Wine in Grocery April 25, 2017

Chris Dini – Director of Grocery Operations

Grocery Operations

Agenda

Team and the Players

Program Overview

• Tranches

• Authorization Types

• Boutiques

• Definitions & Display Requirements

• Wine Catalogue Committee

The Numbers

Recalls

Pain Points & Adding Value

Resources Available

LCBO: Mandesh Dosanjh – SVP Supply Chain

Chris Dini – Director

Leanne Rhee – Account Management & Vendor Relationships

Jamie Fazekas – Policy & Operations

IT Cross Functional team

Logistics

QA – Barb Chapple

AGCO

Grocery Operations Team

Mandesh Dosanjh

Supply Chain

Supply Chain Division

Mandesh Dosanjh

Logistics

Retail Service Centres

Traffic & Customs

Specialty Services

Supply Chain

Space Management

Measurement & Analysis

Grocery Operations

Quality Assurance

Laboratory Quality

Services

Regulatory Framework

https://www.ontario.ca/laws/regulation/160232

Responsibilities

• What we are involved in… – Business-to-Business wholesale transactions

– Access between suppliers and grocers

– Listing and order flow

– Financial processing

– Fulfillment facilitation

• What we are NOT involved in – Targeted consumer marketing

– Product category management

– Grocer sales & marketing plans

– LCBO sales and promotions

– Determining wholesale product mix

• Regulates the laws pertaining to the sales,

service and consumption of alcohol

• Enforces Ontario Regulation on

Government Stores 232/16 as per but not

limited to the following

– Types of products eligible

– Shelf space requirements

– Hours of operation

– Advertising rules

– Trade spend restrictions

– Sampling rules

• WWW.AGCO.ON.CA

Responsibilities

Authorization Rollout

By tranche

Beer • Initial allocation

of 60

authorizations

• 13 companies

• Cider added

June 24th, 2016

Wine • Additional

allocation of 70

beer & wine

authorizations

• 35 restricted

• 35 unrestricted

• Wine boutiques

• 18 companies

Beer & Cider • Additional

allocation of 80

beer & cider

authorizations

• 70 Wine boutiques

+ bonus beer

• 22 companies

Dec. 15th

2015

Oct. 28th

2016

Summer

2017

Tranche #1 & #2 Allocations

Grocer B&C B,C&W

19 18 U, 2 R

15 8 U, 7 R

9 13 R

3 2 R

3 4 U, 3 R

2 2 R

1 3 U

2

1

Grocer B&C B,C&W

1 U

1

1

1

1 U

1 R

2 R

2 R

1 R

TOTAL 58* 35 U, 35 R

Grocer B&C B,C&W

1 U

1

1

1

1 U

1 R

2 R

2 R

1 R

TOTAL 58* 35 U, 35 R

Tranche #3

Beer & Cider East West North GTA Total

Large 14 19 6 26 65

Independent 3 2 0 10 15

Total 17 21 6 36 80

Wine

Authorization

Types Wine • Alc. Content ≤ 18%

• ≤ 4L in size

• No cream wine

• No wine beverages

• No fortified wine

Winerestricted 3 years

• Wine constraints +

• SMALL winery using grapes

from SINGLE COUNTRY

• QUALITY ASSURANCE WINE

using grapes from SINGLE COUNTRY that at any time during the 3 year period is a MID-SIZED winery

Wine Boutiques

Bonus Beer

+

OWNERS • VQA wine

manufactured by non-

owners

• Subject to sale targets

• No grocery Floor

GROCERS • Bonus beer & cider

• Alc. content ≤ 7.1%

• No malt based coolers

• No container ≥ 750ml

• Pack size ≤ 6

• Display requirement of at

least 20% small brewers

& 20% small cideries

Wine Boutiques

Sampling

Program • Sample non-owner wine @ boutiques

• Boutique operator must offer variety of SKUs

• Boutique applies to LCBO for sampling refund

Wine Boutiques & Bonus Beer

Current

Locations

1. London

3. Collingwood

2. Brantford

4. Brampton

7. Bowmanville

6. Whitby

5. Pickering

# of locations

Maximum

under

regulation

Wine

Definitions

QUALITY ASSURANCE WINE Wine (other than cider) that is designated as meeting the

quality control standards of a statutory appellation of origin

regime that certifies, in the aggregate, < 50M litres of wine

(excluding cider) annually

Small Winery

• Worldwide sales < 200,000 litres of sales in last 12 months

• Every affiliate of the manufacturer that manufacturers wine is a small winery

Mid sized Winery

• Worldwide sales < 4.5 Million litres of sales in last 12 months

• Every affiliate of the manufacturer that manufactures wine is a mid-sized or small winery

• Manufacturer is not a small winery

Wine

Grocery Floor

Price

Size

(ml)

