Given the recent category growth of craft beers, spirits and new ready-to-drink alcoholic blends, there has been a corresponding growth in start-ups in this space. This in turn has led to an increase in brands that choose to forego the traditional shop front and only sell their products through either retail or online. This trend was particularly accelerated through the pandemic with the massive increase in home delivery. As a result, the regulators across Australia responsible for enforcing liquor licensing laws (which is frustratingly different in each State and Territory) have found themselves adapting the licence requirements to these new business models.
Such regulatory changes are very necessary as nearly all liquor licensing regimes across Australia have a tradition of licensing physical premises, rather than businesses per se. However, unfortunately, one State has implemented a new ‘remote sellers’ liquor licensing category with such ridiculous requirements that it threatens to undermine the third-party fulfilment services that have been developed over the past few years to facilitate direct-to-consumer supply of alcohol from brand owners.
Changes to the Victorian licensing regime
In Victoria, any business selling liquor products online without a physical retail premises will be required to obtain a liquor licence under the new ‘remote sellers’ licence category, which came into effect on 4 October 2022. Existing businesses operating under a renewable limited licence will automatically have their licence transferred to the new category if they only sell products online and are therefore considered to be a ‘remote seller’.
Conceptually, creating such a licence category makes complete sense. However, the details do not. The major implication of this change is that remote sellers are now required to nominate an exclusive physical area to be deemed the ‘licensed premises’. This area must be where the ‘supply’ of liquor occurs, which – according to the new legislation – is where the liquor is picked and packed for the order (but not stored). Licence applications must be accompanied by a warehouse floorplan with the applicant’s exclusive physical area outlined with a red line. Businesses who intend to supply orders from multiple premises must provide details and plans for each location in their application and then ensure that the application is displayed at each premises.
Practical impact of the change
This requirement makes sense when the entity selling the alcohol and the entity storing or shipping the alcohol are one and the same. It will not affect major retailers from creating and moving to online stores, although they might have to have a separate part of their warehouse for online sales as opposed to product to be sold through bricks and mortar (as silly as that sounds). Nor will it affect businesses that own their own physical manufacturing facility (eg a craft distillery that wishes to sell online only).
However, it is likely to be devastating for any new or existing alcohol brand that outsources manufacture (ie does not own the physical premises where the alcohol is made nor will be granted a licence over such premises as manufacturers like to provide their facilities for multiple customers) and subsequently outsources its direct-to-consumer delivery to a fulfilment service. Victorian remote suppliers will now need to ask their warehousing/fulfilment partner to override a certain part of its already licensed area to nominate as exclusive shelf space for the supplier’s business. In other words, a company that stores and ships alcohol for brand owners will have to have a piece of its physical premises licensed not under its own name but instead exclusively to any brand owner selling direct-to-consumers online.
Having designated shelf space for every individual supplier is plainly inconsistent with how warehouses operate in practice. Most warehouses are used by several – often hundreds – of different suppliers at any given time and any shelf space used to pick and pack an order is generally only occupied by products from one individual supplier for a day at a time.
Prior to 4 October 2022, an alcohol brand could have sought a liquor licence and the regulator would have had the discretion not to require a floor plan as in such circumstances the brand owner (ie the person conducting the actual online sales of the liquor), the manufacturing facility, and the storage and delivery services all would have had their own liquor licences. There was no regulatory enforcement gap, as each of these business categories individually triggered obligations to hold their own licences. They still do. The key issue is now that any Victorian alcohol brand owner that outsources manufacture cannot sell online and deliver to consumers unless they find a fulfilment service willing to grant them some permanent floor space for their use only. This is a ridiculous and completely unnecessary regulatory obligation.
Thankfully, other States and Territories – in developing their own online-only liquor licence categories – still require a physical premises to be licensed but are not requiring that those physical premises be where the alcohol is picked and packed. It could be a business address, which is a completely logical requirement in this technological day and age.
Given that Victoria allows for direct-to-consumer delivery of liquor from businesses licensed in other States and Territories, these changes will likely drive any alcohol brand that outsources manufacture or any fulfilment service that wishes to serve multiple customers out of the State.
Are you affected by the change?
If you’re a business affected by this change or need advice on any liquor licensing issue, feel free to contact a member of our Food & Beverage team at food@khq.com.au.
