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DOC 01 ALDI FOODS PTY LIMITED applicant for the conditional grant of a liquor store licence ALDI KARRINYUP Karrinyup Shopping Centre 200 Karrinyup Road, Karrinyup PUBLIC INTEREST ASSESSMENT Prepared by Lavan on behalf of ALDI Foods Pty Limited Ref: Jessica Patterson jessica.patterson@lavan.com.au T: (08) 9288 6946 www.lavan.com.au © Lavan 2019
Public Interest Assessment ALDI Karrinyup Table of Contents 1 Introduction 2 2 Overview of proposal 3 Consultation 6 Community demand 7 3 Applicant’s details and background 8 ALDI supermarkets 15 ALDI pricing and promotion 17 4 ALDI liquor model 19 The premises 21 Stock range 23 ALDI Exclusive Products 25 Low risk features of the proposal 27 5 Locality 28 Nature and character of local community 30 Karrinyup Shopping Centre 32 6 Section 5 37 7 Harm or ill-health – section 38(4)(a) 37 At risk groups and sub-communities 37 Social health indicators 40 Minimising harm and ill-health 43 8 Impact on amenity, quiet or good order – section 38(4)(b) 50 Outlet density 51 9 Offence, annoyance, disturbance or inconvenience – section 38(4)(c) 59 10 Tourism, community or cultural matters – section 38(4)(ca) 60 11 Other matters 62 Patronage 62 Security and crime prevention 63 12 Conclusion 66 3459-2006-0941_1162785, v.2 © Lavan 2019
Public Interest Assessment ALDI Karrinyup 1 Introduction 1.1 ALDI Foods Pty Limited (ACN 086 210 139) seeks the conditional grant of a liquor store licence to operate from a small space within the new ALDI supermarket that will be constructed at the Karrinyup Shopping Centre, 200 Karrinyup Road, Karrinyup. If granted, the licence will trade as ALDI Karrinyup. 1.2 This detailed Public Interest Assessment (PIA) supports the application and addresses all relevant aspects of the public interest in accordance with both the Liquor Control Act 1988 (WA) (Act) and the licensing authority’s Public Interest Assessment policy1 (PIA Policy). 1.3 Pursuant to the PIA Policy, the standard Locality for applications involved a site in Karrinyup is a 2km radius area surrounding the proposed site (Locality). 1.4 This PIA is part of the Applicant’s Case and should be read in conjunction with the other parts, all of which are itemised in the document titled Index of Material Before the Director and Applicant’s Case (Index). Where this PIA cites particular documents with “DOC” followed by a number (eg “(DOC 1)”), it references material in the Applicant’s Case by way of its listing in the tables contained within the Index.2 1.5 In particular, referred to throughout this PIA, are two detailed reports prepared by the following experts that the applicant engaged in respect of this application (DOCS 8 and 9). 1.5.1 Patterson Research Group3 (PRG) surveyed people living in the Locality to assess their attitudes toward the ALDI liquor proposal. This research was done in June 2019 through a series of expertly prepared questions that were put to a representative sample of residents. 1.5.2 Deep End Services4 (DES) has provided in-depth analysis of the Locality, including a detailed analysis of demographics, planning policies and strategies, trade catchment and density of licensed premises. 1.6 The findings in the reports prepared by these two experts supplement the applicant’s own research and submissions in this PIA. Collectively, the documents provide a significant volume of evidence to support the Applicant’s Case for the grant of the ALDI Karrinyup licence. 1 https://www.dlgsc.wa.gov.au/department/publications/publication/public-interest-assessment-policy. Last amended 3 October 2018 2 Supporting material referred to in this document not produced by or for the applicant has been obtained from public sources under licence. Where relevant, personal information within the supporting material has been redacted for privacy reasons. Full copies of some of the source material accompany this PIA and are listed in the Index. Other material not so listed in the Index can be made available in full if required and has only been left out of the Index to lessen the burden of paper on the licensing authority. 3 https://www.marketresearch.com.au/about_us/overview.phtml 4 http://deependservices.com.au/index.php/about-us/ 3459-2006-0941_1162785, v.2 © Lavan 2019 2
Public Interest Assessment ALDI Karrinyup ____________________________________________________________________________ 2 Overview of proposal 2.1 This application is made by a highly sophisticated and experienced packaged liquor operator, which enjoys extensive supermarket and liquor retailing experience within Western Australia, elsewhere here in Australia and overseas. 2.2 ALDI has been operating in Australia since 2001 when the first ALDI store opened in Sydney. There are now over 580 stores throughout Australia, including approximately 520 stores in the eastern states. Around 330 of those stores in the eastern states include a liquor component. 2.3 The company is in the middle of a $700 million expansion into other states in Australia, with approximately 70 stores to open in Western Australia and up to 50 stores in South Australia in total. 2.4 ALDI opened its first four supermarkets in Western Australia on 8 June 2016. By the end of 2016, ALDI had opened 19 stores in total and served approximately 3.2 million WA shoppers.5 There are currently 41 stores operating throughout this State, with more expected to open this year. 2.5 ALDI is one of the largest and most popular retailers in the world. Some customers are such passionate and dedicated fans of ALDI’s wide range of household and consumable products that they have developed their own name, “ALDIholics”. There is a customer-driven Facebook page named, ALDIholics, with its own logo depicted to the right,6 devoted to information for ALDI lovers. 2.6 Further in terms of social media, ALDI boasts strong following and popularity, as shown in the screenshots below.7 These mediums are the modern day voice of the public and significant representations of community sentiment. 5 http://www.perthnow.com.au/news/western-australia/aldi-to-open-14-more-stores-in-wa-in-2017/news- story/0de29965fcd9712852ab9b2919908286 6 https://www.facebook.com/ALDIholics/ 7 https://www.facebook.com/ALDI.Australia/ and https://www.facebook.com/ALDI.Australia/app/116943498446376/ 3459-2006-0941_1162785, v.2 © Lavan 2019 3
