Warehouse to obtain liquor license for Tauranga store

The Warehouse has set up a joint venture to sell beer and wine, finally confirming its planned foray into groceries won't be dry.

The company said yesterday it had taken the first steps towards obtaining a liquor licence for a Tauranga Red Shed, where it plans to set up an independent beer and wine store within the Fraser Cove store.

The news follows a September Herald report that the discount retailer was considering beer and wine sales and had trademarked the phrase The Warehouse Cellars.

That is the name of the new joint venture, 90 per cent owned by The Warehouse and 10 per cent by the Aster family-owned Reliance Wines - who also own the luxury Spa du Vin south of Auckland.

Warehouse shares gained as much as 11c yesterday to finish the day 6c higher at $4.10 each. But analysts said the gains were sparked by a statement by Australian company Miller's Retail that it was still in negotiations over the sale of its discount business.

The Warehouse, which in June confirmed it was in talks with several parties including Miller's over its own Australian operations, reiterated that statement.

Nevertheless, most analysts welcomed the foray into beer and wine.

"If they're intent on going into grocery, then they need to participate in the high foot traffic categories," said Warren Doak, of Macquarie Equities, who said the company could not be a serious supermarket operation if it did not sell liquor.

It is a significant departure for The Warehouse, whose founder and major shareholder Stephen Tindall has previously said the chain would not stock liquor as long as he was associated with it.

"This signals strongly that [chief executive Ian] Morrice is in control," Doak said.

He believed it was likely at least half the company's 85 stores - those that could also encompass a full grocery offering - would eventually stock beer and wine.

Warehouse spokeswoman Cynthia Church would not speculate on any plans for more beer and wine stores, saying only that the "trial will last until we have sufficient information to move forwards". The trial is unlikely to begin until next year.

Though analysts have previously speculated the company might discount beer and wine to draw customers, Church would only say that to be successful prices would have to rival those seen in supermarkets.

Supply arrangements have been put in place with Lion Nathan, Allied Domecq, Dominion Breweries, Foster's and Pernod Ricard - allowing the store to stock brands such as Lion Red, Tui, Export Gold, Steinlager, Corbans and Montana.

But at least one analyst believed the move could backfire - pitting The Warehouse against Australian supermarket giant Woolworths, whose deal to buy New Zealand supermarket owner Progressive Enterprises was approved by shareholders this week.

Woolworths has annualised liquor sales of about A$3 billion, offering buying power which could allow it to undercut on price.

Foodstuffs managing director Tony Carter, whose company operates the New World and Pak 'N Save chains, said supermarket beer and wine sales already operated on tight margins.

"I don't see great potential for a significant reduction in prices as a consequence of their move."

DB Breweries managing director Brian Blake said the new player 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 its 80-store Liquorland chain losing sizeable market share.."As the market fragments further the weaker players will be the ones in danger."

- additional reporting Michelle DaCruz