National Off-Licence Association (NOffLA) Presentation to the
Committee on Jobs, Enterprise and Innovation
Introduction
Chairman and members of the Committee, thank you for the invitation to appear before you
today to brief you on the current challenges facing independent off-licences in Ireland. My name
is Evelyn Jones and I am the Chairperson of the National Off-Licence Association (NOffLA). I am
also the owner of an independent off-licence, the Vintry in Rathgar. I am joined by my colleague
Jim McCabe, who is the National Spokesperson for NOffLA and also the owner of McCabes
independent off-licence on Merrion Avenue. I am also joined by Terry Pennington, Commercial
Director UK & Ireland Santa Rita Estates, Christine Smith, Financial Controller, Mackenway
Distributors and Andrew Kinsella formerly the owner of ‘Bin Number 9’ off-licence in
Clonskeagh but which ceased trading in 2010.
The reason for such a diverse panel is to show members of this Committee the co-dependency
between the various sectors of the alcohol trade and how the closure of an independent offlicence can negatively impact on the business of each enterprise in the supply chain; namely the
producer and the wholesaler.
The Producer is the person who makes the product, in this case Terry’s firm which makes wines
in Chile and Argentina. In terms of costs involved in the production of wine, these include the
maintenance of the winery and vineyards, vineyard workers, winemakers, the wine itself, the
bottle, the cork, the label, the box and the merchant costs for transporting it from South America
to Rotterdam and then to Ireland.
The Wholesaler represented here by Christine must then pay for the storage of the wine until it
is sold and delivered to the retailer or restaurant. Overall, the wholesaler must pay the
warehouse, sales, delivery and accountancy staff. It is also the wholesaler who pays the duty to
customs and excise.
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The off-licence itself is the final link in the chain between the consumer and the vineyard in
South America. By law it is permitted to be open 78.5 hours per week and requires store, sales
and accountancy staff to support it.
All of the costs that I have just outlined must be covered by alcohol sales. Let’s look at how in
practice these costs are covered. The excise (including VAT) on a bottle of wine is €3.90. If that
bottle of wine is retailed at €10 including VAT then there is only €4.96 left after taxes to cover
all of the named costs incurred from the vine to the consumer. A lot of bottles of wine would
have to be sold to cover all of these costs.
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Today, we are going to try to communicate the following to you:

Who NOffLA is and who we represent;

The current operating environment for our members and the increasing pressures on
them financially;

The negative impact the repeal of the Groceries Order has had on our industry, and the
need for it to be re-instated;

Ireland’s relatively high tax economy and the long-term implications this is having for
our sector – and many others;

The very real risk of an increase in cross-border shopping in the coming months and
years if certain recent decisions are not reversed.
In essence, we want to give you a very real sense of the independent off-licence sector as it is in
2013, the pressures it is facing, the implications if it is not supported, and the practical supports
this Committee could provide.
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About NOffLA
NOffLA was established in 1991 and represents independent specialist off-licenses across
Ireland. The Association has 315 members in 26 counties and each is a specialist or pure offlicence - alcohol is their primary product. They tend to be owner-operated, located in the heart
of their communities and employ the highest standards of expertise and excellence when
retailing alcohol. NOffLA works to promote the responsible sale, marketing and consumption of
alcohol and to share best practices with the entire trade. Alcohol is the principle product that
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NOffLA’s members retail. Failure to adhere to licensing laws can lead to a licence being revoked,
and also court proceedings being issued. This would mean the loss of livelihood and the loss of
jobs. It is therefore in our members’ best interests to retail alcohol in the strictest, most
transparent manner.
The Association is also the only trade body in the alcohol sector that requires its members to be
fully trained in how to retail alcohol responsibly. In order to ensure the highest standard of
training is provided, NOffLA developed and implemented the Responsible Trading Certificate
(RTC) which ensures that independent off-licence employees are highly trained in retailing
alcohol responsibly. To date, NOffLA has trained over 750 alcohol retailers, (with 391
employees availing of the innovative e-Learning platform for this programme).
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Operating Environment
Onerous excise and legal responsibilities aside, off licences are similar to other small retail
businesses in Ireland and like all other SMEs independent off-licences are suffering from rising
direct costs. In the past, many small businesses had control over direct costs such as rates,
electricity, water charges, and gas. If sales fell, a decision would be taken to reduce costs.
However, today it is extremely difficult to keep a business going with rising costs – often beyond
the control of retailers. Today even though sales may have fallen by as much as 50%, and over
the last few years, costs have risen steadily:

