West Auckland liquor wars: Action Group battles The Trusts’ $40m plans to expand

The Trusts is convertings its current bottle stores to Super Liquor and LiquorLand franchises, still owned and operated by The Trusts but with access to the two chains' supply chains and other systems.

An action group is calling for a community vote before The Trusts - which has a monopoly on liquor sales in West Auckland - embark on a $40 million expansion plan.

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The call comes against the backdrop of a survey by Dot Loves Data, commissioned by The Trusts, which recently found a “bleed” of “at least $129m in 2022″ - that is revenue it lost as West Aucklanders travelled outside Trusts-controlled areas to buy liquor.

'For every $100 spent at a Trusts store over the last 10 years, just $0.82 was returned to the community,' - Trusts Action spokesman Nick Smale. Photo / Jason Oxenham

The community-owned Trusts wants to spend the $40m to freshen up its existing bars, and to open up to 10 new hospitality venues and bottle stores over the next five years.

Trusts chief executive Allan Pollard said the Dot Loves Data survey also found that West Auckland has far fewer off-licence (bottle stores) and on-licence (bars, pubs) than other parts of Auckland or Invercargill (chosen as a point of reference because it’s also controlled by a trust).

Nick Smale, a spokesman for the West Auckland Licensing Trusts Action Group, says the answer isn’t more Trusts-run bottle stores and pubs in West Auckland but opening up the area to competition to make pricing more competitive, and venues more attractive. He says he does not want an end to The Trusts, but an end to its monopoly, which his group says would see The Trusts lift its game. He says his group isn’t anti the $40m expansion per se (”Trusts pubs are better than no pubs”) but it does want it put to a referendum.

“Since 2012/13 revenues have grown a minuscule 0.7 per cent after inflation despite a population surge of around 20 per cent,” Smale said.

'We’ve been pretty much in crisis mode since I got here' [in May 2020] with Covid, floods and cyclones It’s only been in the past six months that I’ve had the opportunity to do the job'. - The Trusts CEO Allan Pollard.

“Annual profits over that period averaged just $4.4m after tax, while community returns averaged a modest $1.1 million. It’s a decidedly poor return on the $134 million that The Trusts currently manage on the community’s behalf. For comparison, KiwiSaver growth funds returned an average of 8 per cent per annum over the same decade.

“The only consistent growth story is head office expenses which have marched steadily upwards from $3.6m in 2012/13 to over $10m in 2022/23. Over the same period, the chief executive’s remuneration has moved from the mid-$200,000′s to the mid-$500,000, with a whopping 30 per cent increase in the last year alone.”

Pollard confirmed he is the un-named employee in The Trusts top salary band for FY2023 ($540,000 to $549,000 vs $410,419 in FY2022. All up, there are 19 staff earning more than $100,000, including eight earning more than $200,000.)

Pollard said the CEO’s salary was reviewed every three years by an independent party, whose recommendation for a market rate was then put to the elected board.

Unlike his predecessors, Pollard has accepted many of the Action Group’s criticisms, including those about tired venues and increasing spending on admin spending - even if he’s opposed its push for an end of its monopoly. He told the Herald he’s barely had a chance to address things since he arrived as the new-broom boss in May 2020.

“We’ve been pretty much in crisis mode since I got here. We’ve lost trading days to Covid, cyclones, flooding and extreme labour shortages,” Pollard said.

“It’s only been in the past six months that I’ve had the opportunity to do the job,” Pollard said.

He blamed the red ink in the year just gone to property investment losses.

Already a vote, of sorts

The Trusts gaining a licence for a new bottle store or hospo venue need approval from its elected board. It must then get a green light from Auckland Council and pass reviews by the police and Te Whatu Ora Health NZ.

Pollard said there was already a vote process for the $40m. The money would come from The Trusts’ current reserves. It would not be allocated in one big bang. Rather, it would be allocated to a series of projects over the next five years. Any project over $250,000 (which would be most or all of the upgrade work) had to be voted on by The Trusts’ elected representatives (the boards of the Portage and Waitākere Trusts are elected by a popular vote that coincides with council elections).

The community owned Waitakere and Portage Licensing Trusts are run by a single organisation, West Auckland Trust Services.

Pollard has the momentum in the ongoing tustle. The Action Group’s last bid for a referendum on The Trusts’ monopoly in 2021 fell 934 signatures short of the required number to trigger a referendum in 2022.

Super Liquor, man

Pollard has already driven one major reform: A transition from bottle stores with The Trusts’ own branding to The Trusts taking Super Liquor and LiquorLand franchises. The stores still feature the same staff and remain controlled by The Trusts, but they get access to nationwide pricing and systems from the two major chains (LiquorLand is part of the Foodstuffs stable that also includes PaknSave, New World, Gilmours and Four Square; Super Liquor was spun out of Lion).

Smale said the new franchise setup had not helped with pricing, but he saw it as good for The Trusts because it put them on a good footing to deal with competition, should his group be able to force it.

For now, he remains dark on The Trusts.

“West Aucklanders value the charitable grants given by The Trusts. But their ever-present marketing doesn’t tell the whole story. For every $100 spent at a Trusts store over the last 10 years, just $0.82c was returned to the community,” Smale said.

“Those same products purchased at a Pak’nSave would have cost about $80, and probably even less at Costco. Competition will leave substantially more money in the pockets of shoppers.”

Boost to $5m by 2028

Pollard said The Trusts contributed to the community in ways beyond donations and sponsorships, which go to everything from sports clubs to programmes to refurbish old laptops for lower-decile schools.

“We choose to pay a living wage, but that comes straight off the bottom line - around $600,000.”

The Trusts aims to raise donations and sponsorships to $5m by 2028.

“But we have to do it responsibly and carefully over the next five years. We’re not just going to tip all of the money in the balance sheet back to the community.”

Smale said The Trusts could still hit its goal if it was opened to competition.

The Trusts has $21m in cash and equivalents, $1m on term deposit, $14m in investment funds and $18m in investment property, according to its 2023 annual report.

“Their $5 million ambition could be immediately realised and exceeded simply by moving away from liquor,” Smale said.

Under The Trusts’ current five-year plan, he doesn’t see the $5m goal being hit - because he’s dubious about the $40m expansion fuelling an FY2028 revenue target of $165m, and says it would be no great shakes if that mark was hit.

“The revenue goal seems rather modest and is actually lower than revenues in two of the last five years after accounting for inflation,” Smale said.

“Such tepid growth is unlikely to enable the community returns promised. In 2019, The Trusts’ promised to deliver $5m in community returns by FY2021. It didn’t happen.”

Pollard said result targets had been hit by pandemic disruption, including store closures and the labour crisis.

Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.