JOINT COMMITTEE ON ENTERPRISE, TRADE AND EMPLOYMENT díospóireacht -
Wednesday, 11 Mar 2009

Sale of Alcohol: Discussion with Vintners Federation of Ireland.

Chairman

I welcome Mr. Val Hanley, president, Mr. Pádraig Cribben, chief executive, Mr. Richard Dunne, chairman, and Mr. Michael Fitzgerald, secretary, from the Vintners Federation of Ireland and thank them for their attendance. As they will be aware, they have been invited to appear before the committee following the acceptance of a proposal by Deputy Ned O'Keeffe who is concerned that since the removal of the grocery order supermarkets are selling alcohol below cost as a loss leader. He proposes there should be a minimum price for alcohol based on the volume of alcohol per product to offset this development.

I draw attention to the fact that while members of the committee have absolute privilege, the same privilege does not apply to witnesses appearing before the committee. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official by name or in such a way as to make him or her identifiable.

Mr. Pádraig Cribben

Mr. Michael Fitzgerald is not with us. He has been replaced by Mr. John O'Sullivan, a publican in Tralee.

Chairman

Mr. O'Sullivan is very welcome.

Mr. Pádraig Cribben

We provided an opening statement which I will briefly outline. Effectively, the Vintners Federation of Ireland represents publicans in the 25 counties outside of Dublin. Our members range from rural publicans to bigger outlets in cities such as Cork, Limerick, Galway, etc. Our remit is to represent members' interests in every area of activity to ensure the best possible trading and general environment for their businesses.

There have been many regulatory changes affecting the business in recent years. The introduction of the smoking ban, the removal of the groceries order, in particular, and the introduction of mandatory breath testing have all had a serious effect. Side by side with these, there has been the effect of changing lifestyles, people being — perhaps I should use the word "were" — time poor and cash rich, something that probably will change, leading to significant closures of public houses and the resulting impact, not just on those who own public houses but also on the community and the tourism industry. One of the key issues affecting trade in recent years has been the removal of the groceries order in 2006. At the time it was pointed out by the federation that it would lead to significant irresponsible marketing and selling of alcohol in the supermarket trade.

The reason a licence is required to sell alcohol is that alcohol is a behaviour and mood changing product. It cannot be treated like any other product such as cornflakes, bananas, biscuits or oranges, but, unfortunately, that is what has happened with the multiples in recent years which have used it as bait to attract customers. Once customers are in the store, they fleece them in other areas. It is public knowledge that in 2007 a particular UK multiple admitted that it upped the price of basic foodstuffs to compensate for the lower price it was charging for alcohol in its UK stores. No doubt the same type of practice is followed here. There has been serious undercutting and below-cost selling of the product. This is compensated for by putting the price of other products up.

Allied to this is the marketing of the product. It is not unusual to see "buy one, get one free" on six packs and we have seen "buy 24, get 24 free". That is highly irresponsible marketing of the type of product we are dealing with. While there are exceptions to every rule, we see the pub as, by and large, a controlled environment. The publican generally knows his or her customer and treats him or her accordingly. In a major multiple there may be young, inexperienced people on the tills and they can be intimidated. We have plenty of evidence in certain areas of three or four people standing at the till and a young individual behind the till. A young girl of 18 or 19 can be quite intimidated by three or four guys who might be younger than 18 buying the product.

We recognise that this is not an easy problem to solve. There is a level of predatory pricing and cross-subsidisation of products. In our 2008 submission to the advisory body to the Minister for Justice, Equality and Law Reform, we proposed that a minimum price for alcohol based on the alcoholic content of the product be introduced. We put forward some suggestions on the Canadian model and it is gaining quite a foothold in the UK. There are moves in Scotland and England to introduce a minimum price. There was a detailed offering on how that might be implemented and it bears looking at again.

There has been a significant revenue loss to the Exchequer with the shift of product from the on trade, as we call the pub business, to the off trade. Economists reckon that for every 10% shift there is an approximate annual loss in VAT to the Exchequer of €35 million. If one takes it that there has been close to a 30% shift over the past six years from the on trade to the off trade, that is a revenue loss of approximately €100 million per year in VAT.

The ratio of jobs in the on trade to the off trade is approximately six to one. There have been considerable job losses. There have been approximately 1,500 pub closures in the past five years. On average we are talking about five to six employment positions in each of those, so that is a loss of approximately 6,000 to 8,000 jobs as a minimum over those years in the shift from the on trade to the off trade. Our business generates substantial Exchequer input. In 2008 the general drinks industry contributed more than €2 billion in VAT and excise duty to State coffers and there was approximately €1.25 billion in exports, all of which is very significant.

Last Christmas the supermarkets were selling product considerably cheaper than our members could buy it from wholesalers. Supermarkets were selling a bottle of vodka between €6 and €8 cheaper than our members could buy it from the wholesalers. That is a very significant issue. When one puts together the revenue and job losses it has a serious impact on the Exchequer.

In the opening statement I supplied I made a note on a separate issue. At the end of last year publicans faced very significant increases. They had already taken on board two increases from major suppliers during the year, one in March and one in September, and we anticipate another this March. This is against the background of very significantly increased rates, particularly water rates, and entertainment costs. People generally do not know that the cost of Sky, Setanta Sports, IMRO and PPI to a publican averages out to approximately €700 to €800 per month and can be as high as €1,100. People think publicans have Sky on the same basis as domestic users. If a publican wants a second Sky box in the pub the cost doubles.

