Forecourt Trader - 30 years at the heart of the fuel retailing community

Sparkling opportunity

02 October, 2006
As the new licensing regime beds in, legal experts say forecourt retailers should not be deterred from what is a profitable category
Page 44 

It's been almost a year since the mad rush to convert to the new licensing system. But while all the fuss may have made some retailers wonder if the category was worth the hassle, alcohol remains a big opportunity for forecourts.

It's been almost a year since the mad rush to convert to the new licensing system. But while all the fuss may have made some retailers wonder if the category was worth the hassle, alcohol remains a big opportunity for forecourts.Research by Datamonitor shows that UK consumers spent a massive 10.8bn on take-home alcohol last year and at-home drinking is now growing faster than drinking in pubs, cafes, clubs and restaurants. In forecourts, alcohol shoppers visit around three times a week and spend an average of 9.60 per trip - more than twice as much as the typical c-store shopper - according to HIM's Convenience Tracking Programme.The oil companies have continued to make the most of the increased footfall and spend the category can bring. At Esso Dave Richardson, convenience retail manager for UK & Ireland, says alcohol as a percentage of shop sales can be anything from around 5% to 10% plus. "We're seeing significant growth year to date," he adds. "Some 245 Esso company-owned sites now have licences."Catalist figures put the current number of licensed forecourts at 2,115 - just over 20% of the network. This is compared to 1,360 around the same time two years ago.But while the number of sites selling alcohol has been steadily rising, Chris Mitchener at licensing agents Lockett & Co, believes some retailers will have been put off by the new regime and the bad publicity that's surrounded it.As some local newspapers have quickly discovered, there is now more scope for objection to an off licence, as applications have to be much better advertised. And if local residents, or any of the other responsible authorities such as the police, do object to your plans, there will be a hearing and possibly appeals, which all add to the costs.However, Mitchener, whose company has worked on more than 900 licences for forecourts, says: "If the business plan says a licence is required and the premises are suitable, then generally it can be expected that it will ultimately be granted."The main obstacle to forecourts remains unchanged - retailers still need to prove that their site is not primarily used as a garage. This can usually be done using epos data or through manual recording of customer transactions. Basically, to secure a licence you'll need to have a credible retail offer. "You can have a high fuel turnover and not be disqualified as long as the shop offering is there," says Mitchener.A major gripe with the new system is the increase in costs. Previously a licence was renewed every three years at a cost of £30. Now it has to be renewed annually at an average cost of 180, based on rateable values. The initial application fee for most forecourts is 190 and there are also the costs involved in securing personal licences. What's more, some retailers have found themselves effectively being asked to pay their first renewal fee early. "We've got instances where the licence was granted last September, issued in October and didn't come into force until November 24. But the local authority is saying the anniversary of the grant is September and therefore they want their fee in September," says Mitchener.Those who don't pay will be pursued for civil debt and, while this in itself doesn't affect your licence, Mitchener warns: "Retailers have to remember that the people pursuing them for the debt also issued the licence and they will be the ones policing it." Hence it's probably wiser to pay up.With the new rules likely to be robustly enforced, thorough training of staff is even more paramount. "Keeping your licence now is something that requires far more effort and formal recording than under the old regime. If there's a problem, you've got to be able to show that you've done everything you can to avoid it," explains Mitchener.It is now an offence for staff to sell alcohol unless they have been authorised to do so by a personal licence holder. This person will also usually be the Designated Premises Supervisor (DPS), responsible for the day-to-day sale of alcohol, although sites can have more than one personal licence holder. While individual sales do not require direct supervision, there does need to be a system in place to show that overall authorisation has been given. If not, the DPS could be open to prosecution if any problems arise. "Staff have got to agree that they've been trained and authorised to sell alcohol. This requires some kind of signature sheet," explains Mitchener.Regular refresher training and re-authorisation are also important says Mitchener.Moving away from the legal side, beer sales on forecourts have increased by 33% over the past year and are now said to be worth an estimated £15m. Despite this, John Coe, director of channel marketing at InBev UK, believes there is room for improvement. "Research shows that beer only accounts for a 3% penetration of sales on forecourts, so there is a great deal of scope for expansion," he says."There are certainly areas where operators could improve their performance, notably through better use of category signage on and around the forecourt."Coe claims sales are being lost because many forecourt shoppers often just don't realise alcohol is available. If you've worked hard to secure your licence then it should be up there on the pole sign. InBev has been helping drive awareness by providing point of sale material.The forecourt beer shopper is said to be very lager-biased, with sales accounting for 95% of business, compared to 85% in the overall take-home market. Meanwhile premium lager accounts for 61.5% of sales - twice those of standard brands.The major selling period is after 5pm, when people are on their way home. And research has found that around 60% of beer is consumed within three hours of purchase so chilling could be a major selling point for forecourts over the multiples.CIDER SURGE Cider has been enjoying a revival over the past year, with much of its success being attributed to the heavily marketed brand-of-the-moment, Magners Irish cider. The product has been so popular that its Irish owner C&C has struggled to keep up with demand, particularly in take-home, and is said to be planning to increase its production capacity for next year.In the impulse sector volume sales of cider are up 5%, while value growth has grown by 9%, according to AC Nielsen figures. Premium brands are said to be driving the category.John Mills, managing director of Gaymer Cider Company, says forecourts should focus on the mainstream brands and keep them chilled for customer convenience.GRAIN TO GRAPEBritish consumers are now drinking more wine than beer, according to research by AC Nielsen carried out for leading winery E&J Gallo.The wine market has grown by 88.2% in the past seven years, with overall sales of 4.4bn last year compared to 3.2bn for beer.E&J Gallo claims that it's the big brands that are spurring this growth as consumers seek products that deliver "consistent, reliable quality and value."Sales of branded wines have almost trebled in recent years, while own-label and unbranded varieties have stayed flat.LEGAL UPDATEThe Licensing Act 2003 came into force on November 24, 2005 and the administration of liquor licensing has now been transferred from the magistrates court system to local authorities.The Act covers four licensable activities, two of which can apply to forecourts - the sale by retail of alcohol and the provision of late-night refreshment. This means that you need a premises licence to sell hot food and drinks after 11pm, regardless of whether or not you offer alcohol.As well as a premises licence permitting the sale of alcohol, your site will also need at least one personal licence holder, one of whom will be named as the Designated Premises Supervisor (DPS).It is an offence for staff to sell alcohol unless they have been authorised to do so by a personal licence holder, usually the DPS.A personal licence costs 37 and is valid for ten years. To apply you must be aged 18 or over and will need an accredited licensing qualification.24-HOUR OPENINGThe new Licensing Act also offers the opportunity for forecourts to extend their licensing hours, subject to the impact on local residents and the expert opinions of the responsible authorities. Esso, for example, has secured 24-hour licences for most of its On The Run sites, and licensing agent Chris Mitchener believes that 6am to midnight or 6am-2am are becoming more typical hours for forecourts. He estimates that around 200 sites have opted for 24-hour opening.Kitchens Garage in Burnley, Lancashire, owned by Steven Blackadder, now sells alcohol around the clock and site manager Christine Aitkin says it's made a big difference to shop sales."We've more than doubled the takings on alcohol," she says. The site's management team was apprehensive about extending their hours at first, admits Christine. The threat of violence was a concern, however there have been far fewer problems than they expected. "The trickiest part is turning away drunk people but we've not had any trouble," she says.



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