Home > Joint Committee on Jobs, Enterprise and Innovation debate. Business closures and job losses: discussion with National Off-Licence Association.

[Oireachtas] Joint Committee on Jobs, Enterprise and Innovation debate. Business closures and job losses: discussion with National Off-Licence Association. (22 Oct 2013)

External website: https://www.oireachtas.ie/en/debates/debate/joint_...

Chairman: The next item on the agenda is a discussion with the National Off-Licence Association on the significant number of business closures and job losses in the sector and proposed solutions to address the losses. 

Senator Feargal Quinn: May I declare an interest? As the young man Mr. Jim McCabe is a nephew of mine, I ask the Chairman to go easy on him.
Chairman: I welcome Ms Evelyn Jones, chairperson, Mr. Jim McCabe, spokesperson, and Mr. Andrew Kinsella, from the National Off-Licence Association, Mr. Terry Pennington, commercial director UK and Ireland at Santa Rita Estates, and Ms Christine Smith, financial controller at Mackenway Distributors, to discuss the significant business closures and job losses in the sector and proposed solutions to address these losses.

By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. If witnesses are directed by the committee to cease giving evidence on a particular matter and they continue to do so, they are entitled thereafter only to a qualified privilege in respect of their evidence. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. I remind members of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable. I invite Ms Evelyn Jones to make a presentation to the committee on the significant business closures and job losses in the sector and any proposed solutions.
Ms Evelyn Jones: I thank the Chairman and members of the committee for the invitation to appear before the committee to brief it on the issues facing independent off-licences in Ireland. My name is Evelyn Jones. I am the chairperson and owner of an off-licence. I am accompanied by my colleague Jim McCabe, national spokesperson for the National Off-Licence Association, NOffLA, who is also the owner of an off-licence; Mr. Terry Pennington, commercial director UK and Ireland at Santa Rita Estates, who has kindly flown back from Chile for the meeting; Mr. Andrew Kinsella, formerly the owner of Bin No. 9 off-licence, which ceased trading in 2012, and Ms Christine Smith, financial controller at Mackenway Distributors, a wholesale group. The reason for such a diverse panel is to show members of the committee the co-dependence among the various sectors of the alcohol trade and how the closure of an off-licence can have a negative impact on the business of others in the supply chain.

The producer - in this case, Mr. Pennington's firm - makes wines in Chile and Argentina. In terms of costs involved in the production of wine, these include maintenance of the winery and vineyards, the vineyard workers, the winemakers, the wine itself, the bottles, corks, labels and boxes and the merchant costs for transporting it from South America to Ireland. The wholesaler, represented here by Ms Smith, takes delivery of the wine and pays for its storage until it is sold to restaurants, off-licences, pubs and hotels. The wholesaler employs warehouse, sales, delivery and accountancy staff. It is also the wholesaler who pays the duty to customs and excise and, by necessity, this is highly regulated. The off-licence employs store, sales and accountancy staff and is permitted in law to be open for 78.5 hours per week. It is the final link in the chain between the consumer and the vineyard in South America. The cost of all the jobs outlined must be met by sales revenue. All of the costs I have just outlined must be covered by alcohol sales. If that bottle of wine is retailed at €10, including VAT, then only €4.96 is left after taxes to cover all of the named costs incurred from the vine to the consumer.

The National Off-Licence Association, which was established in 1991, represents independent specialist off-licences across Ireland. The association has 315 members in 26 counties. They are owner-operated, located in the heart of their communities and employ the highest standards of expertise and excellence when retailing alcohol. Alcohol is the principal product that NOffLA members retail. Failure to adhere to licensing laws can lead to prosecution and revocation of a licence, which would mean a loss of livelihood and jobs. It is therefore in our members’ best interests to retail alcohol in the strictest manner. It is mandatory for our members to be fully trained in how to retail alcohol responsibly. NOffLA has developed and implemented the responsible trading certificate, RTC, and to date has trained more than 750 alcohol retailers.

Onerous excise and legal responsibilities aside, off-licences are similar to other small retail businesses in Ireland. Like all other SMEs, independent off-licences are suffering from rising direct costs. In the past, many small businesses had control over direct costs. If sales fell, a decision would be taken to reduce costs. However, it is extremely difficult to keep a business going with rising costs. Today, even though sales may have fallen by as much as 50%, costs are rising steadily. Rates have increased by 20%, electricity costs have increased by 15%, water rates are up 100% as they are a recent charge, gas costs have increased by 22%, and the licence fee has doubled - that is, increased by 100%.