Rates: Up 20%

Electricity: Up 15%

Water rates: Up 100% (No charge in the past)

Gas: Up 22%

Licence Fee: Up 100%
Additionally, whilst it can be argued that today is a good time to start a business as rents are
lower and leases in many cases suit and favour the tenant, measures must be taken to help small
existing businesses who 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, but in
order to protect these small, locally-based, responsibly-run businesses, something must be
done. For example, some local authority areas are already valued on a high base, future ones on
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a low base. A credit for the rent differential for the lessee caught in a upward only rent reviews
lease against their rates bill would be very constructive.
Also, as with most other SMEs in Ireland, the impact of the severe lack of access to credit for
independent off-licences is critical, as is the high trading costs for independent off-licences. We
would urge the Committee to do what they can in these critical areas.
Fundamentally, declining sales means reduced profit. And without profit off-licences simply
cannot pay core bills such as rates, insurance, electricity, PRSI and wages. The only core cost
that a business can cut without being legally penalised or affecting the customer is jobs. That
really is the only fat that can be trimmed nowadays in independent off-licences. The
consequences of this action is that the retailer must first pay redundancy which places a further
strain on the business; the ex-employee seeks social welfare, placing a strain on the State, and
overall retailing standards drop due to low staffing levels. The State then has to pay
unemployment benefit, has lost tax revenue from the employee and the employer’s tax as well.
While NOffLA agrees that certain supports are being offered for job creation, we argue that
nothing is being done to protect existing jobs. In the last eight months 12 off-licences have
closed and combined, almost 60 jobs were lost. These figures haven’t made the headlines yet
but if we were to announce the creation of 60 jobs, that would certainly make headline news.
The Committee and the Government 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 here.
Whilst independent off-licences make a significant social and economic contribution to Ireland
Inc. and contribute millions to the economy in employment, rates and taxation, this contribution
much like the sector 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 also closed or lapsed. Based
on the current rate of closures, the issue of below cost selling, and excise duty increases, we
would expect further 20-25 businesses, to cease trading in 2014.
The closures and job losses may come as a surprise to many given that sales in the off-trade are
continuing to grow – they account for nearly 60% of all alcohol sales today. However, it must be
realised that the majority of this is confined to the multiples, discounters and symbol groups in
the sector, who hold 78.2% of this share. These are the retailers who are benefiting from the
shift to home consumption. Not independent off-licences.
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In addition to rising direct costs, 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 with these players has led to large sales volume
declines, significant job losses and business closures.
I would like to point out that independent off-licences held 21.8% of the market share in
2012 – a decline of 6.7% on the previous year. NOffLA estimates that this figure will reduce
significantly to 19% market share in 2013 and 16% in 2014. This is evidenced by the fact that
overall off-licence sales volumes declined in Q1 and Q2 2013 and much of this decline was seen
in the independent off-licence sector.
In a survey conducted with NOffLA’s members in May of this year, we had some startling
findings:

54% of our members reported that turnover had decreased by between 10-30% in
2012;

46% stated that they expected their overall turnover in 2013 to be down;

In 2012, 41% stated that wine sales declined the most, 27% stated beer sales, 32%
stated that spirits declined the most;

In 2012, 70% of members saw a 10-20% decline in spirits sales, and 16% saw a decline
of 20% or more;