Against the background of all those increases hitting publicans and the noises being made at the time that maximum prices might be introduced, the publicans decided to put a ceiling on prices for 12 months while making it very clear that people were free to compete below those prices. Because we did that we appear to have fallen seriously foul of the Competition Authority, which seems to think we were trying to maintain prices at a certain level and that it was anti-competitive. We are scratching our heads as to whether we were working for or against the consumer in that respect.

There is a serious problem with how alcohol is priced and marketed. There are options open to the Minister regarding implementation of measures in the 2008 Act that have not been commenced. We urge that the measures that centre around segregation, marketing and promotion should be examined as a matter or urgency and implemented.

Deputy Dara Calleary

I thank the delegation from the VFI. It never ceases to amaze me that politicians are not supposed to talk to publicans in some quarters. The presentation is very reasonable and we are working on many of the issues. Mr. Cribben mentioned a UK multiple which admitted to predatory pricing in England. Is that company trading in the Republic of Ireland?

Mr. Pádraig Cribben

No.

Deputy Dara Calleary

Can the VFI give us a copy of its submission to the advisory board last year? We would like to consider it for our work.

Mr. Pádraig Cribben

Yes, that is no problem.

Deputy Dara Calleary

In retail we are trying to get our heads around supply chains. The VFI members' supply chain has let them down if they can buy supplies at their local supermarket cheaper than from their supply chains. It is amazing. Are they restricted in the supply chains they can approach for product? Are there licensing agreements or territories they cannot break?

Mr. Pádraig Cribben

Generally not. It would not be fair to say we are restricted. There are some very dominant brands and the VFI members have their own dedicated distributors or they distribute themselves, depending on the area. It is probably a moot point whether the supply chain is letting us down, the manufacturers have different arrangements or the major multiples have different buying power. The issue may be that the arrangements between the manufacturers and the multiples get fogged by what the multiples do afterwards in their pricing policy. We are not privy to the arrangements between the manufacturers and the multiples. We would like to be, but we are not.

Deputy Dara Calleary

We all would.

Mr. Pádraig Cribben

That might tell a different story.

Deputy Dara Calleary

I welcome the comments made by the Competition Authority. It is absolutely ridiculous that an organisation that has taken a hit in terms of costs in order to pass on price reductions to consumers has been investigated by the Competition Authority. One is left to wonder what the authority was doing for the past five years. Perhaps it might be better off investigating the activities of Setanta Sports and Sky rather than examining the affairs of an organisation that is trying to give people a break.

Chairman

People can sometimes go mad.

Deputy Mary Alexandra White

I welcome our guests. I live in an extremely rural part of the Carlow-Kilkenny constituency at the foot of the Blackstairs Mountains. I welcome the increase in breath testing because this will lead to a reduction in deaths on our roads, particularly those that are in bad condition or poorly lit.

I wish to discuss the social impact of what is happening on bachelors. I refer, in particular, to single farmers who live extremely isolated lives in rural areas. I know one man who drives to his local pub at the foot of Mount Leinster on his tractor every evening. He drinks one bottle of Lucozade, has great fun with his friends, plays a game of darts, watches the news on television and returns home. His is a very simple lifestyle and it keeps him in touch with his community. Some pubs in rural areas of my constituency are providing transport home for people. That is a good development.

I am interested in the concept of community. At times, pubs have been the focus of life for those who live in isolated rural areas. I do not condone people drinking and driving or poor driving behaviour as a result of the over-consumption of alcohol. I support the smoking ban because it has made pubs much nicer and more congenial places. It has also created much healthier working environments for bar staff. For people who smoke, however, it has made matters more difficult.

I am particularly interested in the social scene in the rural areas of south County Carlow. Mr. Cribben referred to the Canadian model of a minimum price for alcohol based on the alcohol content of a product. If one's drink is a double gin and tonic, will the price be doubled? How would the system work? How is it proposed to calibrate pricing? How successful is the Canadian model?

Mr. Pádraig Cribben

It is very simple. Whether it is a pint of beer or a short, every drink contains a certain number of grams of alcohol. For want of a better word, a value will be placed on each gram of alcohol. If, therefore, a pint of beer equates to 10g of alcohol and if a gin and tonic equates to 8g, a different value, based on the number of grams in each product, would be assigned. One would be obliged to find a base. The base we considered was that relating to CSO figures from prior to the abolition of the groceries order. We then applied a level of CPI to that from the period prior to 2006 to the current date. We arrived at reasonable figures and it is not the case that prices will be driven sky high. However, we are in a ludicrous situation where beer is considerably cheaper than water. We are attempting to move away from that type of scenario.

We are not attempting to inflate prices, rather we are trying to put in place a base in order that people will not be able to buy 24 cans of beer for €12. That is not in anybody's interest. It is not in our interest, as an industry, that the product be misused. However, it is certainly in our interest that the product be used sensibly. This is a major issue in rural areas, particularly for people such as the man to whom the Deputy refers who drives by tractor to his local pub each evening. There are individuals in such areas who are holed up in their homes and who are almost afraid to come out. An eminent psychiatrist stated in recent months that the fear of going out, as a result of various considerations, is leading to elderly people remaining at home and drinking much more. These individuals are actually drinking themselves into depression.

On the technical question, it is relatively detailed in the context of how we worked it out with the economists. As already stated, it is a matter of identifying the number of grams of alcohol in every product and then assigning a monetary value in respect of each gram.

Deputy Mary Alexandra White

Perhaps Mr. Cribben might furnish members with information relating to the Canadian model and provide the relevant table in order that we might consider the position, particularly in respect of pricing.

Mr. Pádraig Cribben

That information is contained in the submission we made to the advisory board. I will forward it to the committee.