Public Interest Assessment ALDI Karrinyup 2.7 The emergence of the ALDI retailing concept into Western Australia, following the company’s significant popularity in the eastern states, has been and continues to be exciting and highly anticipated from the general public’s perspective. 2.8 The proposal is for a small liquor display/browse and checkout section of only approximately 35m2 within the ALDI Karrinyup supermarket. A carefully selected and exclusive range of unrefrigerated liquor is proposed to be available in a discrete and clearly designated licensed area within the supermarket. 2.9 This liquor model is entirely unique to ALDI. Its various features referred to throughout this PIA, make for a bespoke manner of trade. The boutique type of liquor service is designed specifically to complement and accompany the diverse and attractive ALDI supermarket services and facilities. This creates a true one-stop- shopping8 convenience for customers, which is a key feature of the ALDI offering. 2.10 The ALDI liquor service was first made available in WA at the end of August 2017 in five ALDI supermarkets. A total of 35 ALDI supermarkets have been approved to sell liquor in WA, 26 of which are currently operating with the liquor service. 2.11 The ALDI liquor offering is described as follows by ALDI Australia’s Wine and Sparkling Buyer, Mr Jason Bowyer:9 Like our grocery offer, ALDI’s liquor range is focused, ensuring that we offer great value and exceptional quality. Since establishing in WA more than a year ago, customers have spoken loudly about their desire for us to bring our popular liquor offering to the West. ALDI partners with a number of high calibre international and Australian wine suppliers, who each share our passion for quality. We have built strong relationships with these suppliers, who are committed to ensuring that our wine products offer great value at their respective price points. 8 This is addressed in detail in the applicant’s accompanying Legal Submissions (DOC 7). 9 https://www.aldi.com.au/fileadmin/fm-dam/Products/Groceries/Liquor/WA_Launch/ALDI_Media_Release_- _WA_Liquor_Launch_1_.pdf 3459-2006-0941_1162785, v.2 © Lavan 2019 4
Public Interest Assessment ALDI Karrinyup 2.12 In recognition of the launch of the ALDI liquor service in WA, renowned wine expert Ray Jordan was invited to sample six of the wines in ALDI’s WA stores. Mr Jordan remarked that one of the wines in particular, being a $7 bottle of One Road South Australian Heathcoate Shiraz 2015 (pictured to the right), was “damn good”.10 That Shiraz has also won several other awards, including Double Gold & Best Value Shiraz of the Year at the 2017 Melbourne International Wine Competition. This Shiraz is just one example of ALDI’s many high quality, value- for-money, award winning liquor products. 2.13 The debut of the ALDI liquor service in WA was widely embraced by the public. The following screenshots show the announcement on the ALDI Australia Facebook page11 and the swarm of favourable reactions. Many of the comments revolved around members of the public wanting the liquor service at their local ALDI supermarkets. Some examples are provided below.12 There is clearly a significant demand for the ALDI liquor service throughout WA. This anticipated demand has since translated into significant patronage and sales at the ALDI liquor stores that have begun trading. 10 http://www.perthnow.com.au/news/western-australia/aldi-will-start-selling-alcohol-in-perth-stores-from-today/news- story/c59014afc215ba475dd1265a0e89eb4c 11 https://www.facebook.com/ALDI.Australia/posts/1716136855110475 12 Personal details have been redacted for privacy reasons. A fully copy of the post can be provided to the licensing authority if required. 3459-2006-0941_1162785, v.2 © Lavan 2019 5
Public Interest Assessment ALDI Karrinyup 2.14 Pictured below is a 3D aerial image indicative of the area proposed to be licensed in respect of the liquor display/browse and checkout area. 2.15 This display/browse space is square and the displays themselves will form a basic U shape as clearly seen in the image above. This design enables convenience and a high level of surveillance of the area. The display/browse area will also comfortably accommodate shoppers with their trolleys for added convenience. 2.16 The checkout closest to the liquor display/browse area is proposed to be licensed for the purposes of the liquor transactions. Staff operating at this checkout will be able to monitor all patron activity in this area. 2.17 The very small size and layout of the liquor display/browse area clearly confirms that the liquor section is a complementary service to the supermarket and will help ensure the area is well-controlled and supervised. 2.18 Additional details of the ALDI liquor offering are provided further on in this PIA. Consultation 2.19 As part of its thorough preparation of this application, the applicant consulted extensively with relevant authorities and the local community. In doing so, the proposed liquor service has been explained and feedback sought. 2.20 The following consultation has been undertaken: 3459-2006-0941_1162785, v.2 © Lavan 2019 6
Public Interest Assessment ALDI Karrinyup 2.20.1 In 2013 a representative from the applicant company met with officers from the Racing, Gaming & Liquor arm of the Department of Local Government, Sport and Cultural Industries (as it is now known) and notified the Department in July 2015 that applications for liquor store licences would soon be lodged. The applicant has subsequently liaised with the Department in respect of modifications. 2.20.2 Representatives from ALDI and Lavan met with Police officers in the Liquor Enforcement Unit on 31 July 2015. 2.20.3 Representatives from ALDI and Lavan met with the Chief Health Officer on 31 July 2015 and again with representatives from the Chief Health Officer’s office on 12 March 2019. 2.20.4 An information and promotional flyer was distributed to households within the Locality. A copy of that flyer is included in the Applicant’s Case (Pages 29 and 30 of DOC 8). 2.21 As referred to in the next section and also throughout this PIA, the applicant also consulted extensively with the community through the market survey conducted by PRG. The findings from the survey are contained in the expert’s report (DOC 8) and show overwhelming support for the proposal and demand for the liquor service. Community demand 2.22 The market research found that an estimated 96% of people surveyed would at least try the ALDI store when it opened in Karrinyup.13 2.23 The market research reveals demand from the local community for the ALDI liquor service. “[N]early eight in ten (79%) respondents who ever buy packaged alcohol indicated that if shopping in an ALDI store which contained a liquor section, they would purchase their take-away liquor requirements in that store. This proportion was heightened to 83% amongst respondents who buy packaged alcohol at least once a month.”14 2.24 The ALDI liquor display/browse area being confined within its supermarket footprint was found to be of at least moderate appeal by 93% of respondents who are packaged liquor buyers.15 2.25 The following extract from the PRG report (DOC 8) also supports the proposition that the ALDI liquor concept certainly has the potential to change and enhance the shopping behaviours of the local community:16 13 PRG report (DOC 8) at page 5 14 PRG report (DOC 8) at page 5 15 PRG report (DOC 8) at page 16 16 PRG report (DOC 8) at page 5 3459-2006-0941_1162785, v.2 © Lavan 2019 7
