Good in spirit but flaws remain

The sale and supply of alcohol in Invercargill is largely controlled by a licensing trust, a...
The sale and supply of alcohol in Invercargill is largely controlled by a licensing trust, a unique model which redistributes profits to the community. PHOTO: SAMUEL RILLSTONE
There aren’t many left around the country, but in Invercargill, the licensing trust model is alive and well — controlling the sale and supply of alcohol in the city. Local democracy reporter Matthew Rosenberg looks into the system, and why it isn’t more widely used.

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Walk into any Invercargill supermarket and you may notice the missing alcohol section.

That’s because the community-owned Invercargill Licensing Trust (ILT) has exclusive trading rights for taverns, hotels and off-licences in the city.

It’s a unique setup with a key function of redistributing profits to the community, dating back to the 1940s.

In 2024, just 17 of the 30 have survived, and none have been established in almost 50 years.

Invercargill’s version operates 23 businesses and made a profit of more than $11 million in the 2022-23 financial year, before tax and donations.

For that same period, it returned over $8 million to the community.

Proceeds included money from gaming machines at trust venues, which made up 70% of donations.

"The concept of community ownership is both our uniqueness and our reason for being," the trust’s website trumpets, declaring its vision for a "vibrant Invercargill".

But is the trust model really a good thing for the community? Or contentious by nature, because of the product it hinges on?

University of Otago professor Joe Boden has been involved fulltime with the Christchurch longitudinal study for 19 years, allowing him to examine the effects of alcohol over the life course.

He speaks positively about the model.

"I actually think they’re theoretically good entities," Prof Boden said.

"In terms of redistributing the profits, we have two choices.

"One where parts of the profits are redistributed to the community ... or all the profits magically vanish to multinational corporations.

"In general, I think we just have a serious problem that large multinational corporations make a huge amount of profit from people who are drinking themselves into serious health problems."

The statistics make for sobering reading; according to the most recent data from alcohol advisory Amohia Te Waiora (2017-18), 79% of adults consumed alcohol in the past year, a-quarter of those doing so hazardously.

Prof Boden doesn’t pull any punches when he talks about those dangers.

"As consumption increases, health and social problems associated with alcohol increase.

"It’s entirely linear," he said.

"We could really cut into a lot of lifestyle diseases if we could get our alcohol consumption down."

Flaws of the system

The Salvation Army social policy analyst and advocate Ana Ika understands the cost of alcohol to society better than most.

Although positive about the trust model on the whole, she is quick to point out its flaws — as evidenced by a situation last year in the West Auckland suburb Glen Eden, where profit became the main motive.

In that instance, the trusts ignored the wishes of the community by trying to open a new bottle store, ignoring the objections of more than 200 people, she said.

It was ultimately stymied, but only after a hearing took place.

"If they’re not listening to the community and continue to create liquor outlets in areas where there shouldn’t be any more liquor outlets, then that’s the issue and the challenge that we have."

On the flipside, the trust model could be beneficial by reducing the visibility of alcohol.

The Salvation Army was aware of some tangata whaiora (persons seeking health) who would shop in the section of West Auckland controlled by the trust, so that they wouldn’t have to see alcohol in the supermarkets.

Ms Ika also believes the extra layer of transparency in reporting set it apart from the contentious pokie grants system, which her organisation was critical of because of a lack of clarity around Department of Internal Affairs data.

"The reason we like the trust model is because they’re supposed to be in favour of the community.

"When the trust works for the intended purpose that it was created for — the betterment of communities — that’s when the trust model is a lot better."

Big opponents of the trusts

For the trusts to be effective, they must be transparent.

Those are the thoughts of University of Otago marketing lecturer Dr Rob Hamlin.

Dr Hamlin describes the system as a monopoly necessitated by a high degree of accountability, mainly because any breach of trust could be used against it by those wanting to see its downfall.

The licensing trust model was not one that could be established from scratch in today’s world, he said.

"The main opponents of the licensing trusts, particularly in this country, are supermarkets.

"I think it’s fairly clear that the likes of Foodstuffs and Woolworths Australia and all the other liquor stores would not be returning nearly the amount of money to the community that the licensing trust does."

Dr Hamlin has the personal view that money should not go to sports clubs, pointing out that pokie money was undesirable in the sense it saw the lower classes support the recreational activities of the middle classes.

"I think the main thing is the decision-making where the money goes has to be transparent."

How accountable are trusts?

As a public entity, the licensing trusts come under the mandate of the auditor-general, who in 2014 highlighted key concerns about their oversight.

The auditor-general said the trusts were a high-risk but little-known part of the public sector with little or no visibility in Parliament, and there was a lack of general oversight other than by elected trustees.

"A high proportion of their transactions are in cash, and they trade in small but attractive items," the auditor-general said at the time.

"These factors increase the risk of fraud and theft by customers and staff.

"I have long been concerned that licensing trusts are one of the least scrutinised parts of the public sector."

Contacted for the story, a spokesperson for the office indicated not much had changed from an oversight perspective, but there were plans for a follow-up report later this year.

What does Invercargill Licensing Trust think?

Two years ago, Invercargill Licensing Trust opened a 4.5-star hotel in the CBD to the tune of $52...
Two years ago, Invercargill Licensing Trust opened a 4.5-star hotel in the CBD to the tune of $52 million. ILT Group consists of two brands: ILT redistributes money from alcohol sales, and ILT Foundation redistributes money from pokies. PHOTO: LAYTON FINDLATER / SUPPLIED
In response to questions from Local Democracy Reporting, ILT chief executive Chris Ramsay said no two licensing trusts were the same.

Mr Ramsay said his trust was more diversified than others because only six of its 23 businesses were standalone bottle stores.

The trust firmly believed in ensuring shareholders and the people of Invercargill were given as much information about its performance as possible.

"We always run a monthly public meeting. This is advertised, and every month we send the open agenda directly to all local media."

The trust’s only true monopoly was its retail bottle stores, which was questionable because of changes to online alcohol purchasing, he said.

A number of competitors in Invercargill ran what were essentially bars, and competing hotels had existed in the city for decades.

While some sections of the trust’s meetings were made private because of "commercial sensitivity", the landing point for donations remained ever visible.

ILT’s most recent annual report, released last year, listed more than 300 grants.

They ranged from $350 for Grasmere Indoor Bowls Club to $500,000 for Invercargill City Council’s museum redevelopment.

Rugby Southland received $555,000 across two donations.

With less than 20 remaining across the country, and their existence a chagrin to the supermarket industry, could the days of the licensing trust be numbered?

Mr Hamlin said one thing is certain: public support has been crucial for the ones that have lasted this long.

"Otherwise they wouldn’t survive."

— LDR is local body journalism co-funded by RNZ and NZ On Air.