Deputy Cyprian Brady

I thank Mr. Cribben and the other representatives of the Vintners Federation of Ireland for their presentation. Has the federation approached or made a submission to the producers and manufacturers — Diageo, Bulmers, etc. — in respect of issues relating to pricing?

I was interested in the comments of Deputy Mary White and Mr. Cribben on the social impact of alcohol. Mr. Cribben stated that the way alcohol is sold has led to an increase in domestic violence and disputes. Is he in a position to supply any statistics on that matter? Have studies been carried out in respect of it?

Mr. Pádraig Cribben

We are in regular contact with the manufacturers and producers. There are two issues that arise. The manufacturers and producers are of the view that their dealings with the multiples are a private commercial matter. In addition, one always gets the impression that they are doing nothing to disadvantage us. The question of whether we always accept that impression is another matter. The inference is that the supermarkets are selling alcohol at below-cost prices. There is contact but one must ask from time to time how fruitful such contact is, particularly when one considers that the multiples have considerably greater buying power. The Vintners Federation of Ireland is not a purchasing agency. My three colleagues are individual publicans and they purchase products from and negotiate on price with wholesalers or manufacturers on their own behalf. Compared with the multiples, their purchasing power, as buyers, is negligible.

We recognise that, from the point of view of manufacturers, it is more lucrative to sell to the off-trade rather than the on-trade. This tells its own story and one does not have to be a genius to work out what happens.

The straight answer to the Deputy's second question is that we have not carried out any studies. However, there is anecdotal evidence with regard to the increase in domestic and party-led violence. We hold discussions with various Garda superintendents throughout the country and, periodically, with the Garda Commissioner and his team, and it has emerged from these that many public order problems have arisen as a result of and been fuelled by the increase in the domestic consumption of alcohol.

Mr. Richard Dunne

Under law, publicans are obliged to refuse to sell more drink to people who are already under the influence of alcohol. In recent years, when one served certain individuals their first drink on entering one's pub, one would notice that they had already consumed alcohol prior to their arrival. Drinking habits of this kind are causing difficulties for publicans because they are being deemed to have served drink to those who were already under the influence of alcohol. At the time the publican would not know that alcohol had already been consumed. As far as the publican was concerned, he or she was only serving the person his or her first drink. There is a good deal of drinking going on before people come to the pub and it is causing a problem.

Deputy Chris Andrews

I welcome the delegation. As someone who served his time with Charlie Chawke in The Goat, I have an affinity with publicans. As Deputy Calleary said, the Competition Authority rigidly adheres to a philosophy of deregulating absolutely everything and ignores the social consequences of its actions. The time for light touch regulation is long gone and, clearly, the day of the authority's mindset is gone. I am pressing for its dissolution.

I support the delegation's submission on the groceries order. There is a strong case, particularly in regard to the sale of alcohol, given the social consequences of below-cost selling. We have to examine the reintroduction of the order.

I worked in the tourism industry in Killarney. The watershed of 9 p.m. is particularly difficult for hotels and bars and it is wholly inadequate. I disagree, however, regarding the breathalyser. The way to resolve the issue of people getting to and from pubs is not to suspend the law. The law must be enforced but I can understand the difficulties. The solution is to come up with other schemes to transport bachelors to and from pubs. I am supportive of the delegation's case and I thank the members for their presentation.

Mr. Pádraig Cribben

I do not want this to be misconstrued but we did not suggest in our submission that the breathalysing laws as they currently stand not be implemented. We hold no truck with anybody who gets behind the wheel of a car drunk. We equally do not see great merit in reducing the current blood alcohol level because it is working. When one takes what is happening and examines the research and the reduction in road deaths, there is probably no argument to reduce it from 80 mg to 50 mg. The issue for which a serious education process is required is the morning after. People fear that if they drink three or four pints tonight and sensibly go home at 11 p.m., they are not capable of driving the following morning but that is not true. It is also a challenge for us. We have to address the fear and education deficit regarding the morning after. We would not in any way recommend or extol irresponsible driving.

Deputy White referred to publicans driving people to and from pubs. My colleague, Mr. Dunne, is based in a rural area in Stradbally, County Laois, and he supplies a service to his customers every night.

Senator Brendan Ryan

I welcome the delegation. Mr. Cribben outlined the plight of the rural pub and I am conscious the organisation represents publicans outside Dublin. My experience relates mainly to pubs in Dublin. The issues of drinking driving, the smoking ban, VAT and excise duties are all factors in the downturn in trade for publicans over the years. I refer to the price differential between the on-trade and the off-trade. Have publicans contributed to the differential by, perhaps, being complacent over the years? I see little evidence of price competition as I travel around. If Diageo introduces a 5 cent price increase, the publicans say they must maintain their margin and they adopt an equivalent price increase and, in some cases, go beyond that. Many publicans take the opportunity of a price increase by a supplier to increase prices even further and there is a great deal of evidence of that happening.

In pubs in my home town of Skerries, I can buy a pint of Guinness for €3.70 but in the city centre it will cost €5. A range of prices is charged, which suggests some publicans have been creaming it to the extent that it has given the entire licensed trade a bad name. Why is it always necessary for publicans to maintain their percentage margin? For example, if they make €1 profit on a pint of Guinness today and Diageo increases the price by 5 cent, publicans will still make a €1 profit on the pint. Publicans have had opportunities to compete on price and, to some degree, they have contributed to the problem.

Mr. Pádraig Cribben

The Deputy answered one of his questions by saying there is no competition on the one hand but, on the other hand, he can buy a pint for €3.70 in one place and for €5 somewhere else. Surely that demonstrates there is ample competition.

