off-licence – stores that only sell alcohol – without a parent or guardian, but they are allowed in supermarkets, petrol stations and c-stores. To bring some coherence to the rules, the NOffLA retailers and the health lobby want to see a clear separation between alcoholic drinks and other items in supermarkets and petrol stations. 

“Alcohol is a controlled substance whose purchase should be a conscious decision, not an impulse purchase when filling up on petrol or purchasing milk, and it should be transacted under the strictest conditions and supervision,” says NOffLA. 

O’Donovan says: “Alcohol has to be the end of the run in a boxed off place, not alongside bread or milk. It’s a different product. It’s not the same as cheese and bread. They should do it to the same standard we’re doing it. Trained staff, a dedicated till – just take the category seriously.”

As the traditional supermarkets fight back against Aldi and Lidl, O’Donovan says he regularly opens the Sunday papers to see colourful spreads where the grocers advertise cheap deals on alcohol to drive footfall into their stores. The bill will prohibit price-based promotions and limit this sort of activity, while it will also stamp out alcohol advertising at sporting arenas and other places where there are likely to be children and will prevent drinks brands advertising on TV before 9pm. “We run the risk of not being allowed to put on window displays as a result, but that’s a risk we are willing to take,” says O’Donovan.

Back in 2015, health minister Leo Varadkar said: “Ireland is consistently one of the top five EU countries for alcohol consumption. Harmful drinking is widespread, particularly for those under 35 years of age. It is linked to higher rates of suicide, sexual and physical assault, road traffic accidents, absenteeism and neglect of children. The bill will be published shortly and we aim to have it in the Oireachtas before the end of the year.”

However, the bill has still not been pushed through, much to the consternation of O’Donovan and his group, which has been fearful of the multiples and suppliers fighting back against it. “We have had it on the table for eight years, and it always falls at the last minute,” says O’Donovan, referring to previous versions of the bill that were never passed into legislation. However, they have been given fresh hope this year as Varadkar is now the Taoiseach and new health minister Simon Harris says he wants it pushed through by Christmas. “There is a looming election though, so we have to get this through by Christmas, as it’s election time next year,” says O’Donovan.

Irish newspaper The Journal ran an online poll in February this year and 78% of its readers, 4,412 people, said they did not support the introduction of minimum unit pricing in Ireland, compared to 17% who did. It would, therefore, be an unpopular measure among many voters and O’Donovan and his peers fear that if it is not pushed through by Christmas, the politicians may not risk it during an election year. 

“The big retailers and producers would have liked us to go away, but we have a really good public affairs director now up in Dublin and she’s made us more relevant and visual than ever,” says O’Donovan. “We regularly canvas politicians. They are saying the legislation will go through by Christmas. The Taoiseach is not afraid to stand up to [the big retail lobby]. There is a looming election though.”

The issue looks set to rumble on. Numerous small retailers who sell alcohol in addition to other products have hit back, saying structural separation will be costly and jeopardise their businesses. They estimate the cost of compliance is anything from €5,000-€50,000 and argue they should be exempt from it, something NOffLA opposes. “We believe that the cost of compliance with the new proposals will not be as expensive as mixed retailers imply, as it does not mean a fixed structure like a wall,” it says. “It could alternatively mean glass, shelving or just encased closets for spirits, which are not a heavy capital expense. It is merely bringing the industry up to a standard that we are already setting and removes that predatory retail trick of putting alcohol under people’s noses alongside bread and milk. We commissioned a qualified architect to sketch the feasibility of structural separation. Using the Department of Health’s sketches, costs of compliance only ranged from €1,500 to €5,900 and can be achieved using graphics, full-height panels, obscured doors and a bi-folding curtain. Furthermore, such costings are only short-term in nature and will be redeemed, given they qualify for 100% tax relief by way of capital allowance.”

A TAX ON THE POOR?

There is a strong argument that MUP will penalise responsible drinkers and essentially slaps a tax on the poor, while opponents say it will lead to cross-border booze cruising into Northern Ireland. There is also likely to be strong opposition from European drinks producers, and the government will probably be faced with a similar appeals process to the one Scotland has been mired in for years. They could be fighting a losing battle and striving to push through something that is unpopular, poorly targeted and unlikely to achieve its aims.

NOffLA has a response to all these claims. “MUP allows the government to target cheaper alcohol relative to its strength because the minimum price is determined by, and is directly proportionate to, the amount of pure alcohol in a drink,” it says. “These types of drinks are the alcohol products favoured by two vulnerable groups – the heaviest drinkers among us, who are most at risk of alcohol-related illnesses and death, and our young people, who generally have the least disposable income. Rather than a tax on the poor, MUP seeks to protect those most vulnerable to dangerously low alcohol prices, namely youths and heavy drinkers, and inhibit excessive consumption.”

DRN is used to hearing arguments of this ilk, as are many in the UK drinks industry, but they always come from the anti-alcohol lobby and it is interesting to hear them come from independent retailers instead. NOffLA even heavily references University of Sheffield research in its arguments, which is constantly criticised by many in the UK drinks industry for missing the mark. 

Politicians are split on whether the bill should be passed and there has been intense opposition from Fine Gael TDs and senators. Further opposition comes from organisers of arts festivals, concerts and sporting institutions that say they will fold without support from the drinks industry. Another poll, commissioned by the Alcohol Beverage Federation of Ireland, and published this week, found that 62% of Irish people opposed the bill with just 17% in favour. 

ABFI director Patricia Callan says: “While the drinks industry supports the objectives of the bill we are concerned that certain proposals are poorly-targeted and are not based on evidence. This means that they are unlikely to actually reduce alcohol misuse. These measures will have unintended negative consequences on jobs and businesses across the country. It’s vital that the Government does not damage a thriving Irish industry when introducing legislation to achieve public health objectives.” 




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