Public Interest Assessment ALDI Karrinyup The packaged alcohol purchasing pattern for this locality shows that currently the most common pattern of buying packaged liquor is on a special shopping trip to a “walk in and browse” store. 43% report doing all or most of their packaged liquor purchasing on a special trip to a “walk in and browse” store, compared to 33% who shop for their packaged liquor requirements in connection with their grocery shopping. The finding that a further 30% report buying their packaged liquor requirements on about half their liquor shopping occasions (creating a net of 63% who report that they do so on at least half their grocery shopping behaviours) suggests an emerging behaviour pattern of purchasing alcohol in conjunction with grocery shopping, though still with more potential to expand further. It was not surprising to find that the option of being able to buy their packaged liquor requirements from a liquor section within the grocery store would be seen as more convenient. 2.26 The Karrinyup community members have the opportunity to enjoy the full range of ALDI’s offering, including its liquor service. The ALDI retailing concept is enormously popular with shoppers all around Australia and in other countries. 2.27 Further in terms of ALDI’s popularity within the general community, in response to the initial refusal of the ALDI Harrisdale liquor store licence application at first instance in June 2016, a massive 8,637 people took it upon themselves to participate in an Internet survey conducted by Nine News Perth (DOC 18) which asked: “Do you think ALDI should be banned from selling alcohol because it’s too cheap?” Within just two days 86% of those who participated answered “no”. This represents a staggering 7,428 people. Relevantly, the survey was conducted without any involvement from the applicant. It was completely unsolicited. ____________________________________________________________________________ 3 Applicant’s details and background 3.1 ALDI operates more than 11,000 stores across 19 countries. 3.2 The company has become a world-leading supermarket operator since it was founded in 1913 in Germany as a family business. The following provides some detail about the history of the organisation.17 The first foundation stone was laid in 1913 with the opening of a small food store in the German town of Essen. It didn't take long for this little 'service store' to become a popular place to shop. During the '40s, an expansion program was created and more ALDI stores were opened. In 1954, a celebration was held for the opening of the 50th store in Germany. By 1960 ALDI had grown to a network of over 300 stores between the Ruhr Valley and Aachen. The prosperous family business was then divided into two independent companies: ALDI Süd - to service the South, and ALDI Nord - for the North. 17 https://corporate.aldi.com.au/en/about-aldi/aldi-history/ 3459-2006-0941_1162785, v.2 © Lavan 2019 8
Public Interest Assessment ALDI Karrinyup 'Self-service' was still a relatively new retail structure in the '60s and ALDI became the first company in Germany to adopt this new retail concept. While customers were still able to take advantage of the same high quality products as before, they could now purchase them at much more competitive prices. In 1983, ALDI Süd started chilled distribution depots and sold fresh products such as cheese, yoghurt and sausages. Frozen products came in 1998 and were closely followed by fresh meat. ALDI, to this day, continues to keep up with the ever-evolving taste of the modern consumer. 3.3 ALDI’s published mission is to provide the public with “incredibly high quality at impossibly low prices.”18 This is achieved through a highly sophisticated business model involving a very focused selection of products and advanced levels of systemisation and organisation designed for optimum efficiency and product control. ALDI is dedicated to maintaining consistency in its philosophy of incredibly high quality at impossibly low prices. 3.4 ALDI is a responsible and sophisticated corporate citizen and operates pursuant to very high standards and key performance indicators, which include the following published principles:19 ALDI works to ensure customers quality products at the best price. Our responsibility to customers is intrinsically linked to the health and nutrition of all our products, and we are constantly reviewing our range to improve its nutritional content. We have a number of initiatives that go above and beyond mandated legal requirements. These include: • Providing clear product information, including easy to read nutritional and allergen labelling • Maximising the positive nutritional benefits of our products through dialogue with independent bodies • Minimising any potential harmful impacts of our products • Meeting or exceeding nationally recognized standards for health and safety 3.5 Included in the Applicant’s Case is a copy of the ALDI Corporate Responsibility Policy (DOC 12) and other ALDI published policies in respect of consumers, resources, suppliers, operations and community (DOC 13). These policies, together with other information in this PIA, collectively illustrate the applicant’s very high standards and superior level of corporate responsibility. 3.6 ALDI has published the following statements in its Smarter Shopping brochure (DOC 17): We are exacting in our pursuit of quality and work closely with all our suppliers to deliver products that meet stringent international standards for quality, nutrition and taste. Every single product that appears on ALDI’s shelves has been sampled, tested and signed off by senior management before it is added to our range. 18 https://www.aldi.com.au/en/about-aldi/customer-information/ 19 https://corporate.aldi.com.au/en/corporate-responsibility/consumers/ 3459-2006-0941_1162785, v.2 © Lavan 2019 9
Public Interest Assessment ALDI Karrinyup Once it is in our stores, the rigour does not stop there. Each and every product that appears on our shelves is tested a number of times throughout the year to ensure it still meets the strict specifications we set at the very beginning. 3.7 ALDI’s corporate responsibility principles also apply to its partners and suppliers. For example: 3.7.1 ALDI encouraged Australian suppliers to support and work with a range of international ethical sourcing groups. The following was reported in September 2017:20 Aldi has asked Australian suppliers to sign up to a range of international ethical sourcing groups and start auditing their own supply chain and manufacturing systems. …an Aldi spokesperson said Aldi’s corporate responsibility principles guide Aldi through its day-to-day actions and it is important it partners closely with its suppliers to achieve high standards. “In addition to requiring high social standards throughout the supply chain, we also aim to: source raw materials responsibly, lessen our impact on the environment, support Australian businesses and give back to the communities we operate in, and help make healthy choices affordable for our customers,” Aldi’s spokesperson said. 3.7.2 ALDI announced in October 2017 that it will help support the delivery of the New South Wales Government’s sustainability initiative, dubbed Return and Earn Container Deposit Scheme. The initiative aims to halve the number of bottles and cans thrown away in parks, beaches and waterways. In a statement, ALDI said it was “committed” to supporting and “participating in the largest litter reduction initiative in NSW.”21 3.7.3 Most recently, ALDI announced its goal to “reduce the amount of plastic packaging by 25 per cent by 2025 through a number of steps, including replacing the packaging of fresh produce to more sustainable alternatives and phasing out unnecessary single-use plastics by the end of next year”22. The company will work with its business partners to identify ways and innovate solutions to reduce their reliance on plastics. 