Senator Brendan Ryan

There is little evidence of it. I can outline a number of examples.

Mr. Pádraig Cribben

I refer to price increases. Diageo is the leader in the business but its charge is only one cost faced by a publican. Over the past 12 months, excluding the price increases of drinks suppliers, water rates have trebled because publicans must pay for water in and water out. In most cases, between inflation and the doubling of costs for water in and water out, rates have increased by a factor of approximately three over the past four years. I referred to entertainment earlier. In the past 12 months, the cost of all Sky's packages has increased by double digits in percentage terms. In many cases, where publicans provide food, labour costs are covered by employment regulation orders and, therefore, have statutory effect and they have increased significantly in the past 12 months.

The issue is not the publican maintaining a percentage margin. The publican must recoup other additional costs. However, I could not stick my head in the sand and say there have not been instances to which the Senator referred. It is a small percentage and it is even smaller in the areas we represent. However, there are costs other than increases applied by breweries. The expectations of customers are changing and publicans must reinvest to meet them. To do so, they need to make a profit.

The average price of a pint of Guinness is marginally over €4. In round terms, a third of that goes to the State, a third to the manufacturer and a third to the publican. The publican is probably working off €1.30 or €1.40 of the €4. From that, he or she must meet costs such as insurance, entertainment and staff. One must remember that 1,500 publicans have gone out of business in the past four years. A small number went out of business because of property plays. The others went out of business not because profit margins were too high but because the business was not there.

Mr. Val Hanley

It is important to look at the cost base of doing business here. We would love to sell the pint at €3 or €3.50. In any town or village in Ireland one will see prices between €3 and €3.90. There is competition. We see it in Donegal and in Kerry where drink is being sold at €3 and €3.50 a pint. The commercial rates have increased by nearly 47% in the past five years. We must deal with our own waste management and we are responsible for our own recycling. When publicans add all of those costs they are unable to meet their overheads. That is why they are going out of business.

Senator Brendan Ryan

A supplier raising the price of his product does not affect a publican's other costs. Why, therefore, should it trigger price increases beyond that imposed by the supplier? Publicans are making large profits on the sale of water. They decide what to charge for water. No one imposes that price on them.

Mr. Val Hanley

The sale of water is a very small percentage of our business.

Mr. Richard Dunne

The cost of putting a drink on the counter is the problem, whether the drink is water or Guinness. Champions League games were broadcast last night. Most of my customers were young men in their early 20s drinking bottles of water but watching Sky Sports, which costs me €480 per month. A barman costs me a minimum of €8.65 per hour. An ice machine involves a charge for the water used to make the ice and a higher charge for the residue of water going out. These are all new costs introduced in recent years. The cost of drink is only part of the problem. The cost of putting it on to the counter is increasing all the time.

If a parent comes in after a football game with two or three children and asks for three cokes, I always offer them a large coke. Most rural pubs serve large bottles of minerals to families at very competitive prices.

Mr. Pádraig Cribben

Senator Ryan asked why publicans add on additional prices when manufacturing companies raise their prices. In the pub trade, other costs are generally stored up, absorbed and passed on at one time. Otherwise, there would be two or three price increases every year. Consumers would not like that so it would not be good for business. When the main manufacturer imposes a price increase, publicans tend to pass on other price increases at that time. A publican will not usually pass on an increase in water rates or in the cost of Sky TV. In many cases, those cost increases are absorbed for a period of time before they are passed on.

Mr. Val Hanley

We have evidence that some publicans have not raised their prices at all in the past 12 or 18 months because they are afraid to drive more customers to the supermarkets.

Mr. John O’Sullivan

I would like to advise Senator Ryan of what is happening in my town of Tralee. I sell lager and Beamish stout for €3.30 a pint. I charge €3.80 for a pint of Guinness, which is about the average in our town.

About two years ago, we sought a meeting with the manager of Kerry County Council and his financial officer. We showed them an old rates demand going back to 1995. It outlined what the rates were used for, namely water, refuse, sewerage services, collection of glass and so on. We still pay rates but we also pay for the collection and disposal of glass, plastic, cardboard and refuse. We pay for water coming in and going out and sewerage. These costs have impacted greatly, particularly on smaller publicans like me. The county manager said we should regard the rates as a local tax. In our county, one fifth of all rates come from publicans and hotels. The only comfort the county manager could offer was the possibility that central Government might provide greater funding for local authorities. Rates have tended to increase far in excess of the consumer price index. They are a big issue.

Deputy Edward O’Keeffe

I welcome the representatives of the Vintners' Federation of Ireland. They have my sympathy because their business is falling. I can see their business falling off in country towns and the closure of premises, which is an indication of that. The number of their customers has been falling for the past three years, before the economy went into recession.

When I sat on this committee in the last Dáil an all-party group opposed the change in the groceries order. We saw the danger in that change but it was done by ministerial order. How can one get around the problem of the groceries order? Do the vintners have a formula for that? The Competition Authority and the National Consumer Agency are not on their side. There was reference to soft regulation but we have seen what that did for the banks. The 2003 legislation, which separated the Financial Regulator from the Central Bank, gave us a crisis the like of which we never thought we would see. Regulation fell between two stools, as was made clear at yesterday's meeting of the Joint Committee on Economic Regulatory Affairs.

I recognise that publicans collect tax on behalf of the State. Why do they not sell milk rather than water? It is much cheaper now at 18 cent per litre.

Chairman

Deputy O'Keeffe, you should declare your interest in this matter.