Overall, 78% of NOffLA’s members attributed deep discounting and high taxes as the top
two reasons for the decline in business.
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Regulation and the Repeal of the Groceries Order
Regulation of the drinks industry is the remit of the State. The State issues the licences for the
importation, wholesale and retail of alcohol in return for a licence fee. The State therefore 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-alcohol products and by way of
increasing their percentage market share within their own specific markets.
These sales tactics which include below cost selling, deep discounting and aggressive and
irresponsible alcohol sales techniques (it is common practice in some outlets for example to
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purchase alcohol at self-service checkouts) are completely legal. The reason they have reached
such extreme levels is a direct result of the repeal of the groceries order on alcohol on 20th
March 2006 and the failure of the State to anticipate the impact of its removal.
The Groceries Order which was under the remit of the 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 that a retailer could
sell goods at 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 that price. It also
ensured a level playing field for all retailers of alcohol and as such, created an environment
where people felt confident about opening an off-licence and investing further in their
businesses.
In 2008, Minister for Enterprise Trade and Employment, Micheál Martin TD decided to repeal
the Groceries Order. NOffLA engaged with the Minister at the time and highlighted that its
repeal, as far as alcohol was concerned, would result in a flood of below cost alcohol on the Irish
market. Regrettably NOffLA’s predications have come to fruition and major multiple retailers
have consistently been engaged in a “blood bath battle” to see who can sell alcohol at the
cheapest price.
Since its removal:

Deep discounting and below cost selling is being used to attract customers to drive
footfall – the result is the ridiculous situation where a can of beer is now cheaper than a
bottle of water;

Alcohol is being retailed in an extremely irresponsible manner and the most vulnerable
in society are being affected as a result;

Irresponsible and sensational below cost price promotion is undermining duty and VAT
taxation as a policy instrument in controlling alcohol abuse. The Revenue is in effect
subsidising 23% of the net cost of the promotion for the multiple in the form of lost VAT
revenue;
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The Exchequer loses out by on average €21 million each year because of this
practice. VAT is refunded on the higher bought in value and paid on the lower
“below cost” selling value;

The level of investment in the independent off-licence sector has significantly decreased
because businesses cannot compete with large multiples;
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
Manufacturers and wholesalers are being squeezed by large multiples to supply product
at discounted prices which is impinging on their ability to operate profitably;

