Red Shed dips toe in drink market

The Warehouse could be considering beer and wine sales.

The company has trademarked the phrase "The Warehouse Cellars" for beer and other alcoholic drinks, as well as mineral water, fruit juices and other non-alcoholic beverages.

If it goes ahead with such a move - which is not guaranteed by the decision to file a trademark - analysts say it could potentially use alcohol as a loss leader to entice customers into its stores.

That could bring the so-called "two-buck chuck" (as extremely cheap wine is termed in the United States) to New Zealand shores.

The company is casting little light on its plans and is refusing to say whether it is definitely entering the liquor market.

"We have talked openly about the fact we are going down the hypermarket route and we have to be prepared for the opportunities that could go along with that," a spokeswoman told the Herald.

The Warehouse, which has 85 stores around the country, has said it plans to open two hypermarkets - stores which include a full grocery service selling fresh and frozen food - before the end of next year.

Alcohol Advisory Council chief executive Dr Mike MacAvoy said he would not have a problem if The Warehouse operated in the same way as supermarkets and sold alcohol at reasonable prices.

But if it began selling very cheap wine "that would be a matter of concern".

"It's always an issue when prices drop. That's where people will go who want to get plastered."

Selling liquor has become a big section of supermarket revenue since wine sales started in the late 1980s and beer sales in 1999.

ACNielsen figures show supermarkets sold $38 million of wine in 1991, $223 million in 1998 and $500 million last year.

Beer has grown steadily, with supermarkets selling $287 million of the brew last year.

Guy Hallwright, a retail analyst at Forsyth Barr, said the company might consider a liquor sales operation that was not integrated into the planned Red Sheds grocery offering.

"There is probably room for a discount liquor operation. It's not a silly idea."

A fully stand-alone operation would be an expensive proposition, so it made the most sense for the company to adopt a store-within-a-store approach, similar to the convenience store being tried at the company's Te Rapa outlet.

Although supermarkets were already competitive in beer and wine sales, Mr Hallwright said there might be an opportunity with less recognised beer brands that generally were not in supermarkets, or non-brand beers.

There was also potential for The Warehouse to take advantage of cheap Australian wine not yet coming to New Zealand, or being priced more highly here.

There was a chance the company might see beer and wine as a loss-leader to attract customers.

Said Hallwright: "There is the potential for the $2 bottle of wine".

Bottle-shop boom

* 3436: Off-licences in 1995

* 4568: Off-licences last year.