Deputy Edward O’Keeffe

There is an abuse involving below cost selling by retail multiples, and alcohol is getting into the hands of people under the legal age. This problem must be addressed, whether under the Groceries Order or otherwise.

I understand the vintners' position and they have my sympathy. I have held political clinics in many of their establishments and they were always very successful. In towns which do not have halls or similar facilities I now find it very hard to find public houses which are open at convenient times. In some towns in north Cork, many pubs do not open on Saturdays until very late in the afternoon. That is an indication of where things have gone. When I started in politics 28 years ago, every pub in the country was open at 10.30 a.m. All is changed. Discount brands of low quality and high alcohol content are adding to the problem of the abuse of alcohol. We must address the issue of young people abusing drink. We cannot blame the problem solely on public houses because people now drink before they go out and blackguard the pubs. Is the groceries order an issue and has it affected other items?

Chairman

That is a comment on Deputy O'Keeffe without the milk.

Mr. Pádraig Cribben

One of the reasons we are not into milk is that we might have to buy it from Deputy O'Keeffe. In a former life I dealt with Deputy O'Keeffe in other areas and I know that is not too easy.

Chairman

It is not easy for us at this committee.

Mr. Pádraig Cribben

I can imagine.

Deputy Edward O’Keeffe

I could give Mr. Cribben a product.

Chairman

We would have milk with a black head.

Mr. Pádraig Cribben

We recognise the issue in the groceries order and the answer lies possibly in the submission we made to the advisory body. I will forward a copy of it to the secretariat of the joint committee.

Deputy Deirdre Clune

I too wanted to ask about the groceries order. One of its negative by-products is the amount of alcohol available to young people. We have seen a proliferation of slabs of cans and cheap alcohol. The use of alcohol has changed during the past number of years. People are drinking more. One only has to look at the sale of garden furniture to see that people are having barbecues and socialising and drinking at home.

I have said it before that alcohol should not be sold to those under 21 in an off-licence. I strongly support the statement that the sale of alcohol in the on-licence trade is taken seriously, that staff are trained, are well able to deal with individuals who have taken alcohol and are able to monitor who is on their premises. I do not think that level of supervision or competence is available in some off-licence shops. I know it is proposed to introduce a Bill in the Dáil this year dealing with the sale of alcohol.

Wearing my hat as a former member of Cork City Council, the price of supplying water and removing it has certainly become an issue following the major infrastructure programme of water and sewage treatment plants, which was reflected in the rates on commercial premises. Has there been an escalation in service charge prices across the country?

Mr. Pádraig Cribben

There has been a trebling of prices.

Deputy Deirdre Clune

Is it directly related to investment in infrastructure?

Mr. Pádraig Cribben

We do not believe it is.

Deputy Deirdre Clune

It should be.

Mr. Pádraig Cribben

The water directive allows the various councils to recoup the cost of producing and discharging water, but there is no mention of efficiency in the service. The systems are relatively old and there is a loss of about 50% between the amount of water produced versus the water used. We are losing about 50% of the water produced, but we are paying for its production. It is then metered into the premises.

One of my gripes with the water directive is that there is no recognition of lack of efficiency in delivering water. In a village, one could be living on the border of an administrative council and paying considerably more for services than a publican in a different council area at the end of the village. Let me give an example, the water rates for one of our members was €6,000 three years ago, last year it was €18,000. That is crippling. One would generate a lot of part-time jobs with €12,000. People cannot sustain that level of increase.

Deputy Michael Fitzpatrick

I welcome the delegation from the Vintners Federation of Ireland. I have a little knowledge of the business as a few years ago I did a costing with a view to purchasing a pub in a rural area. I did not do so because the figure did not add up. It was not too bad at that stage because people were going to the pubs. I went to my local last Saturday night and there were only two of us there. A few years ago there would have between 20 and 30 people in it. There were two people serving the two people standing at the counter. How would one survive in that environment? Who would be a publican? The chairman often refers to the small rural shop and I ask how they survive. How do you put a value on the service that publicans provide to the community? The GAA provides a service, but publicans also provide a service that is of significant value to rural communities. Publicans make their premises available to local groups and political parties on an ongoing basis.

I was very interested to hear that the supermarket could buy a bottle of vodka for between €4 to €8 cheaper than a publican can purchase it from a wholesaler. There is something wrong when that happens. I would know that a local wholesaler will call to the pub once a week to make deliveries, and the salesman will call once a week to take orders and that means one can give him a small order. It is unfair that supermarkets that provide a range of services and are in a position to make larger profits are putting publicans at such a disadvantage.

I do not know how publicans are paying their overheads. Perhaps, this week with Cheltenham, one might make a few bob when the people on the dole back the horses. It is no surprise that pubs are closed for half the day, but the publican still has to pay the overheads. Those pubs that provide food are subject to NERA.

Will the federation comment on the regulations introduced last year on off-licences and the display of drinks in supermarkets? When we met a delegation from the supermarket groups, one individual related his experience of being able to cross the Border and buy the 7Up cheaper in Northern Ireland than he could buy it from the wholesaler in the Republic. How are publicans in Border counties surviving when publicans in County Kildare find it hard to survive?

Senator Ivor Callely

I welcome the delegation from Vintners Federation of Ireland. I particularly welcome my good friend and colleague, Mr. Val Hanley, whom I have known for a number of years and who has done trojan work for the federation. I appreciate the challenges with which the federation is faced in the current circumstances.

This is not the first time a group has brought the difficulties with the groceries order to our attention. The delegation lobbied against the removal of the order and has been proved correct, so the onus is on us to take the appropriate steps to rectify the difficulties that exist. Other issues are highlighted in the document presented to us and we need to set a schedule for how we will address them.

