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The ruling comes as the Government has moved to plug the gap in the law which put Brockville Four Square's liquor licence under threat because of the amount of tobacco it sells.
Large increases in taxes in recent years meant almost 40% of its sales came from tobacco, making it the largest source of revenue as opposed to ``food products''.
The law did not allow stores which had tobacco as their ``principal business'' to sell alcohol.
As the Government's planned changes were not yet in force they had no bearing on the Dunedin district licensing committee's decision to allow Brockville Four Square to continue selling alcohol.
The committee instead ruled the store was an exception to the law because of the ``special characteristics'' of the area it served.
The area was one of low socio-economic status and many people did not own cars.
Shop co-owner Greg Davis said the committee's ruling and the Government's law change was a case of common-sense prevailing.
``I think they've done a good job and come up with a good outcome.
``It's good for us, it's good for the community,'' Mr Davis said.
The threat of losing alcohol sales was stressful.
``When you are in a small business, any cost is a big cost.''
He was pleased the Government's move would mean other small grocery shop owners would not have to go through the stress he went through.
``It makes life a bit fairer for people.''
Associate Justice Minister Mark Mitchell announced last week the Government was taking steps to remove the ``unintended impacts'' of increased tobacco taxes.
``It is not the purpose of tobacco excise tax increases to restrict small grocery stores from being able to sell alcohol,'' Mr Mitchell said.
To address the problem, it would make minor changes to the Sale and Supply of Alcohol Regulations 2013 to exclude the tobacco excise tax when determining a store's principal business.
District licensing committee chairman Colin Weatherall welcomed the change after the committee raised ``serious concerns'' about the unintended consequences in its decision.
Foodstuffs government relations general manager Melissa Hodd was also pleased by the move.
``A large number of our Four Square stores were at risk of losing their alcohol licence when their licence next came up for renewal, and the change to regulations will fix this unintended consequence of tobacco excise hikes.
``This is a common sense decision that supports small business, and consumers' interests,'' Ms Hood said.