Draft Liquor Bill (B23

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

• Currently operates 317 grocers wine licensed
  outlets
• Best represents the countrys demographic profile
  (LSM)

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Retail Shopper profile by LSM group
Shoprite Checkers
All Shoppers
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Shoprite

• Total of 34m customers monthly
• 60 of housewives shop at Shoprite
• Supermarkets sell approximately 22 of all
  unfortified wine

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Bill objectives

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

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1. 3 Tier system

• Manufacturer
• Micro Manufacturer (not specifically determined)
• Distributor
• Retailer

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Disadvantage of 3 Tier system

• Abandonment of existing infrastructure
• Procurement (now only from distributor)
• Re-distribution not permitted
• Result Increased cost

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Disadvantage of 3 Tier system (cont.)

• New entry to the second tier will be very costly
  while efficient distribution systems currently
  exist
• Inevitably a cost passed on to the already
  burdened consumer

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Disadvantage of 3 Tier system (cont.)

• Price sensitive product
• Increased price reduced volume (source USB
  price elasticity 1)
• Price increase 20 volume down 20
• Influence on employment
• 345 000 farm workers wine industry

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Disadvantage of 3 Tier system (cont.)

• Proposed 3 tier system does not dilute current
  monopolies of manufactures
• Second tier will continue to dominate sector as
  currently experienced by small retailers because
  of size and brands

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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)

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2. Conversion of Grocer wine license

• Section 5 provides for the conversion of current
  wine grocer licenses to full off-consumption
  licenses
• We welcome this
• Require OPTION to retain the grocer wine licenses
  as some locations cannot be converted.
• Extend range to include beer (reasons later in
  presentation)

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Conversion of Grocer wine license (cont.)

• For the following reasons
• No regulations available
• Adhere to the specific needs of community in
  which we operate
• 70 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

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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

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Conversion of Grocer wine license (cont.)

• Supermarkets are
• well controlled and disciplined
• comply to all the requirements of the act not to
  sell liquor to minors and other unqualified
  people
• Tax collection is structured and controllable

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Conversion of Grocer wine license (cont.)

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

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3. Empowerment

• The 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

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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

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Off consumption Supplier Share of
Total Beer market
YE Feb/Mar 2003
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Total Liq Off-cons Category Share of
Total Liq market
YE Feb/Mar 2003
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Empowerment (cont.)

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

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Empowerment (cont.)

• Wine
• Brands are also strongly controlled unless
  diluted by strong retail channels new entrants
  will fail
• Grocers successfully established new wine brands
  and this could be enhanced should beer sales be
  permitted

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Total Liq Off-cons Supplier Share of
Total Liq market
YE Feb/Mar 2003
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Conclusion

• Welcome intentions of legislature
• To weaken monopolies
• Promote new entrants
• We believe the 3 tier system will not meet its
  objectives (US failure)
• 3-tier System to be properly investigated before
  implementation

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Conclusion (cont.)

• Supermarkets holds the key to
• New entrants
• Effective Distribution
• Delivery to the public
• Responsible manner
• Lowest prices

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Conclusion (cont.)

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