Can the delegates provide us with some information on issues which are not covered in the document? For example, how are financial institutions accommodating members of the federation at the moment? A code of conduct relating to small and medium enterprises has recently been put in place but I hear on the ground that additional credit, the extension of overdraft facilities and reasonable mechanisms to renegotiate loans in cases of difficulty have not been put in place by financial institutions. Moreover, the Revenue Commissioners are not accommodating people who require a tax clearance certificate for a licence. They are looking for their money but the only way businesses can get that money is by keeping their doors open so that the money continues to flow. There are other issues relating to local authority rates and the regulatory regime.

Publicans to whom I have spoken have indicated many issues which warrant the attention of this committee. However, there is no point in concentrating on the problems without acknowledging the positive developments. Some publicans have reinvented themselves and are doing well, albeit in challenging times, by offering additional attractions and incentives to people to come into their premises.

Deputy Leo Varadkar

I have a couple of comments and apologise if they have already been answered. I was delayed at a funeral so missed the start of the presentation. Mr. Cribben talked about the costs associated with "water in and water out". Forgive my ignorance but I do not fully understand how the process works.

It is most important to focus on the three things we can do as politicians and members of this committee. There is a cross-party case for putting something into the sale of alcohol Bill on the minimum price of alcohol. There are mixed views on the groceries order. On balance I believe it has worked to the advantage of consumers with regard to groceries but that has definitely not been the case in relation to alcohol. It has created big problems of alcohol abuse and other issues.

If the current or a new Government can do anything it is probably in the area of costs. There is an opportunity to reform local taxation, which politicians have chickened out of in the past for various reasons, the main one being the risk of political unpopularity. The current recession presents an opportunity for reform and that should involve the costs of local services falling on everyone who benefits from them, rather than simply on business as is the case at present. It would be a shame if the opportunity was not taken to fix our local taxation system.

On the other side there are labour and utility costs. The catering sector has sorted out the issue with the euro but utility costs have not yet been dealt with. Private sector prices are falling but Government-regulated prices are going up and up. There are strange regulations which artificially inflate the price of electricity and gas but we should benchmark ESB and gas rates to the European average and demand that they come into line within two years.

Reference was made to job losses but do the delegates have any figures for the number lost in the past couple of years? Would they like the restrictions on opening hours to be changed? I have a more liberal view on this than most and do not see what was achieved by reintroducing the restricted opening hours. I would prefer them to be extended because the change in the economy, in which people have less money and many from eastern Europe have returned home, means the alcohol issues are not what they were. In that context there may be a case for longer opening hours.

What are the delegates' views on the restrictions on pub licences? This comes up from time to time but what is the current position and how do they want the matter to develop?

Deputy Arthur Morgan

I apologise for being late. I had urgent constituency business though it was not as urgent as the matter which delayed Deputy Varadkar.

I agree that the end of the groceries order adversely affected the industry to a significant degree, as it did a number of other sectors. It is most unfortunate that it was removed. I do not believe the smoking ban has the same impact now as it did when it was introduced. Many homes have their own smoking ban and many of my neighbours send smokers outside, particularly where there are children in the house.

There will be a budget in the near future. What impact would a further rise in excise duties have on the industry? I assume the federation has lobbied in advance of the budget but will the delegates use this forum to detail the effects of a significant increase in duty? One of the significant issues I encounter when going to a traditional pub for a few pints is that of transport, because significant costs are involved. Could a number of pubs come together to provide transport? Would that help in attracting customers back into pubs?

Chairman

I come from a very rural area and Stradbally is a city to me. I am also a pioneer and the strongest drink I take is water. I have often spoken about rural shops and the danger that we will soon have ghost villages. As Deputy Edward O'Keeffe said, village pubs always used to be open at 10 p.m. or 11 p.m. and were often the only place a person travelling through a village could get a sandwich. There are few restaurants in small villages and towns, so the pub served multiple functions. Very often pubs multitask, even in terms of the use of the toilets which are accessible to the public. We should not forget there is more to a pub than selling drink. Most of the proprietors are very accommodating in areas other than drinking. I do not have an interest in a pub but I did have five or six years ago, further back than Deputy Fitzpatrick goes. I do not how pubs survive. We must recognise the reality that many are closing. It is no use to say they are not. As a pioneer I have particular views on drink. However, the Competition Authority is certainly not helpful because if competition is brought to its ultimate conclusion the strongest survive and everybody else is weeded out. One ends up with one pub in any village or major town and eventually the competition that the authority tries to promote undermines and effectively wipes out that very thing. The social consequences are never factored in. That is what annoys me about this great rush to competition. If the Competition Authority looked beyond the end of its nose it would see that ultimately the consumer loses. It needs to look not just at today but to think through to the very end. I said the same about rural shops. I have an interest in that type of business although I am not involved in the running of it. My wife and many other business people who run such enterprises work hard for no reward. In small businesses like these there is no reward for the proprietors. Often they are just providing a service. They also provide a mechanism by which the Government can collect VAT, PAYE and PRSI contributions and so on. In addition, they pay rates.

Many publicans are very angry about the increase in water charges. Local authorities took no joy in imposing significant increases in water charges on publicans. They were obliged to do so under an EU directive. It is important to make that point. Most members of the vintners federation recognise that, although some were pretty vociferous. It is fair to say, however, that the hands of local authority members were tied, just as publicans' hands are in regard to closing times. I defend local authority members who found themselves in the invidious position of having to place those burdens on publicans. It was not their fault. Some members of the vintners federation were pretty annoyed and irate and, having a small business in another area, I can understand where they are coming from. We are all being hit with this, but publicans are being particularly badly hit.

