Sounds like the cashier is inadequately trained. If you can see that they are a family shopping together there's no reason to suspect that this would be a proxy sale, it's clearly evident that they wanted to purchase the alcohol for themselves. If the children were random strangers from the street I'd understand, but the fact they are the children of the people purchasing the alcohol is beyond me.
Of course the store manager will always back up the cashier, once they've asked for identification they have to provide. There's no way out. But you can use your own discretion and common sense to know the alcohol wasn't for the children. If that was the case then thousands of families everyday across the country would be getting declined sales for alcohol - on suspicion of a proxy sale.
I'd suspect the person who served them was some 50-something year old woman with a stick up her arse.