Committee Secretariat. Justice and Electoral Committee. Select Committee Office. Parliament Buildings WELLINGTON nd February, 2010

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1 Committee Secretariat Justice and Electoral Committee Select Committee Office Parliament Buildings WELLINGTON nd February, 2010 To the Justice and Electoral Committee SUBMISSION ON THE ALCOHOL REFORM BILL 1. Introduction I work for Nautilus Estate, a quality focused Marlborough winery, wholly owned by Negociants New Zealand which is in turn family owned. We have been producing premium New Zealand wines since 1985 and are part of a wider family group that has been producing quality wines in Australia since Nautilus Estate employs about 20 people including winery, vineyard, sales and marketing, and administration staff. We support the submission of New Zealand Winegrowers (NZW) on the Alcohol Reform Bill (the Bill). We strongly agree that, if enacted in its current form, the Bill will place a significant financial and compliance burden on wineries which is unequal to the attendant risk and unlikely to achieve the Bill's objective. To that end, (and because this has not been specifically addressed in the Bill's Regulatory Impact Statement), the purpose of this submission is to provide you with an appreciation of the practical effect of these key provisions on our business. 2. Objective (Clause 2) We support the Bill's objective of minimising the harm caused by excessive or inappropriate consumption. In our commitment to supporting the moderate and responsible consumption of wine, we support the following initiatives: All cellar door staff trained and licensed in the responsible sale of alcohol Cheese platters served with wine tastings Breathalyser kept on site to ensure no drink/driving by staff or customers Internal responsible consumption of alcohol policy for staff drinks Subsidised taxi policy from work events Avoidance of deep discounts/multiple purchase offers on our wines throughout all distribution channels

2 However, if the Bill is to be effective in achieving its aims, we strongly agree with clause 2(a) that any such system must be "reasonable." 3. Winery Cellar Door Sales We support the call for a separate endorsement and definition for winery cellar door and mail order sales. As stated in NZW's submission and in the Cabinet Paper to which it refers, off licence sales from winery cellar doors are a very low risk environment which are currently facing disproportionately high costs given the volume they are selling and the risks that they pose. Given that the regime proposed by the Bill will substantially increase those costs, it is vital that the Select Committee understand what that will mean for our winery. Nautilus Cellar Door has an off premise licence and sells wine by the bottle to be taken away and drunk at a later date. We also have a dell licence in order to provide food to accompany wine tastings. We have also applied for a special licence on several occasions, to be able to sell wine by the glass and/or bottle at events such as the Wine and Food Festival, Bridal expositions, and local special holidays. The cost of fulfilling the current requirement for the sale of liquor at our cellar door is quite significant in relation to the overall sales of this channel. We understand the need for the high level of training for our staff in relation to the sale of liquor and see the relevance of this in our operation. The nature of cellar door work and local labour pool means we have eight part time staff who have the formal liquor licence qualifications and these licenses need to be renewed every three years. The off licence permit for our cellar door business also needs renewal every three years. In summary the costs for the licensing of our cellar door is as follows: Off licence permit for our cellar door = $700 (valid for three years) Advertisement for off licence $150 (every three years) Staff training (LCQ Qualification) $ days pay for staff member $200. Total = $400 Staff license fee = $135 (valid for 3 years) Special day licenses = $50 We estimate that this costs us approximately $1000 / year for the upkeep of these licenses, excluding the administration costs involved. There are also issues related to the turnaround time for the issuing of these licenses by our local council at present. Sometimes a simple application for a staff member could take over two months. Any further requirements to the current licensing would drag the lead times out even further and make it even more difficult for a small cellar door business like us (1000 cases per year sales). 4. Special Licences (Clause 55) We understand that clause 55(b) effectively requires the cellar door to be open at the same time as we are attending a special licence event. This would severely impact our commercial viability on days where there are large local events, in particular the Marlborough Wine and Food Festival. This is an extremely important event in our calendar both in terms of actual wine sales, and in terms of building brand awareness amongst potential consumers. We require all our

