The future of the corner dairy: Owners will need to 'diversify' business in order to survive without tobacco

Friday, 10 December 2021

Anyone aged 14 or under won't ever be able to legally buy tobacco in New Zealand when a new law takes effect under the Government's smokefree plan. (First published December 9, 2021.)

There’s a warning many of the 3000 family-owned and operated dairies across the country could collapse if they cannot adapt their business model to fit a tobacco-free future.

On Thursday, Associate Health Minister Dr Ayesha Verrall announced fewer shops would be able to sell tobacco products, as part of the new Smokefree Aotearoa 2025 Action Plan.

Out of the 8000 tobacco sellers, less than 500 outlets nationwide would be able to have a licence to sell tobacco.

Dairy owners’ livelihoods are on the line if they don't adapt.

Dairy owners facing loss of income from tobacco sales would not be compensated, she said.

**READ MORE:

The Detail learns that if enacted a post-Smokefree 2025 plan would essentially bar anyone born after 2004 from ever buying tobacco. Ever. (First published April 20, 2021)

* Smokefree 2025 plan is '100 per cent theory' and will destroy dairies, owners' group says

* Ban on selling ciggies will sink corner stores, says Taranaki dairy owner

* Restricting tobacco sales 'could mean the end of the road' for small dairies

Dairy and Business Owners Group chairman Sunny Kaushal said the move would collapse dairies, and owners’ livelihoods across the country.

“We all want a smokefree New Zealand, but destroying dairies and lives and families in the process is not the way. That would happen,” he said.

Circle K stores feature self-serve frozen and chilled beverages, hot dogs and food to go, with menu items such as fish & chips.

One option that has been proposed is for independent dairies to shift to a franchise model.

Holder of the New Zealand Circle K licence to franchise, Pamma Retail Group (PRG), wants to convert 100 dairies to the brand Circle K chain.

Site developer Iqubal Basra said a Circle K franchise could help dairy owners increase their profit margins and move away from their dependence on tobacco sales for survival.

Some dairies have already become franchises of Night 'n Day. (File photo).

Circle K is the largest chain of company-owned and operated convenience stores in the United States. It has four central Auckland Central stores operating now.

Basra said it is looking for 200m2 sites that can open 24 hours a day, but could also work with sites with smaller footprints or operating on reduced hours in rural or lower traffic areas.

A comprehensive training programme and team of specialists would help dairy owners move away from a dependence on tobacco as a revenue source, he said.

Selling tobacco makes more than 50 per cent of the High Street Dairy’s turnover.

“They will be able to leverage the buying power of a multinational along with the market intelligence and data insights that will help them progress with these changing customer behaviours and regulations,” he said.

Dale Patel, manager of Night ‘n Day Manners St, in Wellington’s CBD, recommended dairy owners look to diversify.

Patel owned a dairy for years, but said the support from the Night ‘n Day head office took the pressure off.

“Customers come and buy the cigarettes and tobacco, they never come and buy the milk or the bread,” Lin said.

“We don’t focus as much on cigarettes now but groceries and other conveniences,” Patel said.

Started in 1990 by Denise and Andrew Lane, there are now 50 Night ‘n Day outlets around the country.

“We don’t have to go and shop for stock ourselves as this is run from head office. I am very happy with it,” Patel said.

But north Taranaki dairy owner Jane Lin said it would be just as expensive to become a franchisee, as to lose the sale of tobacco.

“I don't want to do that. We can’t afford to do that,” she said.

Tobacco made up more than 50 per cent of the High Street Dairy’s turnover.

“Customers come and buy the cigarettes and tobacco, they never come and buy the milk or the bread,” she said.

She wouldn't be able to afford to pay her staff, and was facing closure.

“We’ll need to cut staff, we can’t afford it. It's really hard for us.”

First Retail Group managing director Chris Wilkinson understood that the shop fit-out for a convenience store franchise could be an expensive barrier for a traditional dairy.

But diversifying would help businesses remain relevant and viable as the convenience store market expanded.

“Those dairy businesses that have a Lotto kiosk or a postal service agency have adapted better than the traditional small dairy,” Wilkinson said.

In 2018 a Retail NZ report looked at the future of dairies, stating “if dairies close, communities will be deprived of what is often the last business standing.”

Retail NZ chief executive Greg Harford said this was still the case.

“Many dairies have been finding it increasingly tough over a number of years given changing consumer habits,” he said.

“They play a valuable role in maintaining social cohesion but are often heavily reliant on tobacco sales - and many are seeking to diversify.

“It's important that these businesses can continue to offer non-smoked tobacco products, but also that they look at other products and services to encourage customers to support their local shop.”