We all have a view on below cost selling. You have heard the views of this committee. I always believed the abolition of the groceries order would have no impact other than a negative one and that is what has happened. The consumer has not gained as promised. The idea that such would happen was for the fairies. There is no anecdotal or empirical evidence that it happened. That issue may have to be revisited. The long-term health of young people is at stake because of below cost selling of drink and major drinks promotions. Ultimately society will be the loser and we should not lose our focus on that.

I am not carrying a torch for the vintners federation. I am not much good to it. However, I empathise with it in regard to a significant amount of what has been said on its behalf today. It is important that its members continue the work they are doing and implement the law rigorously, particularly in relation to young people. They have a controlling mechanism, whereas the law can be circumvented in other ways. Somebody who is under age can be told to leave. I advocate continuing the policy of telling someone who is intoxicated or on their way to intoxication to leave a premises, although that may not be easy to do.

Rural publicans have also provided transport for their customers. It is important that the law is implemented and that people do not drink and drive. The laws on breathalysing and so on are there for the protection of society as well and we cannot resile from them at this stage. I have noticed that a significant number of publicans, many of whom may not even be members of the vintners federation, provide transport, particularly at weekends. People are always transported safely back to their place of residence and are never left. The federation should continue to promote that way of ensuring customers are looked after. They value their customers and it is important to get them home safe and sound. Clubbing together and providing transport is a very important mechanism in that regard. However, there are issues we may have to confront in the not too distant future for the benefit of society as a whole.

Mr. Pádraig Cribben

There are quite a number of questions to respond to. I will deal with the last point first while it is fresh in my mind. It relates to the transport issue. It is one of the issues on which we have been pressing for some time. No relief is provided for any of our members who buy a people carrier to bring people home at night. There should be some relief on VRT or otherwise to accommodate the fact that they are providing a service. There has been much talk about rural transport initiatives and the need for same. If we are honest, we will not have a rural transport initiative that will be working at 1 a.m. or 2 a.m. We might as well live in the real world, and that is the real world. There is scope in terms of VRT to grant relief in respect of specific purposes such as this.

To address the issues raised by Deputy Fitzpatrick and going back to the Intoxicating Liquor Act 2008, the restriction on serving times in off-licences has worked against publicans because they cannot serve for consumption off the premises after 10 p.m. If people come in to the pub at 11 p.m., have a few pints and then decide to buy half a dozen cans and drink a few at home, the publican cannot sell those cans at closing time because they are for consumption off the premises and it would be illegal. This has worked significantly against the publican. People who consume off the premises anyway, who are home drinkers, have adjusted their buying patterns and are now buying in the supermarkets earlier in the day.

In regard to marketing and display of products, nothing has happened apart from the fact that it is dealt with in the Act. Section 9 which refers to segregation, has not been commenced. There is a so-called voluntary code of practice that from our perspective is not worth the paper it is written on because nobody adheres to it. On marketing and display, it is my understanding that the Minister had to advise Brussels and that Brussels had until 9 March to reply. We are expecting some action but we are not holding our breath. However, we believe it is a prerequisite and should happen. In terms of the 2008 Act, it has done little or nothing for the publican other than to diminish capability. On a practical basis, it has caused untold problems for publicans who at closing time have to refuse to sell to people alcohol they will not consume on the premises.

On the point made by Deputy Calleary, the answer is that we are experiencing problems with financial institutions. I have dealt with many cases involving people whose overdrafts have been cut, and not because they were being abused. It is fair to say that this is a serious issue causing ongoing problems for many of our members. Members who operate primarily in tourist areas and who require a natural overdraft from October to March, following which there is a relatively peak period from March to October, are experiencing severe difficulties because credit is not being extended. The problem is not so much that credit is not being extended but that existing credit arrangements are being negated, which is a serious problem.

As far as we can see, there is no flexibility from Revenue in regard to licensing. Without a tax clearance certificate one cannot get a licence. We are not advocating that people not meet their obligations in respect of tax and so on but flexibility is not a word in Revenue's dictionary.

Deputy Varadkar raised several issues. On water in, water out, the situation is simple. Many years ago when one paid one's rates one got water. A decision was then taken to charge for water piped into premises. In this regard, water is metered and one is charged per cubic meter of water received. Currently, it is assumed that water that goes in also goes out and as such one is charged accordingly. Also, one is charged for the meter. There is a standing charge for the meter and people are charged on the double for water on the assumption that water that goes in also goes out. In effect, costs in the past four years have trebled. Increases have been way above the rate of inflation and charges for water have doubled, which is a millstone around the necks of publicans. It is not only publicans but hairdressers and so on who are affected by this.

Deputy Leo Varadkar

How can a charge apply in respect of water that goes out if it is not metered?

Mr. Val Hanley

It is metered in and the assumption is made that whatever is metered in goes out.

Deputy Leo Varadkar

The cost of the water in is doubled?

Mr. Pádraig Cribben

Yes, it is a simple equation.

Deputy Deirdre Clune

I was under the impression that water out charges were in respect of a sewerage treatment plant and that one was paying for upgraded facilities.

Mr. Pádraig Cribben

No.

Deputy Deirdre Clune

The treatment system is not improved.

Mr. Pádraig Cribben

No, the charge applies irrespective of what plants, if any, are installed.

