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 creditis 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 salesmeans 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 retentionas 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.

In 2006, then Minister for Enterprise Trade and Employment, Deputy Martin, decided to repeal the groceries order. NOffLA engaged with the Minister and highlighted that its repeal, as far as alcohol was concerned, would result in below-cost alcohol on the Irish market. Regrettably, NOffLA's predictions have come true 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, the following has occurred. Deep discounting and below-cost selling is being used to attract customers to drive footfall, the result of which 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 way. Sensational below-cost price promotion is undermining duty and VAT taxation as a policy instrument in controlling alcohol abuse - the Revenue is subsidising 23% of the net cost of the promotion in the form of lost VAT revenue and the Exchequer loses out by on average €21 million per annum because of this practice.

The following are other issues as a result of the groceries order's repeal. The level of investment in the independent off-licence sector has decreased due to reduced profitability. Manufacturers and wholesalers are being squeezed by large multiples to supply product at discounted prices. Brand equity and quality is being affected as it is only brands with high consumer recognition that are of interest to these players.

Minimum pricing is often mooted as an alternative to a ban on below-cost selling but it will not eradicate deep discounting, aggressive alcohol sales techniques or below-cost selling itself. A minimum price will only target the cheapest, unbranded alcohol. The large operators are not interested in promoting little 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, but we would ask the committee to look into this matter for us further. Reintroducing a ban on below-cost selling would stop the sale of alcohol products below cost; save jobs and prevent business closures; eliminate deals promoting heavily discounted branded alcohol, such as, buy two 20-packs of premium branded beer for €25; yield additional VAT to the Exchequer; and prevent the cynical use of alcohol as an enticement to purchase other grocery products.

On high-tax economy, independent off-licences are also being affected by the high rates of alcohol taxes in Ireland. Our rates of excise are 576% higher than the EU average for wine, 280% higher than the EU average for beer and 230% higher than the EU average for spirits. As a result of these taxes, alcohol prices in Ireland are now 62% higher than the EU average.

Budget 2013 introduced substantive increases in the alcohol taxation. Excise duty of beer and cider rose by 22%, spirits rose by 18% and wine rose by 41%. As a result of these increases, taxes on wine became the highest in the EU, taxes on cider became the second highest, taxes on spirits became the third highest and taxes on beer the fourth highest. In a recent survey, 75% of NOffLA members stated that they were experiencing serious volume decline in sales in 2013 due to higher excises.

Budget 2014 also introduced significant excise duty increases and this has dealt another blow to the sector. For example, the 2013 and 2014 excise increases represent a 61% increase in duty on wine over an 11-month period. Prior to budget 2013, the excise duty on 1,000 cases of wine was €23,600. Following budget 2013, the excise duty on such product rose to €33,357 and as of the budget of Tuesday last, this has now risen to €38,237. An extra €14,000 in extra cash must be found per month per 1,000 cases sold. The Revenue Commissioners take the duty from bank accounts on the third last working day of each month. The impact on cash flow for wholesalers 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 and in bad debts. An extension of credit by Revenue for duty payments would be a major help.

Another issue is the black economy. Greater enforcement in this area is required due to these significant excise duties as, obviously, there is a benefit to be accrued in engaging in smuggling.

On cross-Border shopping, consumers will return to purchasing alcohol in Northern Ireland because there is now a significant difference between excise in Northern Ireland and the Republic of Ireland. This, coupled with a UK VAT rate of only 20% compared with our 23% rate, leads to significant savings for the consumer 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 here.

A survey conducted on 8 October 2013, shows that a basket of alcohol products in Northern Ireland was already 34% or €56.80 cheaper than the equivalent in the Republic of Ireland. The basket retailed in the Republic for €223.12, while the same basket could be purchased for €166.33 in Northern Ireland - a saving of €56.80. That was prior to the budget of Tuesday last in which there were more excise increases. There is a tabulation of the items surveyed in the statement.

Consumers, particularly ahead of the Christmas period, will begin shopping in the North of Ireland again, given the substantial savings that can be made. It is for this reason that we ask the committee to call on the Minister for Finance, Deputy Noonan, to reverse the excise increases this side of Christmas before the damage is done.

In a time of immense economic difficulties, NOffLA wishes to be a constructive partner to Government. We have engaged with various Departments because the issues that impact the sector sit with a variety of Departments, namely Health, Justice and Equality, and Finance as well as, of course, the Department of Jobs, Enterprise and Innovation. In the past decade, our sector has been gravely impacted upon because of the disjointed decisions that have been taken in the various Departments without examining their impact as a whole on the other aspects of our business. This approach does not enable us to plan and invest in our businesses in the long term.

To support the survival of the independent off-licence sector, we come before the committee today to ask for its help in the following areas: make it illegal for alcohol to be sold below cost; reward employers for continuing to employ existing staff - a graduated tax credit orientated around employee retention rates and length of employment which could be offset 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 review lease against his or her rates bill would be constructive; an extension of credit terms for excise payments would be helpful; and restore the equilibrium of prices between the North and South of Ireland - we ask the committee to call on the Minister for Finance to reverse the excise increases before Christmas.

The elimination of below-cost selling also offers an alternative revenue-raising option to policy makers that is realistic and achievable, and this is under careful consideration in the UK. These policies will ensure that the viability of the indigenous off-licence sector is sustained, protecting much needed jobs and businesses, and that alcohol is retailed in the most responsible manner possible.

The recommendations I have outlined will benefit not only the independent off-licence sector but also the Exchequer.

I thank the committee for allowing me to present this statement on behalf of the independent off-licence owners of this country.