3.8 ALDI operates pursuant to a highly-evolved corporate structure (DOC 11) and very sophisticated hierarchy whereby staff at each level are entrusted with a high degree of responsibility and are provided with extensive and comprehensive training and support. 3.9 ALDI’s pursuit of excellence and quality in all things is evident in the many accolades it has won in Australia. The following paragraphs describe some of its awards just within the past few years. 20 http://www.ausfoodnews.com.au/2017/09/11/aldi-tightens-supplier-corporate-social-responsibility-standards.html 21 https://www.insideretail.com.au/blog/2017/10/10/woolworths-and-aldi-sign-up-to-can-scheme/ 22 https://www.heraldsun.com.au/business/companies/aldi-announces-plastic-bag-ban-support-will-phase-out-singleuse- plastic-by-2020/news-story/0737f2d3da9e6547efee0a28eda09803 3459-2006-0941_1162785, v.2 © Lavan 2019 10
Public Interest Assessment ALDI Karrinyup 3.9.1 ALDI was named the 2016 Retailer of the Year by the Australian Retail Association.23 In awarding ALDI this prestigious title, the Australian Retail Association noted that a key factor behind the organisation being selected was its strong track record for creating innovative staff programs, investing heavily in its staff with above-industry standard pay and staff development opportunities. ALDI won the award “in recognition of its growth, influence and market leading policies, which have seen the supermarket chain significantly challenge the majors in its category and beyond with the implementation of innovative sales approaches.”24 3.9.2 ALDI was also nominated Roy Morgan Research Supermarket of the Year 2016. This is the fourth time since the customer satisfaction-based awards were first established in 2011 that ALDI has claimed this title.25 3.9.3 ALDI won several awards in BrandSpark International’s 2017 Best New Products Awards, “taking out the top prize in 16 different categories, including household cleaning, skin-care and fabric softener.”26 3.10 ALDI’s momentum in achievements has not stopped. Just last year alone the company was recognised for its popularity and success in the market place: 3.10.1 In July 2018 it was announced that ALDI was voted as “the most trusted brand” in Australia in a Roy Morgan Research survey.27 It was reported that the success of this global retailer in the Australian market “has been built not only on discount prices but also a reputation for reliability and meeting the needs of consumers.” Roy Morgan Research highlighted that important drivers of trust “include reliability, customer focus, knowledgeable staff, ease of contact and previous good experiences with the company, in addition to other key performance indicators.” This accolade is a testament to ALSI’s high level of corporate social responsibility and dedication to its customers. 3.10.2 ALDI recently rated at the top of Canstar Blue’s 2019 customer satisfaction ratings for supermarkets, again.28 23 http://www.smartcompany.com.au/industries/retail/73746-aldi-crowned-australias-retailer-year-embarks-major-expansion- 100-new-stores/ 24 https://www.retail.org.au/mediacentre/australias-top-retailers-crowned-at-2016-eftpos-ara-australian-retail-awards/ 25 https://www.aldi.com.au/en/groceries/awards/roy-morgan-supermarket-of-the-year-2016/. Roy Morgan Research is Australia’s best known and longest established market research company, https://www.roymorgan.com/about 26 http://www.ausfoodnews.com.au/2017/02/20/products-of-the-year-awards-for-2017-announced.html 27 https://www.roymorgan.com/findings/7653-aldi-most-trusted-brand-in-australia-201807060755 28 https://www.canstarblue.com.au/stores-services/supermarkets/. Canstar is Australia and New Zealand’s premier research and expert ratings agency: http://www.canstarblue.com.au/about-canstar-blue/ 3459-2006-0941_1162785, v.2 © Lavan 2019 11
Public Interest Assessment ALDI Karrinyup 3.10.3 In October 2018, ALDI was crowned 2018 Retail Employer of the Year at the Australian Retailers Association awards. “To be in the running, [ALDI] had to demonstrate a strong track record across a range of areas, including staff education, training and development, internal communication, community support programs and Corporate Social Responsibility”.29 The Association remarked that “ALDI have proven to be “fierce contenders” with 29 https://www.aldiunpacked.com.au/Article/October-2018/ALDI-crowned-Retail-Employer-of-the-Year 3459-2006-0941_1162785, v.2 © Lavan 2019 12
Public Interest Assessment ALDI Karrinyup a strong commitment to diversity, non-discrimination and support to all employees.”30 The Association even considered ALDI to be “pioneers in the retail sector”.31 3.11 More specifically, ALDI is also an award-winning retail liquor supplier. ALDI was named Liquor Store of the Year 2017 at the Roy Morgan Research Customer Satisfaction Awards.32 3.12 These awards by Roy Morgan Research recognise companies across a range of industries that go the extra mile to please clients and customers. These awards are “the benchmark by which customer satisfaction is measured in Australia, New Zealand and Indonesia. Reliable, accurate and totally objective, the Australian awards reflect the experiences of some 50,000 consumers, as aggregated in [Roy Morgan’s] Single Source survey over 12 months.”33 There can be no question as to the credibility of these awards and certainly no doubt that ALDI customers are immensely satisfied with the liquor service ALDI provides. 3.13 Jason Bowyer gave the following remarks on this achievement of ALDI’s:34 At ALDI Australia, we are delighted to win the Roy Morgan Customer Satisfaction Award for Liquor Store of the Year 2017. We believe that all our products, from our award- winning $19.99 Monsigny Brut Champagne to our red and white wines, deliver exceptional value, quality and consistency. It’s great to see our customers across Australia agree. Our success is based on the close relationships we have with our suppliers, who all share our passion for awesome quality. Aldi partners with some of the best producers and winemakers both in Australia and internationally, which means we can deliver exceptional quality, value and consistency to our customers. Our partnerships with our suppliers are focused on a desire to see the customer win with great-tasting wines at unbeatable prices. 3.14 The title of Liquor Store of the Year 2017 follows many individual product awards that ALDI has received locally and internationally over the years. “It recognises the 30 https://insidefmcg.com.au/2018/10/19/aldi-awarded-ara-employer-of-the-year/ 31 https://insidefmcg.com.au/2018/10/19/aldi-awarded-ara-employer-of-the-year/ 32 https://www.aldi.com.au/en/groceries/awards/roy-morgan-liquor-store-of-the-year-2017/ 33 http://www.roymorgan.com/findings/7505-roy-morgan-announces-winners-of-the-2017-customer-satisfaction-awards- 201802201125 34 https://www.theshout.com.au/news/aldi-wins-roy-morgan-liquor-store-year/ 3459-2006-0941_1162785, v.2 © Lavan 2019 13