While it can be argued that today is a good time to start a business as rents are lower, measures must be taken to help existing small businesses that are caught in long, expensive leases. We recognise that from a legal perspective, the implementation of a retrospective ban on upward-only rent reviews in existing lease contracts prior to 28 February 2010 will prove a huge constitutional challenge, with implications for property rights. Another impact is that rates in many cases will be based on a market rent set prior to 28 February 2010. A credit for the rent differential for a lessee caught in an upward-only-rent-review lease against his or her rates bill would be very constructive.

Also, as with most other SMEs in Ireland, the impact of the severe lack of access to credit is critical for independent off-licences, as are the high trading costs for independent off-licences. We urge the committee to do what it can in this area. Declining sales means reduced profit. Without profit off-licences simply cannot pay core bills such as rates, insurance, electricity, employers' PRSI and wages. The only core cost that a business can cut without being legally penalised or affecting the customer is jobs. The staff member is let go and the retailer pays redundancy, which places a further strain on the business. The State then has to pay unemployment benefit and has lost tax revenue from the employee, as well as the employer’s tax.

While I agree that supports are being offered for job creation, what is being done to protect existing jobs? In the past eight months 12 off-licences have closed, costing 60 jobs. These figures do not make headlines, yet if we were to announce the creation of 60 jobs, that would certainly make headline news. The committee must recognise the benefits of job retention as well as job creation. A graduated tax credit orientated around employee retention rates and length of employment which could be off set against employer’s PRSI would be helpful.

Independent off-licences contribute millions of euro to the economy in employment rates and taxation. Unfortunately, this contribution, like the sector itself, is diminishing. In total there are 5,300 people employed in the industry. This figure stood at 8,300 in 2008. Since 2008, 544 off-licences have closed or lapsed. Based on the current rate of closures, we expect a further 20 to 25 businesses to cease trading in 2014. Independent off-licences are particularly vulnerable in the retail sector as they are losing market share to multiple retailers, whose profits, in many cases, exit Ireland. The lack of a level playing field has led to large declines in sales volumes, significant job losses and business closures. Even though sales in the off-trade are continuing to grow, accounting for almost 60% of all alcohol sales, the majority of this is confined to the multiple discounters and symbol groups in the sector, who hold 78.2% of this share. These are the retailers that are benefiting from the shift to home consumption.

The independent off-licence sector held 21.8% of the market share in 2012, a decline of 6.7% on the previous year. NOffLA estimates that this figure will decrease significantly. This is evidenced by the fact that overall off-licence sales volumes declined in quarter 1 and quarter 2 of 2013, and much of this decline was seen in the independent off-licence sector. In a survey conducted of NOffLA’s members in May 2013, we found that 54% reported that turnover had decreased by between 10% and 30% in 2012, 46% stated that they expected their overall turnover in 2013 to be down, and 78% gave deep discounting and high taxes as the top two reasons for the decline in business.

Regulation of the drinks industry is the remit of the State. The State issues licences for the importation and wholesale and retail sale of alcohol in return for a licence fee.
The State has a duty of care to regulate the industry adequately. Lack of regulation allows alcohol to be sold at discounted and below-cost prices which has had a negative impact on consumption patterns. This practice occurs in supermarkets, convenience stores and petrol stations where premium alcohol brands are used as loss leaders to sell other dearer non-alcoholic products and to increase their percentage market share within their own market segment.
These sales tactics, which include below-cost selling, deep discounting and aggressive and irresponsible alcohol sales techniques, including the self service of alcohol, are completely legal. The reason they have reached such extreme levels is a direct result of the repeal of the groceries order on alcohol in 2006 and the failure of the State to anticipate the impact of its removal.
The groceries order which was under the remit of the then Department of Enterprise, Trade and Employment was a vital piece of legislation for the alcohol sector as its main benefit was to prevent alcohol being sold below cost. It stipulated that the lowest price at which a retailer could sell goods was calculated based on the invoice price for those goods, and discounts, rebates or other deductions that were not on that invoice could not be used to lower the price of those goods…………

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