A hard Act to swallow

The new legislation has significant ramifications for the off-trade
The new legislation has significant ramifications for the off-trade

A provision that would have forced mixed-trade outlets to make costly modifications to their premises may have been put on ice but the off-trade certainly won’t be toasting the new Intoxicating Liquor Act.

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12 August 2008 | 0

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The new legislation has significant ramifications for the off-trade

Not since the repeal of the Groceries Order in 2005 has a piece of legislation caused so much consternation within the retail trade as the Intoxicating Liquor Bill, which has been passed by both houses of the Oireachtas and is expected to be signed into law by President Mary McAleese in the coming weeks. The Bill was rushed through the Dail in recent weeks to ensure it was enacted before the Dail summer recess on 10 July, causing some retailers to argue that the legislation might be half-baked and counterproductive.

“It might well come back to haunt them because it has been rushed through but that’s the risk they take when they put such a short time-frame upon themselves,” remarked Vincent Jennings, chairman of the Convenience Stores & Newsagents’ Association (CSNA).

Potentially crippling costs

The legislation has significant ramifications for the retail trade. None more so than the requirement of Section 8 that mixed-trade outlets such as convenience stores and supermarkets should effect a physical separation between the sale of alcohol and other goods or where such separation was not possible, alcohol products must be displayed and sold from behind a counter.

Such was their concern about the cost of complying with Section 8 – so-called ‘structural separation’ would cost at least E200 million for the modifications and a further E74 million in additional annual staff costs, according to retailers – that a group of five key trade associations met Minister for Justice Dermot Ahern on 20 June to plead its case. The delegation consisted of the CSNA, RGDATA, Retail Ireland, the National Off-Licence Association (NOffLA) and a group representing the Next Door off-licence chain. In what was seen as an eleventh-hour reprieve, the Minister agreed to postpone the Section 8 proposals in return for an alternative proposal from the retailers: a voluntary code of practice to be put together by the trade and monitored by an independent auditing body. The code (see panel, opposite page), which ShelfLife understands has been drawn up but won’t be operational till October at the earliest, will change the way alcohol is sold within the off-trade.

The code is the best outcome retailers could have hoped for under the circumstances. Jennings told ShelfLife that the proposal had the potential to allay retailer fears over Section 8. “If we end up with a code of practice that we can all agree to adhere to, then the matters of separation within Section 8 will not come into play, so it won’t be a concern to us,” he said.

Industry is given a chance to put its house in order

According to Jennings – who incidentally advocates much stronger alcohol-control measures than are contained in the Act, such as compulsory training for off-licence staff and mandatory ID cards – the Minister’s acceptance of the code in principle means the industry has been given a chance to “put its house in order”, rather than being forced into extremely costly store modifications.

Torlach Denihan, director of Retail Ireland, expresses similar sentiments. “We were pleased [with the outcome] because we hope we can get the Minister to where he wants while getting away from the heavy costs.”

Edel Clancy, director of communications at Musgrave Group is also happy with the outcome. “We had some practical issues with regard to structural separation because that was going to have a particular impact on smaller retailers. It’s impractical to create a store within a store if you’re only talking about 2,000 to 3,000 sq ft to begin with. We are very pleased that that has been suspended and that there will be a code of practice that will be up to the industry and retailers to implement.”

The fact that the Minister has agreed not to press the button on Section 8 subject to the production of a satisfactory code of practice would seem to take the teeth out of the legislation as far as retailers are concerned. However, getting agreement on a code and then ensuring that all retailers stick to it will not be a trivial exercise. Then there is the question of new entrants to the market. Will they feel obliged to sign up to the code? If the retail industry does fail to produce a workable code of practice, then the Minister will, in his own words, “not hesitate” to sign the commencement order that would put Section 8 into effect.

Not out of the woods yet

So Section 8 is still very much a live issue and not the only troubling element of the Act for retailers. The Section 5 provision that wine retailers must from now on apply to the District Court for a new licence is also potentially damaging.
Far from being a backwater of the off-trade, wine-only licences now account for the majority of licence approvals. More than 3,600 of these were issued in 2007 alone, almost treble the number issued for off-licences selling spirits and beer as well. Previously, wine retailers looking to open a new premises could obtain a licence from the Revenue Commissioners for @250. under the new Act they will have to go the District Court, a process that could cost up to €8,000.

At the same time, the Minister told the Dail that he planned to exempt wine from the Section 8 controls being introduced for beer and spirit sales because it didn’t pose the same public order threat. Jennings sees it as “somewhat anachronistic” that the Government would exempt wine in this way, deeming it not to be a particular problem, and yet impose these heavy additional costs on wine-only retailers. He sees the Section 5 provisions not only as “foolish and grossly unfair” but also as “a barrier to trade”.

Another provision of the Act with potentially significant implications for retailers is Section 15. This paves the way for the introduction of regulations that would outlaw the practice of including alcohol on loyalty card schemes, with the aim of curbing the incentive-purchasing of more alcohol. Such regulations could also prohibit bulk deals such as ‘two-fors’ (two-for-the-price-of-one) and ‘bog-offs’ (buy-one-get-one-free), thus bringing alcohol-retailing legislation into line with that governing cigarettes, which has had such restrictions in place for years.

If such regulations are introduced, they will not be popular with the large supermarkets in particular, which use volume deals to drive business. On the other hand, smaller supermarkets and off-licences, which don’t run these loyalty schemes or bulk deals, are likely to take a different view.

According to Clancy, Musgrave has no problem with these provisions so long as the “playing field is level”. She adds that there will still be some scope for promotional activity within the new legislation. “You’ll still be able to discount in terms of the unit price. You won’t be able to say this bottle of wine used to cost @8 and is now @4 but you’ll still be able to market a lower price.”

Just the tip of the iceberg?

While there is plenty in the new legislation for retailers to ponder, the fact is that the Intoxicating Liquor Act might only be the thin end of the wedge. This is because the Government has indicated that it plans to codify the entire liquor licensing code, in other words all previous intoxicating liquor legislation, in the next Dail session, starting in September.

In basic terms, codifying means reclassifying and consolidating legislation to make it more user friendly for the legal profession and the like but it can also involve an element of updating and modification.

Jennings believes there is a real possibility that the government may review this legislation with a ‘public health hat’ on, and, in its newly codified legislation, include provisions that would dramatically alter the way alcohol can be sold and marketed by retailers. In this scenario, he says, Section 8 “may be the least of our worries come September.”

Clancy is also slightly apprehensive about what the new Dail session might bring. She feels that while the retail industry is supportive of the Government’s efforts to end society’s love affair with drink, balance is also needed. “The retailers we partner with are part of the community and it’s in their best interest to find a proper and equitable solution in trying to manage social order issues. At the same time they have to look after consumers who want a bottle of wine on a Saturday night.”

 

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