Public Interest Assessment ALDI Karrinyup unique value ALDI can offer [its] customers with [its] tightly focused range, unwavering passion for quality and longstanding relationships with local and international suppliers.”35 3.15 ALDI certainly enjoys many accolades for its exclusive product range (DOCS 15 and 16). The following are but few examples of ALDI’s acclaimed liquor products and awards won over the past several years: 3.15.1 In 2014: “The Sydney International Wine Competition found a $6.99 Cabernet Sauvignon from South East Australia and a $9.99 Semillon, blended specifically for the Aldi discount supermarket chain, to be in its top 100. And Aldi’s $4.99 Spanish Tempranillo snagged a Blue Gold award — the equivalent of a silver medal.”36 3.15.2 In 2015: “The Sydney International Wine Competition has deemed Aldi’s discounted wine offerings among the best of the best”.37 3.15.3 In 2016: ALDI’s Prosecco “was voted as the ‘Best Value Buy’ in Winestates Annual Edition 2016” and “based on the frequency by which it was out of stock during the summer months, has been a strong performing item for Aldi”.38 3.15.4 In May 2017: “The $8 Aldi Côtes de Provence Rosé has taken out an amazing silver medal at the International Wine Challenge – an event dubbed ‘The Oscars of the wine Industry’, according to The Sun UK. The award-winning drop was competing against bottles three times its price, even beating a vintage version of the drop, which retails for over $30”39. 3.15.5 In June 2017: ALDI’s Highland Black Eight-Year-Old Scotch Whiskey received a Double Gold prize in the Melbourne International Spirits Competition. This product “beat some rivals valued three times more in price”.40 3.15.6 In July 2017: ALDI’s Oliver Cromwell London Dry Gin won a gold medal at the International Spirits and Wine Competition and was named one of the best gins in the world. 35 https://www.aldiunpacked.com.au/Article/May-2018/Lifting-the-lid-on-ALDI’s-liquor-story 36 http://www.news.com.au/lifestyle/food/drink/six-of-aldis-cheap-wines-judged-among-best-at-sydney-international-wine- competition/news-story/eb163e6f8d5e9b85a5522a8d1b622d50 37 Australian National Retailer, February 2015 at page 16: http://en.calameo.com/read/0003734959f4c8982c4bc 38 ALSA – IRI State of the Industry Report, March 2017 (DOC 10) at page 62 39 http://www.elle.com.au/culture/aldi-rose-is-one-of-the-best-wines-in-the-world-13255 and http://fortune.com/2017/05/30/best-rose-wine-challenge-aldi/ 40 http://www.news.com.au/lifestyle/food/drink/35-aldi-whisky-takes-out-top-prize-for-being-a-phenomenal-drop/news- story/14ca83dce732c7f46232a283eff29110 3459-2006-0941_1162785, v.2 © Lavan 2019 14
Public Interest Assessment ALDI Karrinyup 3.15.7 In August and November 2017: ALDI’s $6.99 bottle of One Road South Australian Heathcoate Shiraz 2015 won the Double Gold award at the 2017 Melbourne International Wine Competition and the Gold medal at the Great Australian Shiraz Challenge. 3.15.8 In October 2018: ALDI’s Blackstone Paddock Limited Release Chardonnay 2017 took home two awards at the 2018 Wine Show of Western Australia.41 This wine retails for just $14.99 and is exclusive to ALDI. Even at its price point, this Chardonnay “beat a hot field of WA chardonnays that included other more famous gold medal winners such as Vasse Felix Heytesbury, Flametree SRS Wallcliffe, Xanadu Stevens Road and Deep Woods Estate SV in winning the best chardonnay and best white wine of the show.”42 3.16 The various accolades described above, which are only a few examples, “[paint] Aldi in a positive light and [they reinforce] the fact they’re offering quality products at a value price.”43 3.17 ALDI has clearly enjoyed great success across various aspects of its organisation, including liquor. In another online article published this year, Jason Bowyer briefly explains some of the company’s strategies and its plans to maintain success:44 “Quality and value have always been the main focus for us. When you are focused on the customer, it’s easier to produce wines they will like and will also perform strongly in the show circuit. Everything we do is designed with one purpose in mind: to provide the highest quality products at the best possible prices. … “We constantly look for innovation, studying consumer trends and looking domestically and abroad for new varietals and styles. Rosé is certainly the hot topic at the moment and we will be focusing on this category, bringing a range of styles and regions to our customers. Early in 2019 we will launch a Soave (a dry Italian white wine) under our Corte Carista brand.” As well as Rosé, Aldi is looking to focus on the growing popularity of sparkling wine which Bowyer believes is driven by customers’ desire for “aspirational products” and “affordable luxury”. He sees these approaches as “undeniably different” and knows that looking ahead, he relishes the challenge of taking things another step further. ALDI supermarkets 3.18 ALDI supermarkets generally comprise a total footprint of around 2,000m2. Some are located at shopping centres (such as at Karrinyup), while others are free-standing. 41 https://insidefmcg.com.au/2018/10/10/aldis-15-chardonnay-bags-wa-wine-award/ 42 https://thewest.com.au/lifestyle/drink/aldi-chardonnay-is-best-white-wine-in-state-ng-b88983629z 43 http://www.smartcompany.com.au/industries/retail/aldi-wins-two-awards-alcohol-whats-unassuming-underdog-right/ 44 https://www.theshout.com.au/national-liquor-news/aldi-puts-trust-in-affordable-luxury/ 3459-2006-0941_1162785, v.2 © Lavan 2019 15
