The devastating impact of lockdown’s liquor restrictions

The devastating consequences of liquor restrictions has been highlighted by recent research into the off-site consumption liquor industry.

Research showed that almost 3,000 jobs and about R8.5 billion in sales have been lost as a result of current restrictions, which only allowed liquor sales from Monday to Thursday.

This has cut revenue in half for liquor stores.

The research was conducted for the Consumer Goods Council of South Africa (CGCSA) and the Liquor Traders Association of South Africa (LTASA) by Ipsos to determine the impact of the Covid-19 regulations on the off-site consumption liquor sector.

It included over 1,400 individually owned liquor stores that employ over 14,000 people.

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Liquor restrictions gift to illicit sellers

Researchers concluded that the four-day trade restrictions imposed on retail liquor stores are unjustifiable, discriminatory and uncompetitive, and fuelled the illicit market, with significant revenue loss for government.

Liquor restrictions were eased for onsite consumption, allowing establishments to serve liquor seven days a week.

Sales volumes have dropped by 20%-50% across the retail formats per month, with at least 67% of stores interviewed saying they will have to close down if the restrictions continue, with 35% at risk of closing in less than three months and another 25% in six months or more.

Liquor retailers are also losing about 50% of revenue that could have been earned from Thursday to Saturday.

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Job losses due to liquor restrictions

According to Sean Robinson, chairman of LTASA, many of these stores are black-owned and the majority of the employees are black women who are bread winners.

They now run the risk of losing their jobs and the consequences will be devastating.

Further retrenchments cannot be ruled out due to the lockdowns so far, and considering that some retailers may need at least six months to fully recover from successive lockdowns.

Some businesses even indicated they can only operate for another month with the current restrictions.

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Weekend losses

Liquor stores also have to continue paying all the overheads, even hough they have been losing about 50% of their revenue due to being forbidden from trading from Thursday to Saturday.

Small liquor outlets are losing as much as 65% of weekly turnover, as people find it more convenient to buy liquor after five on weekdays and on weekends.

The restrictions on liquor sales have also snowballed to affect other industries.

While retailers have cut staff and costs, they have also been negotiating with landlords for reduced rent, but this ten affects the income of commercial property owners.

Liquor store owners have also tried other avenues to survive, such as reducing working hours and wages, diversifying product and service lines or changing or improving their operations models.

Others have tried their hand at e-commerce or cut discretionary spending and salary increases.

Some also renegotiated leases or debt repayments, or applied for government support although not all have received the required funding.

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Economic impact

“The economic impact of the restrictions has been dramatic and devastating for small businesses as well as their employees and families.

“The continued bans on the sale of alcohol without significant government support, such as the TERS [Temporary Employee/Employer Relief Scheme], could see the decimation of the independently owned liquor store sector,” Robinson says.

The organisations points out that it is particularly worrying that the restrictions have simply “gifted” the illicit market, which has grown since the first total ban on alcohol sales was imposed in March 2020.

“People have found ways to access alcohol which has benefitted unregulated, illegal operators to the detriment of responsible, law-abiding liquor traders.”

Robinson says restricting trade to four days is not a viable or sustainable solution to respond to Covid-19 cases.

“Alcohol restrictions are merely driving trade to the illicit market while causing irreparable harm to the sector through closures and job losses.”

CGCSA warns that the longer the restrictions continue, the higher the probability becomes that illegal trade will be institutionalised while licensed liquor traders face bankruptcy as they continue to lose a significant portion of three days of their weekly revenue.