Giving back in a COVID world

The Trusts are starting to make noises about giving back to help the community cope with COVID-19 . They’re conducting a workshop next week to develop the next steps toward their stated aim of “finding a way that they can best serve our West Auckland community in the short, medium and long term”.

But under the difficult conditions that COVID-19 has created, what can we reasonably expect from The Trusts? Can they give back, and if so, how much and what form should it take?

Can The Trusts afford to give back?

In short, yes.

Hospitality may be closed but retail liquor sales are running higher than normal under lockdown. Australian data during their lockdown shows bottle shop sales were 22 percent higher than the previous year. New Zealand data shows our alcohol consumption during lockdown isn’t much different to normal. The average weekly consumption during lockdown for NZ drinkers was 14 standard drinks versus 12.5 standard drinks in normal times. With bars, restaurants and most bottle stores closed, those options still available (supermarkets, online retailers and licensing trust stores) must be experiencing greater than normal volumes.

In their latest annual report, The Trusts generated 84% of their revenue from retail. The Trusts should therefore be pulling in plenty of cash – perhaps even more than normal.

If The Trusts have lost significant revenue, it is not a direct result of the COVID-19 situation so much as their own inability to react quickly. There is a sharp contrast between the speed and effectiveness of the supermarkets and liquor stores in other areas (who moved incredibly quickly to implement online sales) versus The Trusts whose difficulties have been well documented by us and the media.

So cash shouldn’t be an issue, thus the question becomes one of priorities.

How much should they give back?

The Trusts have previously been very clear that they planned to increase their giving back to $5 million in 2020/21 (and keep that ongoing from there). From their last annual report:
“OUR AIM IS TO GIVE BACK $3.5 MILLION IN 2019/20, $5 MILLION BY 2020/21”.

Five million was seen as a sustainable level of Giving Back and they should stick with this plan. In lean years, this might mean that the net worth on their balance sheet shrinks and in richer years it will grow. Allowing the net worth to fluctuate somewhat is far preferable to turning off the tap of community funding in times of need (such as now).

But will 2020/21 be a lean year for The Trusts? Forecasting at the moment is more or less impossible but there’s a very good chance that The Trusts will deliver at least $5 million in profit in 2020/21. The liquor retail sector is relatively unaffected (perhaps even positively affected) by COVID-19. Their hospitality business will become even more of a millstone on their finances, but it never made much of a contribution anyway. Their investment asset values will likely take a significant hit, but this should be more than outweighed by recognising the re-valuation of Richardson’s Tavern, which was sold in 2017/18 but is only due to settle in September 2020. With a council valuation of $10.5 million, this settlement/revaluation will likely add something like $8 million to their profit line (and their cash balance too).

How should they give back?

We’ve been highly critical of The Trusts’ giving back in the past and have consequently seen some improvement. Late last year, a planned household distribution was ditched in favour of topping-up the Million Dollar Mission. The current situation demands that The Trusts step away entirely from self-promotion and focus their giving back on the wellbeing of their community.

That means an end to the Million Dollar Mission and sponsorships. Every dollar spent on promotion is a dollar not spent on supporting the community. Self-promotion (including sponsorships) serves to drive awareness and brand affinity for The Trusts. It isn’t justified by commercial gains (i.e. increased sales) and simply acts to protect the monopoly and promote the re-election of those currently in control. Their self-promotion has always been in bad taste, and in the context of COVID-19 and a community that will desperately need the funding, to continue these sorts of activities would be ugly, cynical and self-serving.

How’s it looking so far?

The noises coming from The Trusts are good that they’ll continue to give back, however the nature of the giving back isn’t looking so great. The Trusts have already sponsored ($50,000) a home-monitoring initiative through the Well Foundation . The initiative looks like a worthy project, but it doesn’t seem quite right that funding for COVID-19 related health projects are reliant on finding external sponsors (because they’re not).

The Well Foundation attracts additional funding for the Waitemata DHB through donations and corporate sponsorships. It’s a pragmatic setup allowing the DHB to secure private funding by monetising the public appeal of certain projects. Corporate sponsors buy-in for the positive public relations opportunities that the project provides. That The Trusts’ sponsorship was announced during the peak of the negative media coverage screams of $50,000 spent to generate some positive coverage.

Competition is still the best option

Now, more than ever, West Auckland would benefit from competition. The best giving back would be letting go of their monopoly. The National Business Review published a piece this week that couldn’t have been clearer about the relative return of their liquor business “It doesn’t take a genius to see the trusts could deliver a better return to their communities by exiting the monopoly liquor store business and investing in a balanced portfolio”.

COVID-19 is wiping out hospitality across NZ, but in time the sector will recover and new venues will set up to fill the void left by those that didn’t survive. Unemployment will likely reach levels not seen in generations. The monopoly is a totally unnecessary constraint on hospitality and removing it would help foster a faster recovery in hospitality, creating more jobs in West Auckland.

The lower prices available at supermarkets also puts money in the pockets of West Aucklanders. The Trusts have published a price list and we’ll post a comparison with supermarkets soon, but the headline figures were that different supermarket chains were 5%, 11% and 18% cheaper than The Trusts. Putting wine and beer into West Auckland supermarkets would deliver $5.4 million in saving back into the wallets of West Aucklanders.

A quick note on our representatives

As you’ll know, Andrew Flanagan and Ben Goodale were elected to the licensing trust boards last year. All elected members have been advised on their legal duties and constraints and as part of this, Ben and Andrew are unable to disclose anything discussed in closed sessions or that might impact the Trusts negatively. We believe The Trusts operate behind closed doors more than they are allowed and we currently have a complaint lodged with the Ombudsman about this. Andrew and Ben are working to help make the activities of The Trusts more transparent, and more aligned with our goals, whilst observing their legal responsibilities. This means that although they can’t be too overt in comments in social media, they remain a part of WALTAG, share our opinions and are working constructively within their boards to achieve positive change at The Trusts.