Public Interest Assessment ALDI Karrinyup 3.19 Consistent with other ALDI stores, the Karrinyup store will comprise the following different parts or areas, listed in order of size in terms of the approximate portion of the total area: 3.19.1 Main public retail area (non liquor) – grocery and other supermarket items. 3.19.2 Storage. 3.19.3 Loading dock/delivery area. 3.19.4 Entrance and trolley bay. 3.19.5 Checkout. 3.19.6 Office and staff facilities. 3.19.7 Liquor display and browse area (proposed). 3.20 ALDI stores are bright and pleasant shopping environments. The following images depict the stylish and clean appearance that can be found at the ALDI Karrinyup store: 3.21 ALDI operates a generic store modelling concept. The size, layout, colour, product location and stock range of each ALDI store are almost always the same. Minor differences may occur from time to time at some stores owing to land formation, town planning requirements or other unique particulars of the site. For example, the entrance door may be positioned a few metres away from its usual position at a particular location. 3.22 The standardisation of store layouts engenders familiarity for customers, enhances shopping comfort, efficiency and convenience. It also enables customers to rely on consistency of style, standard and overall offer. Importantly, these are key features of the applicant’s successful superior efficiency model of operation which benefits customers enormously and is clearly popular with shoppers. 3459-2006-0941_1162785, v.2 © Lavan 2019 16
Public Interest Assessment ALDI Karrinyup 3.23 ALDI supermarkets contain only around 1,350 core product lines. There are limited brand options within each different product line. For example, ALDI may offer only two or three different brands of plain flour, rather than five or more as is commonly stocked at most supermarkets. This enables ALDI to operate from a smaller and more user-friendly footprint and with a more exclusive and carefully selected range. 3.24 Many of ALDI’s products are exclusive versions of mainstream big-brand name items which are manufactured according to ALDI’s strict specifications to ensure quality and value for money. Expressi Coffee is one of the most popular examples. The Expressi Coffee capsule machine and coffee capsules were category winners in the 2017 Product of the Year awards.45 ALDI’s Smarter Shopping corporate brochure (DOC 17) provides further details of ALDI’s exclusive products. 3.25 ALDI’s liquor range also includes exclusive products that can only be purchased in its stores. The ALDI liquor offer is explained in further detail later in this PIA. 3.26 “The majority of ALDI’s exclusive brands are sourced from Australian suppliers and we only source products from overseas when we can’t find the product, quality, efficiency or innovation we seek, here in Australia.”46 3.27 63% of ALDI shoppers surveyed in the eastern states have said that they buy more of the ALDI exclusive products than well-known branded products.47 3.28 ALDI supermarkets offer a wide range of quality products including fresh food, packaged food, other consumables and various household and personal items. In addition, every Wednesday and Saturday “special buys” are promoted by ALDI which are specialty short-term product lines that are usually non grocery items. Flat screen televisions, furniture, clothing, appliances, BBQs, tools, gardening equipment, vacuums and toys are just some examples. These have proven extremely popular in the eastern states. Some are repeated occasionally, such as ALDI’s now well-known annual line of ski gear popular in the eastern states which customers queue for each year.48 3.29 Included in the Applicant’s Case are copies of pages from various “special buys” catalogues, by way of examples (DOC 21). A very large and diverse range of products can be seen to be on offer, including the popular clothing line by Colette Dinnigan, Dyson vacuum cleaners and a six burner BBQ. ALDI pricing and promotion 3.30 ALDI prides itself on consistently competitive pricing across all of its product lines and providing customers with exceptional value for money. The company’s ability to achieve such low prices for quality products stems from its highly sophisticated 45 http://www.ausfoodnews.com.au/2017/02/20/products-of-the-year-awards-for-2017-announced.html 46 https://www.aldi.com.au/en/about-aldi/australian-made/ 47 http://www.roymorgan.com.au/findings/6242-home-brand-products-have-way-to-go-with-grocery-buyers-201505202311 48 http://www.weekendnotes.com/aldi-snow-gear-sale/ 3459-2006-0941_1162785, v.2 © Lavan 2019 17
Public Interest Assessment ALDI Karrinyup business model which focuses on operational efficiency. With reference to a 2015 online article, the following are but a few examples of aspects of ALDI’s in-store operations which heighten productivity and reduce waste:49 3.30.1 “One of the most visible examples is trolleys. To get one you must insert a gold coin, which is refunded when you return it. That way Aldi doesn’t have to pay anyone to hang out in carparks retrieving scattered trolleys.” 3.30.2 Products in ALDI stores are displayed on re-usable crates, designed specifically for ALDI. The crates fit systematically in the ALDI warehouse, delivery trucks and supermarkets. For example, ALDI’s multi purpose beverage trays “can go from the factory to the truck to the supermarket floor without being unpacked. It can store 1.25L bottles or 2L bottles. You spend less on shelf stackers if you don’t need to stack shelves.” 3.30.3 ALDI’s products “have multiple barcodes or enormous barcodes…so the checkout person needn’t fumble and fuss to scan them.” 3.31 ALDI’s business is highly systemised and disciplined. ALDI’s shelving, storage methods, displays, product placement and other logistical aspects are designed to coordinate with each other to achieve optimum operational efficiencies for stocking products and store management. As a result ALDI is able to reduce operating costs and provide better services and facilities for its customers. 3.32 ALDI does not operate by the regular retailing method of rotating discounts each day or week. Rather, prices are maintained at a consistently low level. This means that customers know what to expect when shopping at an ALDI store. It also reduces costs and resources associated with the logistics of managing specials which involves external promotion, advertising on site, changing ticket prices, reconfiguring product placement, adjusting till systems and other processes. ALDI does not incur all of these costs, thereby enhancing its operating efficiency. 3.33 Consistent pricing is also indicative of consistent quality. ALDI does not downgrade its products through heavy discounting. The applicant is driven by quality. In this regard in terms of liquor especially, ALDI’s products very much represent value-for- money. High quality award winning liquor items are provided at prices accessible to most people. 3.34 ALDI’s policies and practices clearly achieve the goal of managing costs for the benefit of customers, whilst maintaining quality. ALDI was one of the two best performers in 2017 for gaining share in the total grocery market, up 0.8% points to 12.1%.50 Indeed “[ALDI’s] influence is growing”51 over the consumer market with its expansion in Australia. 49 http://thenewdaily.com.au/money/finance-news/2015/05/24/secret-aldis-super-low-prices/ 50 http://www.roymorgan.com/findings/7537-woolworths-increases-lead-in-$100b-plus-grocery-war-201803230113 51 http://www.ausfoodnews.com.au/2016/10/05/aldi-supermarket-shoppers-are-the-most-satisfied.html 3459-2006-0941_1162785, v.2 © Lavan 2019 18