Chairman

This was introduced as a result of an EU directive. I want to defend local authority members who were wrongly accused and subjected to pretty vigorous comments not alone by vintners but by others in respect of the imposition of this charge. The charge was introduced by way of an EU directive this year. Most local authorities were late implementing it.

Mr. Val Hanley

They are only catching up.

Mr. Pádraig Cribben

Efficiency is what is at issue.

Deputy Leo Varadkar

Are all county councils involved?

Mr. Pádraig Cribben

The major users of water are launderettes, hairdressers and publicans. An issue arises in terms of efficiency of service provided. Some 50% of water produced is unaccounted for.

Mr. Val Hanley

It is going into the ground.

Mr. Pádraig Cribben

On the other issues raised by the Deputy, we would certainly welcome if the promised sale of alcohol Bill introduced measures in regard to minimum price. On costs, utility costs are causing serious problems. We are operating at a serious disadvantage in terms of energy and waste disposal costs. Reference was made to NERA, with whom we have had issues. We have done a great deal of work on this and are close to achieving changes in the law in regard to overtime and premium rates. In this regard, a level of sense is coming about.

On job losses, we estimate that approximately 1,500 pubs closed in the past four to five years. Taking into account that there would have been between four and six people, outside the proprietor, employed in each pub, there have been approximately 7,000 to 9,000 jobs lost, with more to come. On opening hours and the restriction on same, I do not believe there will be any clamour from us for extended opening hours.

Chairman

Most pubs are not even open in the afternoon.

Mr. Pádraig Cribben

The question related more to the back rather than front-end of the business. The cost of a special exemption rose, with the stroke of a pen last year, from €210 to €410. The €210 cost was made up of a €100 court fee and €110 stamp duty. The court costs have been increased from €100 to €300. The cost to a pub acquiring a special exemption which will provide an additional two hours trading will be €410 plus legal fees. This cost doubled with the stroke of a pen last year.

Deputy Leo Varadkar

Is that the cost per night?

Mr. Pádraig Cribben

Per exemption. As regards restrictions on pub licences, that is not a major issue as currently nobody wants them. Whereas there was a market for licences that were transferred to supermarkets as they had a particular value, the value of pub licences has diminished by approximately 40% in the past 12 to 18 months. There is not an appetite for additional licences.

Deputy Morgan asked about the potential impact of increases in excise in the forthcoming budget. There are approximately 100,000 people employed in the general drinks industry, including manufacturing, retail, service and so on. In this regard, there is a return to the Exchequer of in excess of €2 billion from VAT and excise duty. This figure does not include PAYE. We are good, unpaid tax collectors and we recognise that.

The Minister stated in late 2008 that returns from alcohol in terms of excise were diminishing. We believe this to be the case and that any additional increase in excise will not do anything for the Exchequer but will have significant consequences for jobs. Also, we export approximately €1.25 billion worth of alcohol products. Whatever else we need to do in current circumstances, we do not need to do anything that will affect jobs. There is a significant possibility any increase in excise will affect jobs.

On transport and rural initiatives, as I stated earlier, it is difficult to get an efficient transport service in daylight hours. Seeking such a service after daylight hours would be presumptuous. A great deal is happening in this area, including as mentioned earlier the service provided by publicans. Also, many publicans are clubbing together to provide transport and are making taxis available to their clients. People are addressing the issue as the need arises.

On the Chairman's comments in regard to the Competition Authority not being helpful, it is pertinent to put this in context. It would appear to us that there are two parallel universes in operation, namely, the universe that thankfully most of us live in — the real world — and, the universe of ideology. The latter states that it is better for competition to have two rather three major brewing companies in this country. The upshot of that was the loss of 300 jobs in Beamish and Crawford in Cork, and less competition and more power for super companies. That is the universe of ideology.

In the real world we are trying to maintain jobs and maintain competition, and when we try to do so we are threatened with legal action. That does not make sense to us. In our view, it is regulation gone mad. Whether it is regulation, lack of control or whatever gone mad, it is something gone mad. No doubt the consumer will be the ultimate loser.

Reference was made to there being no savings from the groceries order and the famous €50 a week that Eddie Hobbs had in his back pocket at one stage. In fairness, we have heard or seen very little of either the €50 or Eddie Hobbs in recent times, maybe for the better.

What happened when the groceries order was abolished, which is verifiable, is that the price of products that were not controlled by the order went in the opposite direction and the price of products that were controlled by the order did not increase. There is a great deal of evidence to suggest that there is a good case to be made for a form of minimum pricing for alcohol, and a form of control that helps competition rather than hinders it. At the end of the day that helps the consumer. That is what we are trying to do. We are under severe pressure to do that. We do not need the kind of threats that we have received in the past week as a result of our efforts to ensure that there be no increases in the price of alcohol and that publicans would compete. Anybody who reads the newspapers this week would have seen ample evidence of the competition in the drinks industry at retail level, with pints selling for a little as €3 right across the country.

Chairman

We read them. I thank Mr. Cribben, Mr. Hanley, Mr. O'Sullivan and Mr. Dunne for assisting us in our deliberations. Your contribution has been informative. As you will be aware, this meeting is part of our ongoing investigation into matters concerning the retail trade in Ireland. The sale of alcohol in supermarkets is controversial for many reasons and we will certainly take the views you expressed here into consideration.

As we have other business to do, I will excuse Mr. Cribben, Mr. Hanley, Mr. O'Sullivan and Mr. Dunne. I propose we go into private session to complete the business of today's agenda. Is that agreed? Agreed.

The joint committee went into private session at 11.35 a.m. and adjourned at 11.50 a.m. until 10 a.m. on Wednesday, 25 March 2009.