Whether alcohol should be sold in SA supermarkets is one of the 32 issues up for consideration under the wide-ranging review. Currently Section 37(2) of the Liquor Licensing Act states a licensed liquor retailer must be “physically separate” from premises used for any other commercial purposes.
International entrants, as well as independents, have taken the opportunity to air their concerns over a lack of competition in the liquor market.
Aldi, which opened its first four stores in the state on February 3, made a 24-page submission to the review advocating for a, “carefully controlled approach to selling alcohol within supermarkets”.
Aldi argued the current law prohibiting the sale of alcohol in supermarkets has strengthened Coles and Woolworths’ duopoly in the liquor market and hindered the SA wine industry by denying winemakers a wider choice of retail entry points.
In South Australia, it is estimated Coles and Woolworths currently account for 66 per cent of packaged liquor sales, according to data from Neilson.
“This situation is serving to homogenise the liquor market and limit competition within the industry,” Aldi states in its submission.
Aldi, which currently sells alcohol in stores in Victoria, NSW, and ACT, proposed strict conditions for the sale of alcohol, such as only selling unchilled products within a designated area, which is limited to no more than five per cent of the total floor space.
Aldi has plans to open up to 50 stores in South Australia and Aldi’s low-priced private label wines have made headlines for winning international wine competitions.
Aldi’s submission also stated it would take a, “conservative approach to liquor marketing” and would not enter a price war with other liquor retailers.
Costco’s liquor licence struggle
US giant Costco finds itself in a similar position to Aldi – it is able to sell wine through its warehouse buying clubs in Victoria, NSW and the ACT, but not in SA.
Costco’s submission to the review argued for, “flexibility in the regulations to enable new retail formats to emerge and compete in the liquor market.”
Nish Vithlan, CFO and company secretary, requested prescribed times within which the authorities, including courts, are required to make decisions in response to liquor licence applications, disputes and appeals.
He wrote that Costco has been in process of obtaining a SA liquor licence for nearly two years and is still awaiting an outcome.
“We opened and started trading (other than liquor) from the subject premises in November 2014 and are still awaiting a decision from the Supreme court on our appeal to the decision of the lower court,” he wrote.
Costco had its application for a ‘special circumstances’ liquor licence for its Adelaide warehouse knocked back in 2014, leading to a Supreme court appeal. Its membership model for selling alcohol was deemed not compliant with existing laws.
Vithlan also argued objections to liquor licence applications should be deemed irrelevant if motivated by a, “desire to limit competition”.
“All interested parties should have an opportunity to have their views heard, but there should be some process to filter out those objections which are primarily motivated by a desire to limit competition in the liquor market,” he wrote. “All contestants to our application for a liquor licence in SA are existing licence holders who, in our opinion, are trying to protect their business by limiting competition.”
He concluded that Costco is eager to enter the SA liquor market.
“We have a unique retail format through which we bring to market quality merchandise at low prices,” Vithlan wrote.
“Our experience in Australia to date tells us that there is a demand for alternative retailing concepts and we are humbled by the positive response that each of our warehouses have received in the Australian market.”
Independents sound off
A submission by Australian United Retailers Limited (AURL), trading as FoodWorks, also backed the introduction of alcohol to supermarket shelves.
In his submission, Rick Wright, AURL CEO, wrote that independent retailers are facing significant challenges across Australia, including margin erosion and pressure from smaller format stores opened by large retail chains that target traditional independent supermarket locations.
Allowing Foodworks to sell liquor would open up a new revenue stream, increase basket size and improve the overall store offering for shoppers, Wright argued.
“It is our view that action needs to be taken to foster greater competition within the Australian supermarket industry by strengthening and supporting the independent supermarket sector. Allowing FoodWorks stores to sell liquor would be an important step in this direction,” Wright wrote.
Master Grocers Australia (MGA), a national employer industry association representing independent grocery and liquor stores, argued removing current restrictions would boost small-scale SA wholesalers and retailers.
“Australia is fortunate enough to have amongst the best wine producing areas in the world, MGA believes that some of the restrictions on retailers that wish to promote those local wines should be reconsidered and removed,” Jos de Bruin, CEO of MGA wrote.
“If the law is amended to permit the sale of packaged liquor and wine including South Australian wines in independent supermarkets, it would not only foster growth in the South Australian wine industry, but also boost the South Australian economy and enhance and strengthen the diversity of the state’s grocery retail market.”
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