Public Interest Assessment ALDI Karrinyup 3.35 The Australian Liquor Stores Association noted in its March 2017 report that Australian “shoppers have migrated towards the value messaging of Aldi”.52 3.36 Canstar Blue also made the following statement about ALDI:53 While ALDI doesn’t have the same number of stores as Coles and Woolworths, it’s fighting back against the duopoly with often lower prices, with its own brands offering real competition against major brands stacked by other supermarkets. ALDI also offers something different with its ‘Special Buys’, one-off or seasonal products ranging from specialty foods to snow gear to luxury skin cream. 3.37 At the opening of ALDI’s distribution centre in Jandakot in May 2016, former MLA Mr Joe Francis noted that one of the biggest benefits of ALDI was going to come from the downward pressure on prices that would be applied to the major supermarkets.54 His statement has clearly been confirmed by the evidence provided above. 3.38 ALDI’s approach to business is neatly encapsulated in its “Good Different” slogan, which was launched in early 2017. Mr Thomas Daunt, one of the applicant company directors, explained this campaign as follows: 55 ALDI Australia is unapologetically different – and that’s a good thing for shoppers. We are proud of our differences and we stand by them wholeheartedly, as they are what allows us to bring unbeatable value to our customers, maintain strong relationships with our suppliers and support our staff every day. 3.39 In many aspects, ALDI is distinctly different from alternative supermarket concepts. Its range of products and services offer outstanding points of difference that have won high favour with the public. The business model has huge popularity elsewhere in the country and is proving just as popular in this State. ALDI attracts its own loyal and faithful patrons who become regular repeat customers relying on ALDI’s consistency of product, service and value for money. 4 ALDI liquor model 4.1 The ALDI liquor model has been carefully designed to complement the supermarket and to provide adult shoppers with the dual benefit of ALDI’s liquor product range and superior convenience of accessing those products whilst doing other household shopping. 4.2 The ALDI liquor section proposed at Karrinyup has been designed based on the eastern states model originally, which has been replicated in WA and proven to 52 ALSA – IRI State of the Industry Report, March 2017 (DOC 10) at page 14 53 https://www.canstarblue.com.au/stores-services/supermarkets/ 54 http://www.watoday.com.au/wa-news/supermarket-giant-aldi-opens-60m-distribution-centre-in-jandakot-20160518- goxuro.html 55 https://insidefmcg.com.au/2017/05/15/aldis-good-different-campaign/ 3459-2006-0941_1162785, v.2 © Lavan 2019 19
Public Interest Assessment ALDI Karrinyup operate extremely successfully. The approximate 35m2 display/browse and checkout area is a very modest liquor outlet by usual industry standards, but highly valuable to customers. The particular liquor stock range itself and also as combined with the supermarket offer, represents a significant evolution in liquor retailing in Western Australia. 4.3 This liquor model has been developed based on ALDI’s many years of extensive supermarket and packaged liquor retailing experience in Australia and overseas. ALDI has been operating liquor services within supermarkets in Australia for more than 15 years. The model has been extensively tried and tested in New South Wales, Victoria and the Australian Capital Territory. In each jurisdiction it has proven to be very successful and low risk. The ALDI business model and liquor area design and layout operate with great success, are very popular with the public and have not caused any undue issues with local governments, police or health authorities at over 300 locations in Australia. 4.4 The unique proposal, unrivalled in this State and having attracted considerable custom in other locations, will provide the Karrinyup community with something capable of catering superbly for the diversity of modern consumer requirements. 4.5 The Karrinyup liquor service will operate during the same hours as the supermarket, subject to permitted trading hours under the Act,56 which the applicant seeks approval for. If the supermarket were to operate outside of the approved licensed trading hours, the liquor display/browse area would be clearly closed off to customers. 4.6 There are many aspects to the ALDI liquor model which differ from virtually all other packaged liquor outlets. The following key unique aspects of this model, which will apply at Karrinyup should the application be approved, are highlighted: 4.6.1 Combination of the ALDI Karrinyp liquor service with the ALDI supermarket. A one-stop-ALDI shopping convenience. 4.6.2 One transaction convenience. 4.6.3 ALDI exclusive product range. 4.6.4 Its small size and location within the supermarket. 4.6.5 Absence of refrigeration. 4.6.6 Absence of external presence of the liquor section. 4.6.7 The particular level of surveillance of the display/browse area which can be seen and monitored by staff at all times in its entirety. 4.6.8 Combined beneficial effects of the features listed above which are supplemented by the overall manner of trade and harm minimisation features identified. 56 Namely 8am to 10pm Monday to Saturday and 10am to 10pm on Sunday, with variations for ANZAC Day, Good Friday, Christmas Day 3459-2006-0941_1162785, v.2 © Lavan 2019 20
Public Interest Assessment ALDI Karrinyup The premises 4.7 The layout of the ALDI Karrinyup supermarket is pictured below. It shows the proposed liquor display/browse and checkout area outlined in the bold red line. This is clearly a tiny proportion of the overall supermarket footprint. 4.8 The following artist illustrations show the proposed sectioned-off licensed area which is to be established at ALDI Karrinyup. 3459-2006-0941_1162785, v.2 © Lavan 2019 21
Public Interest Assessment ALDI Karrinyup 4.9 The image on the right is indicative of how the proposed display area will appear from within the U- shaped space. Uncluttered and uncomplicated, easily accessed, light and bright. 4.10 The photographs below show other depictions of the proposed display/browse area. 4.11 It is obvious from the above images that the position, layout and small size of the liquor display/browse section enable very clear and uninterrupted visibility of and 3459-2006-0941_1162785, v.2 © Lavan 2019 22
