SUBMISSION FROM PICK 'N PAY TO PARLIAMENT REGARDING
THE DRAFT LIQUOR BILL B23 - 2003

INTRODUCTION

All parties involved in the liquor industry, whether manufacturer, distributor or retailer, accept the necessity of replacing the Liquor Act (27 of 1989) with new legislation. The existing Liquor Act is a discredited piece of legislation, estimated to govern less than 10% of the industry. It is a matter of urgency that the liquor industry is brought into the formal economy, regulated and taxed with credible and enforceable legislation.

To this end, Pick 'n Pay has been involved in consulting with the Department of Trade and Industry for a decade. We have been active members of the Law Review Projects' Liquor Initiative since 1995. This Initiative was instituted at the request of the Government in an attempt to gain an overview of the aims and commercial realities of members of the liquor industry.

Pick n Pay at all times represented the view of the consumer. We would like to briefly reiterate our standpoint here:


AIM OF PICK 'N PAY LIQUOR POLICY

Pick n Pay aims to give the consumer:

ease of shopping in a controlled environment, e.g. minimum age, security, etc.
convenience
a quality product
at the best possible price.

With regard to the retail of liquor, we have two areas of concern - (1) the sale of liquor other than wine, and (2) Sunday trading:

1. The Sale of Liquor Other Than Wine

Our market research indicates that our customers would like the range of liquor sold in our stores expanded from wine to include beer and spirits. This is an internationally accepted norm. The alcohol content of beer is lower than wine, and it is recognized as an accompaniment to food, along with wine. Beer is accepted internationally as a consumer item and is sold, together with spirits and wine, in supermarkets around the world.


History of the Grocer's Wine License

In the preceding decades. the manufacturers of liquor monopolized the sale of their products. They successfully lobbied the previous Government to ensure that the liquor le2islatioo reflected and protected their interests. Cross-holdings and vertical integration between manufacturers, distributors and retailers led to prejudice to the consumer.

In an attempt to challenge this control, and for the benefit of the consumer, Pick 'n Pay approached the Government in the mid-1970's for permission to sell beer and wine in supermarkets. At the time, owing to farming conditions and world sanctions against the previous Government. there was a glut of wine in the Western Cape. It was agreed that the legislation would be amended to allow grocers to sell beer and wine. However, at the last minute, lobbying by a beer manufacturer led to this license being limited to wine alone.

The sale of beer through supermarkets was perceived to be a threat by both:
(a) manufacturers with a monopoly on distribution chains; and (b) the economic viability of bottle stores.


(a) Monopoly on Distribution Chains

The current draft Liquor Bill recognizes that such cross-holdings and monopolies in the manufacturing and distribution of liquor are anti-competitive and result in prejudice to the consumer, a position supported by Pick 'n Pay.


(b) Economic Viability of Bottle Stores

The economic viability of bottle stores is a complex issue.

There have been claims that allowing grocery stores to retail a full range of liquor will result in the failure of many bottle stores. with subsequent job losses. Wild claims have been made that nearly half of the existing 3 200 bottle stores will be forced to close. Such
· 'doomsday" scenarios were also sketched with the introduction of supermarkets. Witness the growth in convenience stores and other forms of grocery distribution. Accordingly. we view these claims of imminent destruction with skepticism.

We realize that the expansion of the grocer's wine license into one allowing the sale of a full range of liquor will result in an upheaval in the industry. It is normal for business to adapt to changing circumstances. We feel very strongly that deregulation and free competition will, in the long term. benefit all in the liquor industry. It will lead to increased efficiency in the industry and fairer prices as a result of the increased competition. both of which benefits the consumer.


2. Sunday Trading

Pick 'n Pay. along with most retailers. has been campaigning for the right to sell liquor on Sundays. We feel that such a restriction is based on outmoded ideas and no longer has relevance in our society.

The prohibition of the sale of liquor on Sundays arose as a result of religious pressure to ensure that people would observe this day as a day of Christian worship. This ignores the fact that religions other than Christianity celebrate their holy day on another day of the week. The observance of Sunday as a holy day has not been diminished with the lifting of restrictions on retail, cinemas and sport.

We feel that such considerations should be for the individual conscience of the citizens of South Africa.

This belief is reflected in our new Constitution. Clause 9(3) of Chapter 2 states that there can be no discrimination on the grounds of inter alia religion, conscience, belief and culture.

Accordingly. we believe that liquor should be sold along with all other consumables during legal trading hours.


COMMENT ON THE DRAFT LIQUOR BILL (B23 -2003)

Pick 'n Pay will confine comments on the Liquor Bill to areas affecting the retail of liquor.

We are delighted to note that Schedule 5 of the Liquor BUI provides for the Grocer's Wine License to be converted into "a registration for the sale of liquor for consumption off the premises on which liquor is being sold." This will enable us to offer our customers the convenience and product range they desire.

Given that the Constitutional Court has ruled that the retail of liquor is a Provincial competence. we understand that the national legislation is intended to provide a default position should any Province fail to legislate, and outlines the bare minimum required for a national norm and standard to be achieved.


Regulations?

However. we are concerned that there is no detail regarding how the sale of liquor in grocery stores will be regulated. We understand that the regulations have not yet been drafted. and so it is difficult for us to comment on how they will affect the retail trade.

Accordingly. we would like to take this opportunity to state that we feel that. other than that Sunday trading should be allowed, the existing regulations are sufficient. Liquor is currently sold in a specifically demarcated area in the stores.

We understand from consultations with various Provincial authorities that they are considering a more definite separation of liquor from other consumables. it has been mooted that a "shop within a shop" be created.

It would appear that this idea has arisen to placate the owners of bottle stores, who are attempting to protect their monopoly on the liquor trade. Suggestions have been made that selling liquor in grocery stores encourages the housewife to spend the household budget on liquor instead of food.

We are a reputable and responsible business. All our tellers undergo rigorous training with regard to their obligations not to sell liquor to the intoxicated or to minors.

Regulating in this way would be exceedingly expensive in terms of infrastructure and space. and would not necessarily address any social evil. It would do nothing other than increase cost and inconvenience for the consumer.

Accordingly, we request that the existing regulations regarding the situation of liquor within a grocery store be regarded as sufficient.

THREE TIER SYSTEM

We are sure that you have received a lot of commentary on the proposed imposition of the strict separation of manufacture, distribution and retail sectors of the liquor industry

We wish to comment only on this insofar as it affects the retailer.

Such a structure will results in the inability of the retailer to buy directly from manufacturers. wine estates or to import product. (We note however that the Liquor Bill provides for ministerial discretion in this regard in section 25(5). The imposition of a distributor, with the concomitant cost, will inevitably result in higher prices being paid by the consumer. It has been estimated that distribution costs will increase by over 20% should the three-tier system be imposed.

Other than the ministerial discretion mentioned above, it would appear that retailers registered to sell liquor would be entitled to purchase directly from micro-manufacturers (section 26(I)(a)). However, without the regulations being published. we have no way og knowing if the wine estates with which we deal will qualify as micro-manufacturers. We understand that the annual volume of liquor manufactured will be regulated to define which manufacturers qualify as micro-manufacturers.
CONCLUSION

We applaud the extension of the grocers wine license to one for the sale of liquor for consumption off the premises.

We await the publishing of the draft regulations with in-eat interest and would appreciate an opportunity to comment on them at the appropriate time.