Floor

Price

375 $5.90

500 $7.60

720 $10.65

750 $10.95

1000 $14.05

1500 $20.15

2000 $25.90

2250 $28.75

3000 $37.90

4000 $49.35

https://www.ontario.ca/laws/regulation/160232

Wine

Grocery Floor

Price

Size

(ml)

Floor

Price

375 $5.90

500 $7.60

720 $10.65

750 $10.95

1000 $14.05

1500 $20.15

2000 $25.90

2250 $28.75

3000 $37.90

4000 $49.35

If price falls

below floor

→ product

RECALLED

at supplier

expense

Display Requirements

Wrestricted 3 years

https://www.ontario.ca/law

s/regulation/160232

• Wine displayed in a single contiguous display area

• At least 10% of total containers of beer & wine on display

is BEER

• At least 10% of total containers of beer & wine on display

is WINE

• At least 20% of containers on display manufactured by

SMALL winery

• If VQA WINE sold must have one or more signs indicating availability of VQA wines

Display Requirements

W

https://www.ontario.ca/law

s/regulation/160232

• Wine displayed in a single contiguous display area

• At least 10% of total containers of beer & wine on display

is BEER

• At least 10% of total containers of beer & wine on display

is WINE

• At least 10% of wine on display is manufactured by SMALL

winery

• At least 50% of wine containers on display must contain

wine produced using grape from single country & ONE

of:

• Quality Assurance wine; OR

• Wine produced from SMALL winery; OR

• From a COUNTRY that produces less than 150M litres

of wine annually from grapes grown in that country

WCC

Wine Catalogue Committee • Reviews all wine submissions for inclusion in grocery catalogue

• Meets Monthly

Quality Assurance Wine

Appellation Regime Governing Body

Country Production Gov’t Institution OR Independent auditor

Producer Size (winery size)

Gov’t Institution OR Independent auditor

Issued By: Requirement

The Numbers

Fiscal 16/17

Cases

Received

Net Sales

Beer 1,056,992 $48,139,171

Cider 60,605 $3,638,974

WINE

VQA 42,019 $6,209,720

ON non-VQA 1,129 $132,104

Imports 46,903 $7,006,112

TOTAL WINE 90,051 $13,347,937

GRAND TOTAL 1,207,648 $65,126,082

Wine Market Share

In dollars

VQA

47%

ON

non-

VQA

1%

Import

52%

Wine

20%

Beer

74%

Cider

6%

Product Type Wine

Fill Rates

Fiscal 16/17

Ontario

95.7%

Vintages

91.9%

Imports

92.9%

Total

94.0%

Product

Type

Cases

Ordered

Cases

Shipped

Ontario 40,081 38,339

Imports 48,558 45,091

Vintages 2,782 2,557

Total 91,421 85,987

Making Products Available

The Process

Existing eligible wine products:

• Enter into NISS under:

Product Need #2427 Existing Eligible Wines - Grocery Channel

New Ontario wine products:

• Enter in to NISS under:

Product Need #2426 Ontario Wines – Grocery/Wine Boutique

Product Recalls

Record Year CLASS 1 CLASS 2

Product Recalls

Impact on

your Business

1) Out of market for days to weeks or longer

2) Impact to Brand

3) Fees for:

• Lab testing

• QA Admin fees

• Retail Destruction of inventory

• Repatriation of product from grocery

• Warehouse destruction of inventory

• Freight, recycling fees

• Risk of Fines by CFIA

Vendor

Experience $1,000 - $200,000

Product Recalls

What

happens?

1. Product is withdrawn from all sales channels

2. Grocery inventory is Repatriated to LCBO

for destroyal

3. Retail stock destroyed

4. Warehouse stock returned or destroyed

5. Investigation launched with CFIA

Sensory Evaluation

Risk

Mitigation

To identify faults only and

prevent defective product from

going to market

1. SKU Changes → minimum two weeks notice required

2. Consistent Supply

3. Products going below floor

Grocer Top 3 Pain Points

1. Education

• Product Knowledge

• Industry and consumer trends

2. Build relationships

How to add value in the channel

• Collecting feedback from

suppliers and grocers

• Continuous improvement

through IT enhancements

• EDI transactions

• GMS portal

enhancements

• System & Process

enhancements

LCBO’s commitment for continuous improvement

Enabling a smooth transaction

Grocery Website • www.doingbusinesswithlcbo.com

• Online webinars

• Procedure Manual

• Power point presentations

• Key Contacts

• Authorized store locations

Regulation 232/16 • https://www.ontario.ca/laws/regulation/160232

Grocery Operations team • wholesaleservice@lcbo.com

Available Resources

LCBO Resources Available to You

Questions ? Email: wholesaleservice@lcbo.com

Contingency plan for grocery

www.lcbonegotiations.com

Questions?