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The liquor store industry has stuck to tradition, and independents are holding their own by grouping together - But as Rebecca Spicer found out, it’s one of the most competitive industries with plenty of pressure from complex regulation and the determination of retail giants to take the market.
Liquor stores were born when the first single-bottle licence was introduced around 40 years ago. Since then, the traditional bottle shop hasn’t changed much and to a large extent has avoided the product diversification inherent in other competitive industries. But much has changed in this industry in terms of buying patterns, regulation, and the sheer survival tactics of independents.
The liquor store industry is made up of two types of retailer: off-licence, which is the stand-alone, takeaway bottle shop model (such as Liquorstop, Cellarbrations and BWS); and on/off licence, with the ‘off’ part of this licence being the bottle shop attached to a hotel (such as Pubmart and Bottlemart).
According to Jayson Westbury, CEO of the Australian Liquor Stores Association, there are around 4,000 off-licence retail stores alone in Australia, and Coles and Woolworths represent about 40 percent of the owned licensed outlets.
Unlike other retail models, opening a liquor store isn’t as simple as renting some shop space, sourcing suppliers, and starting up a trade. Obtaining a licence is the first priority and this is where liquor retailing can become complex.
Each state has a different system to determine how licences will be granted. “In NSW you have a social impact assessment process, in Queensland you have a public interest test—but the barrier is the fact that you’ve got to have a pub first—and in Victoria it’s completely deregulated,” says Westbury. “In South Australia and WA they still have the old needs test regime, slightly different in their guise but they’re currently under review. In the Northern Territory there is a very strict licensing regime, and in the ACT it’s always been deregulated.”
Westbury believes a uniform system would be better. “Whether you’re selling a bottle of VB in WA or in NSW, the process, and the Australian you’re selling to, is the same. It’s a very significant debate within our industry.”
NSW liquor licensing has been particularly affected by changing regulation of late. So much so that Westbury suggests anyone hoping to open a liquor store in NSW considers doing it in another state, or choosing a different style of retail altogether!
New NSW licensing laws, established in August last year, gave rise to the social impact assessment regime—replacing the needs test system. The old needs test was based on filling a need in the local market, whereas the new regime means potential liquor store owners need to prove that a new store will have no social impact on the area it’s located in—a difficult thing to prove, says Westbury, considering there’s no precedent.
This has significantly impacted on the industry, which Westbury says is evidenced by the fact that not one licence has been issued in NSW since the change was made. While he admits the industry understood there would be a period of adjustment, it does seem that the new system has made it harder to obtain a licence in NSW. “Getting into the liquor industry from scratch right now in NSW, is a very difficult proposition to consider. The fact is, no matter what happens with the law, it’s going to take a period of time before you get your licence, and you’ve got the situation, as a potential new operator, of chicken and egg—you’ve got to have your premises with your DA approved before you can get your licence.”
This would seem to give an advantage to the likes of Coles and Woolworths with more capital behind them, to sit on un-used premises until their licence is approved. “The upshot is, if the licensing laws end up in such a relaxed way that it becomes easy to open a liquor store, the chains will obviously grow their market share.”
Bob Bourne, chairman of the Independent Liquor Group Co-operative and owner of both off-licence and on/off licence liquor stores, adamantly disagrees with the new system. “What’s happening is, the big players are coming in. We believe that, at the end of the day, in one town there will be Coles at one end, Woolworths at the other, and everyone else will be gone. Then they’ll manipulate the price to keep independents out—there’s a war going on out there!”
He says that on top of acquiring a licence, there’s still “truckloads” of legislation for liquor stores to abide by. For example, a licensee must sit a licensee’s course (in NSW at least) before they can obtain a liquor licence. There are also a lot of signs that must be displayed at the register and/or at the store’s entrance, and all staff have to be 18 or over and have a Responsible Service Appreciation (RSA). These high overheads would normally put pressure on your average retailer but Bourne believes it’s to their advantage. “What I’ve seen over the years has been a huge enhancement in server responsibility and capabilities.”
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