Draft Liquor Bill (B23 – 2003) Public Hearing – 13 May 2003 Shoprite Checkers - Submission N

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Draft Liquor Bill (B23 – 2003) Public Hearing – 13 May 2003 Shoprite Checkers - Submission N. Presenter: Whitey Basson CEO - Shoprite Checkers. Shoprite . Currently operates 317 grocer’s wine licensed outlets Best represents the country’s demographic profile (LSM). - PowerPoint PPT Presentation

Text of Draft Liquor Bill (B23 – 2003) Public Hearing – 13 May 2003...

  • Draft Liquor Bill(B23 2003)Public Hearing 13 May 2003Shoprite Checkers - Submission N

  • Presenter:Whitey BassonCEO - Shoprite Checkers

  • Shoprite Currently operates 317 grocers wine licensed outlets

    Best represents the countrys demographic profile (LSM)

  • Retail Shopper profile by LSM groupShoprite CheckersAll Shoppers

  • ShopriteTotal of 34m customers monthly60% of housewives shop at ShopriteSupermarkets sell approximately 22% of all unfortified wine

  • Bill objectivesReduce socio economic and other costs of alcohol consumption &Promote the entry of new participants in the liquor industry

  • 1. 3 Tier systemManufacturerMicro Manufacturer (not specifically determined)DistributorRetailer

  • Disadvantage of 3 Tier system Abandonment of existing infrastructureProcurement (now only from distributor)Re-distribution not permittedResult = Increased cost

  • Disadvantage of 3 Tier system (cont.)New entry to the second tier will be very costly while efficient distribution systems currently existInevitably a cost passed on to the already burdened consumer

  • Disadvantage of 3 Tier system (cont.)Price sensitive productIncreased price = reduced volume (source: USB price elasticity 1)Price increase 20% volume down 20%Influence on employment345 000 farm workers wine industry

  • Disadvantage of 3 Tier system (cont.)Proposed 3 tier system does not dilute current monopolies of manufacturesSecond tier will continue to dominate sector as currently experienced by small retailers because of size and brands

  • Disadvantage of 3 Tier system (cont.)High establishment cost of new brands to manufacturers without direct access to consumer markets reduced competition (Possible control of delivery)We believe the 3 tier system will not meet its objectives as it failed in the USA see handout of Adv Pretorius (advisory to the competitions board)

  • 2. Conversion of Grocer wine licenseSection 5 provides for the conversion of current wine grocer licenses to full off-consumption licensesWe welcome thisRequire OPTION to retain the grocer wine licenses as some locations cannot be converted.Extend range to include beer (reasons later in presentation)

  • Conversion of Grocer wine license (cont.)For the following reasons:No regulations availableAdhere to the specific needs of community in which we operate70% of wine purchases in Supermarkets are made by women conversion to a full license will force them back into the old bottle store environment which they resent

  • Conversion of Grocer wine license (cont.)Reduce grocers ability to lower prices (10 15%)Removal of the grocer wine license will reduce competition and increase price discrepancy

  • Conversion of Grocer wine license (cont.)Supermarkets arewell controlled and disciplinedcomply to all the requirements of the act not to sell liquor to minors and other unqualified peopleTax collection is structured and controllable

  • Conversion of Grocer wine license (cont.)

    Worldwide, liquor products across the total range are offered for sale in retail supermarkets

  • 3. EmpowermentThe difficulty of achieving objectives like broadening the manufacturing and distribution channels and economic empowerment Is highlighted by the following slides of the current distribution control in the liquor industry

  • Empowerment (cont.)Beer 96% of the beer market is dominated by a single manufacturer and beer equals 53.9% of the total liquor market This resulted largely to the failure of new participants entering the beer market succesfully in the 60s

  • Off consumption Supplier % Share of Total Beer marketYE Feb/Mar 2003

  • Total Liq Off-cons Category % Share of Total Liq marketYE Feb/Mar 2003

  • Empowerment (cont.)New entrants require organised high volume outlets such as supermarkets to enter and launch new brands successfully in the beer market andUtilise the efficient distribution network of grocers to deliver their products

  • Empowerment (cont.)WineBrands are also strongly controlled unless diluted by strong retail channels new entrants will failGrocers successfully established new wine brands and this could be enhanced should beer sales be permitted

  • Total Liq Off-cons Supplier % Share of Total Liq marketYE Feb/Mar 2003

  • ConclusionWelcome intentions of legislatureTo weaken monopoliesPromote new entrantsWe believe the 3 tier system will not meet its objectives (US failure)3-tier System to be properly investigated before implementation

  • Conclusion (cont.)

    Supermarkets holds the key toNew entrantsEffective DistributionDelivery to the public Responsible mannerLowest prices

  • Conclusion (cont.)

    Supermarkets will develop industry as a whole creating export opportunities and employment

    Thank you