Warehouse shuns bargain policy for sales of alcohol

The new Tauranga store will be the "pilot" outlet for liquor sales. Picture / Michael Bradley

The Warehouse, known for its aggressive discounting, will sell beer and wine at its new liquor outlets at around the same prices as supermarkets, and is expecting to win sales with convenience rather than bargains.

Although a departure from its "where everyone gets a bargain" catchline, The Warehouse - which opened its first Warehouse Cellars liquor store in Tauranga yesterday - has decided against an aggressive entry to the estimated $1 billion-plus take-home liquor market.

That was due to the "nature of the category", Warehouse operations director Richard Lewis said.

"There's a level of responsibility associated with alcohol retailing."

When the company first announced its plan to sell liquor six months ago, fears were raised that the venture would give teenagers access to cheap alcohol.

Licence restrictions in place for the Cellars require customers under 18 to be accompanied by a parent or legal guardian.

The company said it had also placed a voluntary restriction on the sale of spirits at its pilot store within the Fraser Cove Warehouse.

Whether it would retain that restriction in outlets to be opened in future was not yet decided.

"We'll cross that bridge when we come to it," said spokeswoman Cynthia Church.

Auckland will be the next city to have a Warehouse Cellars when the Sylvia Park shopping centre opens in Mt Wellington in June.

It will be found inside the 12,500m "Warehouse Extra" hypermarket that will sell groceries, and house a bakery, cafe and and in-store pharmacy.

But The Warehouse plans to test and refine the cellars concept and product range at Fraser Cove before rolling out more through its 85 red sheds throughout the nation.

The company has earmarked $60 million over five years to expand its grocery offering and upgrade its existing retail network to include the cellars.

Lewis said the point of selling liquor was to offer another category to customers, not to try to undercut the competition.

Macquarie Equities retail analyst Warren Doak expected Warehouse Cellars would attract customers on convenience rather than price.

But with only one store it was still early days and he thought ultimately it would be fairly competitive.

The first Warehouse Cellars outlet will stock more than 250 different products in its wine range, including leading brands such as Kim Crawford, Huntaway and Leeward Landing, and ll leading beer brands.

The Warehouse Cellars was formed as a joint venture between The Warehouse Group and Reliance Wines, owned by Ed and Barbara Aster, last November.

Church said it was too early to speculate what share of the liquor market Warehouse Cellars hoped to grab.

Supermarkets have indicated their beer and wine sales already operated on tight margins, and did not see great potential for significant reductions in prices as a consequence of Warehouse Cellars entering the market.

Shares in The Warehouse closed yesterday at $3.80, down 1c.

Late last year, the country's two largest supermarket chains, Progressive Enterprises and Foodstuffs, signalled they would also build stand-alone liquor stores.

These stores will mark the first foray by supermarkets into spirits retailing, which has previously been the domain of bottle shops.

Grocery chains have been licensed to sell wine since 1990 and beer since 1999 and have already captured huge stakes in both liquor categories.

DB Breweries managing director Brian Blake told the Business Herald in November that the Warehouse Cellars would be a threat to all liquor retailers.

"You don't end up selling any more liquor. You just sell the same volume over the same amount of retailers," he said.

But Blake was not worried about DB's 80-store Liquorland chain losing sizeable market share. "As the market fragments further, the weaker players will be the ones in danger."