3 staff to attend this event and typically close our cellar door rather than staff both. If we were required to keep the cellar door open we would lose money as there are very few visitors to individual wineries on that day most people are at the festival. We do not see that there is any justification for this provision in terms of the objectives of the bill. We therefore recommend that clause 55 be amended to provide for the situation described above. 5. Internet and Mail Order Sales (Clause 60) Until we are advised about the nature of the Information which will be required to be published on mail order catalogues and winery websites, it is impossible for us to comment on this aspect of the Bill. However, we ask the Select Committee to note that winery websites are an essential brand promotion tool which are typically used to inform an international audience about our wine and the place where it is grown. We therefore request that the multi purpose nature of winery websites be considered in the wording of this section. Irresponsible Promotion (Clause 220) The Advertising Standards Authority's (ASA) Code for the Advertising of Liquor and the Code for the Naming, Labelling, Packaging and Promotion of Liquor regulate the matters raised in clause 220. Encouraging consumption Clause 220(a) creates an offence for any person in the course of carrying on a business to "do anything that encourages people to consume alcohol to an excessive extent whether on licensed premises or at any other place". We are unsure how this is intended to apply to our own operation given that we are already required to deny entry and service to intoxicated persons. As far as it relates to the product's label or packaging, the intent of these clauses is already covered by the Code for the Naming, Labelling, Packaging and Promotion of Liquor. Once the product leaves our premises, we have no control over its use, however this provision could still hold us liable for the irresponsible actions of the consumer. Unless the provision is limited by reference to licence holders and circumstances, it will severely restrict the ability of anybody in New Zealand to produce or sell any alcoholic beverage to any person. Advertised discounts Clause 220(b) creates an offence to promote or advertise discounts on alcoholic beverages which lead the public to believe that the price is 25% or more below the price at which that alcoholic beverage is ordinarily sold. This clause is of particular concern. Our business is focused on selling quality wine, and we strongly avoid excessive discounting as this would be detrimental to our premium positioning. However there are certain circumstances where a limited time/limited quantity discount offer is vital in moving through older vintage stocks that have been held for a particular market which has then cancelled its order. Often the only way to sell that stock when a newer or better vintage is available concurrently in the domestic market is at a significant discount. Promoting alcohol that is free of charge Clause 220(c) provides that it will be an offence to promote or advertise "alcohol that is free of charge". This too is a significant concern. There is a huge choice of wine styles available for consumers to purchase at quite high prices, relative to other consumer goods. Small free of charge tastings of wine in a controlled

4 environment, whether at the cellar door, at events/festivals, or in retail stores, are a vital marketing tool for our wines, allowing consumers to sample the wine and determine that it is worth the money to buy a bottle or a case. Clause 220 would make this vital and non harmful practice an offence, significantly damaging wine sales, particularly of higher price point wines intended for moderate consumption and actually increase consumption of a few large, cheap brands, which are ironically, more likely to be consumed to excess. This clause would also damage our cellar door business, which, along with other wineries, has an important positive halo effect on other local Marlborough tourism industries. These are all vital to our regional economy. This provision threatens the survival of the winery cellar door tasting, wine trails and tours. We therefore support NZW's recommendation that an exemption be included in the Bill to provide for the promotion of the activities contemplated in clauses 20(2) and 23(6): "[the supply of] alcohol free, as a sample, for consumption on the premises." Promotional competitions Clause 220(d) provides that it will be an offence to offer any goods or services "on the condition that alcohol is bought". As noted in the NZW submission, promotional competitions and giveaways are important tools by which wineries promote their brands. They are universally designed to increase brand awareness, not to encourage excessive or harmful consumption. In the absence of any link between this prohibition on promotional competitions and the Bill's objective of minimising harmful use of alcoholic beverages, we support NZW's proposal to limit the scope of the proposal to competitions designed to promote irresponsible and excessive consumption. Special Appeal to Minors Clause 220(e) concerns promotions which are aimed at, or likely to have, a special appeal to minors. Given the wide scope and uncertain application of this provision, we request the removal of the qualifier "is likely to have" from clause 220(e). 6. Disqualification Of Members (Clause 179) We agree that the proposal to disqualify persons associated with "alcohol" from appointment to a licensing committee or election to a licensing trust is discriminatory, unnecessary and unfair. There is no reason to prevent people who work in the wine industry, our growers, our staff or our families from this important civil function. As stated above, we support the Bill's objective of minimising harm and we are willing and able to form a positive part in achieving that objective. 7. Product Bans (Clause 383) We oppose the unfettered ability of the Minister under clause 383 to ban or restrict the distribution/importation/rnanufacture/sale or the labelling/packaging or promotion of all alcoholic beverages. Provisions such as this create an unacceptable environment of uncertainty for wine businesses such as our own to operate within. We therefore ask that products such as wine that are already legally standardised be excluded from the provisions on product bans. 8. Point of Sale (Clause 384) The Bill leaves open the possibility that regulations will be made to require licensees to display "at or near points of sale" information about the ethanol content of different products and/or information about the potential harmful effects of consuming alcoholic beverages. We support NZW's opposition to this provision

5 and further add that consumer information on ethanol content and standard drinks is already regulated in other legislative sources. It is fundamental to the Bill's objective of supporting safe and responsible sale, supply and consumption of alcoholic beverages that the very businesses which are most able to provide such an environment are not forced out of business on the basis that they are unable to absorb increasing licensing costs. Yours sincerely, Katy Prescott Sales & Marketing Manager, Nautilus Estate