Brand Equity and quality is being affected as it is only brands with high consumer
recognition that are of interest to large multiples because their discounting will have
maximum impact in terms of attracting customer.
Minimum pricing is often mooted as an alternative to a ban on below cost selling but it will not
eradicate below cost selling, deep discounting and aggressive alcohol sales techniques because a
minimum price will only target the cheapest, unbranded alcohol. The large operators are not
interested in promoting lesser known brands. They are interested in big brands that will drive
footfall and gain market share.
It is our understanding that the Groceries Order can be reinstated by Ministerial Order by the
Minister for Jobs, Enterprise and Innovation, Richard Bruton TD but we would ask the
Committee to look into this matter further. Reintroducing a ban on below cost selling would:
1. Save jobs and prevent business closures;
2. Stop the sale of alcohol products below cost;
3. Give people a reason to invest in the off-licence sector or reinvest in their business;
4. Yield additional VAT to the Exchequer;
5. Eliminate deals promoting heavily discounted branded alcohol such as, ‘buy two 20
packs of premium branded beer for €25’;
6. Provide a regulatory framework for a controlled substance;
7. Prevent the cynical use of alcohol as an enticement to purchase other grocery products.
High Tax Economy
Independent off-licences are also being affected by the disproportionately high rates of alcohol
taxes in Ireland which are having a deep and damaging impact on businesses. In a recent survey,
75% of NOffLA members said that they were experiencing serious volume decline in sales in
2013 due to higher excises.
In Ireland, our rates of excise are 576% higher than the EU average for wine, 280% for beer and
230% for spirits. As a result of these taxes, alcohol prices in Ireland are now 62% higher than
the EU average.
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Budget 2013 introduced substantive increases in the alcohol excise duty of beer and cider
(+22%), spirits (+18%) and wine (+41%). As a result of these increases, taxes on wine became
the highest in the EU, cider became the second highest, spirits became the third highest and
beer the fourth highest.
Budget 2014 again introduced significant excise duty increases and this has dealt another blow
to the industry. By way of example, the 2013 and 2014 excise increases represent a 61%
increase in duty on wine. Prior to Budget 2013, the excise duty on 1,000 cases of wine was
€23,600. Following Budget 2013 and 2014 the excise duty on the same product rose to €33,357
and €38,235 respectively. An extra €14,000 in cash must be found as the Irish Revenue takes
the duty from businesses bank accounts on the third last working day of each month. The
impact on cash flow – in light of the fact that banks are not lending to SMEs – has been
devastating. The wholesaler must pay revenue and this in turn has resulted in a tightening of
credit terms that can be afforded to retailers.
Cross Border Shopping
There is also a very real risk that consumers will return to purchasing wine and spirits in
Northern Ireland and abroad due to the fact that there is now a significant difference between
excise in Northern Ireland and the Republic of Ireland. This difference, coupled with a UK VAT
rate of only 20% compared with our 23% rate, leads to considerable savings for the consumer
travelling and purchasing alcohol in Northern Ireland. Four years ago Ireland lost over €500
million in cross-border shopping. This practice led to significant job losses across all retail
sectors and the border counties were particularly hard hit.
A survey conducted by the Alcohol Beverage Federation of Ireland (ABFI) on the 8th of October
2013 (one week prior to the announcement of Budget 2014) showed that a basket of alcohol
products in Northern Ireland is 34% or €56.80 cheaper than the equivalent in the Republic of
Ireland. The basket, made up of randomly-selected alcohol products retails in the Republic for
€223.12. The same basket of goods can be purchased for €166.33 in Northern Ireland. The
following table shows that price variations between North and South.
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Source: Alcohol Beverage Federation of Ireland (ABFI) 2013
It is likely that consumers particularly ahead of the Christmas period will begin shopping in the
North of Ireland given the substantial savings that can be made. Whilst many large multiples can
sustain losses in alcohol sales, independent off-licences cannot given that it is their primary
product. Therefore, any further shift by the consumer away from independent off-licences will
surely lead to more business closures’ and jobs losses.
It is for this reason that we ask the Committee to call on the Minister for Finance, Michael
Noonan to reverse the excise increases.
CONCLUSION
In a time of immense economic difficulties, NOffLA wishes to be seen as a constructive partner
to Government. For many years now, we have engaged with various government departments –
as you know the issues that impact this sector sit with a variety of departments namely; Health,
Justice and Finance as well as of course the Department of Jobs, Enterprise and Innovation. In
the last decade, our industry has been gravely impacted upon because of the disjointed
decisions that have been taken in the various departments. This approach does not lend itself to
enabling us to plan and invest in our businesses for the long term.
To support the revival and growth of the independent off-licence sector, we come before the
Committee today to ask for your help in the following areas:

Make it illegal for alcohol to be sold below cost.
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
Reward employers for continuing to employ existing staff. 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 here;

Help retailers to cope with the rising direct costs of business. A credit for the rent
differential for the lessee caught in an upward only rent reviews lease against their
rates bill would be very constructive;

Restore the equilibrium of prices between the North and South of Ireland. We ask the
Committee to call on the Minister for Finance, Michael Noonan to reverse the excise
increases.
The elimination of the below cost selling of alcohol also offers an alternative revenue-raising
option to policymakers that is realistic, achievable and will ensure that fairness in the off-trade
industry is upheld (note that this is under careful consideration in the UK).
If these policies are implemented they will ensure, 1) that the viability of the indigenous offlicence sector is sustained, whilst also protecting much needed jobs and businesses and, 2) that
alcohol is retailed in the most responsible manner in which all retailers are subject to a level
playing field.
The recommendations outlined above will not only benefit the independent off-licence sector
but also the Irish Exchequer.
FOR FURTHER DETAILS:
Evelyn Jones, Chairperson of NOffLA
Block D, Unit 6 / Nutgrove Office Park / Rathfarnham / Dublin 14
T: (01) 296 2326 / E: evelyn@noffla.ie / www.noffla.ie
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