Public Interest Assessment ALDI Karrinyup supervision into this area. This assists with security, surveillance, management and control by staff. 4.12 Thoroughly trained and suitably qualified staff members over the age of 18 will be positioned at the nearby licensed checkout at all times, where they will be able to see directly into the liquor area, unobstructed. Such constant and close surveillance is rarely achievable at most other liquor stores due to their size, location of the aisles and walk-in cool rooms. Further details of the applicant’s well developed risk management measures, which include a heavy emphasis on staff training, are set out elsewhere in this PIA. 4.13 The liquor area will be entirely confined within the ALDI supermarket and have no access or visibility from outside of the ALDI supermarket. 4.14 Some signage external to the licensed premises may be displayed which is modest and states simply that there is “liquor available in store”, but such signage will not contain images of liquor products, references to particular liquor products or prices of liquor products. An example of this innocuous kind of external signage that may be displayed is shown to the right. 4.15 There will be no cool room or other refrigeration in the liquor area. All products will be stocked and sold at room temperature. This unique feature further confirms the intention that the liquor service is genuinely designed to complement the supermarket and provide a one-stop-ALDI shop. Importantly also, the absence of refrigerated liquor significantly reduces the risks associated with liquor sold and supplied from the ALDI store. The lack of refrigeration will dissuade customers from buying on impulse with a view to consuming the liquor close by or in some other irresponsible manner. 4.16 In addition to the liquor display/browse area and the adjacent checkout, the supermarket office is also proposed to be licensed solely for the purpose of storing licensing-related documents including the approved plans, harm minimisation policy documents and incident register. The applicant also intends to store liquor in the back-of-house storage area of the ALDI Karrinyup supermarket and also at the applicant’s distribution centre situated within the Jandakot Airport commercial precinct. No sale or supply will take place from the storage facilities. Stock range 4.17 The ALDI range of liquor products comprises a modest selection of wines, beers, spirits, ciders and liqueurs. The in-store range will contain a carefully selected value for money range of approximately 95 items, many of which are award-winning. Included in the Applicant’s Case is ALDI’s current core stock range as well as its impressive list of awards won in respect of its liquor products (DOC 15). 3459-2006-0941_1162785, v.2 © Lavan 2019 23
Public Interest Assessment ALDI Karrinyup 4.18 The range will vary from time to time as new products become available, in response to customer requirements and when occasional specialty items are offered. Generally, the ALDI liquor service will include the following: 4.18.1 60 different wines – red, white, sparkling and fortified. 4.18.2 16 different beers – full, medium and light strength. 4.18.3 15 different spirits – bourbon, brandy, gin, scotch, vodka and liqueurs. 4.18.4 4 different ciders. 4.19 ALDI’s award winning and “food-friendly” wines represent excellent value for money for consumers and ensure that “affordable wines can still deliver the goods”.57 4.20 Included in the Applicant’s Case is a copy of pages of an ALDI catalogue showing liquor items (DOC 22). It is a relatively modest, yet stylish and elegant advertisement depicting quality products, including some mainstream items and some products exclusive to ALDI. The advertisement contains product information for each item, clearly demonstrating the quality and value-for-money propositions regarding the ALDI range and the fact the range is indeed carefully selected and responsibly promoted. 4.21 Within the liquor range available in any given week is a selection of new and different liquor items which change from week to week, similar to the “special buys” offer referred to earlier on the PIA. Approximately eight different products per week are made available to customers until the stocks are depleted and then new ones are brought in for customers so the product selection remains fresh and vibrant. 4.22 The applicant’s product range also includes Western Australian produced wines. ALDI has partnered with various wine makers from the Margaret River region to develop a selection of exclusive ALDI Margaret River region products (DOC 16). Those items include the following by way of example: 4.22.1 Miles from Nowhere Margaret River Semillon Sauvignon Blanc 2013 4.22.2 A.C. Byrne & Co Margaret River Chardonnay 2013 4.22.3 Vinatero Margaret River Chardonnay 2012 4.22.4 Blackstone Paddock Premium Margaret River Cabernet Sauvignon 2010 4.22.5 Robert Oatley Margaret River Cabernet Sauvignon 2011 4.22.6 A.C. Byrne & Co Margaret River Shiraz 2012 4.23 ALDI’s liquor range is determined following a rigorous process of elimination trialling and testing of products, then identifying those that offer the very best value for money which necessitates excellent quality. The optimum range is provided to customers. 57 http://www.foodwinetravel.com.au/wine/wine-features/aldi-wine/ 3459-2006-0941_1162785, v.2 © Lavan 2019 24
Public Interest Assessment ALDI Karrinyup Therefore, a smaller quantity of products is stocked than may be found at most other liquor stores. The ALDI range is much more discerning and refined than most other liquor outlets. This ensures, as referred to previously, value for money and great convenience. ALDI Exclusive Products 4.24 One of the most unique aspects of the ALDI liquor offering is the fact that it includes an exclusive range of products (DOC 15), made-to-order for ALDI stores that are not available at any other packaged liquor outlet. 4.25 The majority of ALDI’s range is unique and exclusive to ALDI. Shoppers simply cannot access those items at any other outlet. 4.26 Many of these ALDI exclusive products have been awarded medals at prestigious competitions where they are judged against much more expensive products. For example, at the 2016 Sydney International Wine Competition, the following three ALDI exclusive products (pictured below) won the competition’s highest award, the coveted Blue-Gold Medal:58 South Point Estate 2015 Rose Tudor Central Victorian 2014 Blackstone Paddock “The Player” ($4.99) Shiraz ($12.99) Barossa 2014 Shiraz ($14.99) 4.27 As a result of ALDI’s success at the event, the founder of the Sydney International Wine Competition, Mr Warren Mason, was full of praise for Jason Bowyer, remarking that he was “…probably better than anyone in terms of thinking of his market, given he’s able to offer wines at $10 a bottle or less” and adding that “he has obviously got his technique and approach right.”59 4.28 In order to become an ALDI exclusive product, the producer enters into an arrangement with ALDI whereby it is agreed that particular brand of product will not be distributed or provided to any other retailer. This means that ALDI exclusive products cannot be obtained anywhere other than at an ALDI store. 58 https://www.top100wines.com/currentyear/award_categories.asp 59 http://www.news.com.au/lifestyle/food/drink/supermarket-chain-aldi-has-come-up-trumps-with-its-cheap-wines-a-winner-at- sydney-international/news-story/a85c3072573f72e202198eda928835ae 3459-2006-0941_1162785, v.2 © Lavan 2019 25
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