Grocery Operations Wine in Grocery April 25, 2017 Chris Dini - PowerPoint PPT Presentation

Grocery Operations Wine in Grocery April 25, 2017 Chris Dini – Director of Grocery Operations

Team and the Players Program Overview Agenda • Tranches • Authorization Types • Boutiques • Definitions & Display Requirements • Wine Catalogue Committee The Numbers Recalls Pain Points & Adding Value Resources Available

Grocery Operations Team 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

Supply Chain Division Mandesh Dosanjh Mandesh Logistics Supply Chain Dosanjh Supply Chain Retail Service Traffic & Space Measurement & Centres Customs Management Analysis Specialty Services Grocery Quality Operations Assurance Quality Laboratory Services

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

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

Authorization Beer & Cider Beer Wine Rollout • Additional • Initial allocation • Additional allocation of 80 of 60 allocation of 70 beer & cider By tranche authorizations beer & wine authorizations • 13 companies authorizations • Cider added • 70 Wine boutiques • 35 restricted + bonus beer June 24 th , 2016 • 35 unrestricted • 22 companies • Wine boutiques • 18 companies Summer Oct. 28 th Dec. 15 th 2017 2016 2015

Tranche #1 & #2 Allocations Grocer B&C B,C&W Grocer Grocer B&C B&C B,C&W B,C&W 19 18 U, 2 R 1 U 1 U 15 8 U, 7 R 1 1 9 13 R 1 1 1 1 3 2 R 1 U 1 U 3 4 U, 3 R 1 R 1 R 2 2 R 2 R 2 R 1 3 U 2 R 2 R 2 1 R 1 R TOTAL TOTAL 58* 58* 35 U, 35 R 35 U, 35 R 1

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 Wine Wine restricted 3 years Types • Alc. Content ≤ 18% • Wine constraints + • ≤ 4L in size • SMALL winery using grapes from SINGLE COUNTRY • No cream wine • QUALITY ASSURANCE WINE • No wine beverages using grapes from SINGLE COUNTRY that at any time during the 3 year period is a MID-SIZED • No fortified wine winery

Wine + Boutiques Bonus Beer OWNERS GROCERS • VQA wine • Bonus beer & cider manufactured by non- • Alc. content ≤ 7.1% • No malt based coolers owners • No container ≥ 750ml • Pack size ≤ 6 • Subject to sale targets • Display requirement of at • No grocery Floor 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 •

3. Collingwood Wine Boutiques 7. Bowmanville & Bonus Beer 5. Pickering Current Locations 6. Whitby 4. Brampton 2. Brantford 1. London

# of locations Maximum under regulation

QUALITY ASSURANCE WINE Wine (other than cider) that is designated as meeting the Wine quality control standards of a statutory appellation of origin regime that certifies, in the aggregate, < 50M litres of wine (excluding cider) annually Definitions 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

Size Floor (ml) Price Wine 375 $5.90 500 $7.60 Grocery Floor 720 $10.65 750 $10.95 Price 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

Size Floor (ml) Price Wine If price falls 375 $5.90 below floor 500 $7.60 → product Grocery Floor 720 $10.65 RECALLED Price 750 $10.95 at supplier 1000 $14.05 expense 1500 $20.15 2000 $25.90 2250 $28.75 3000 $37.90 4000 $49.35

Wine displayed in a single contiguous display area • Display Requirements • At least 10% of total containers of beer & wine on display is BEER W restricted 3 years At least 10% of total containers of beer & wine on display • is WINE At least 20% of containers on display manufactured by • https://www.ontario.ca/law s/regulation/160232 SMALL winery If VQA WINE sold must have one or more signs • indicating availability of VQA wines

• Wine displayed in a single contiguous display area • At least 10% of total containers of beer & wine on display Display is BEER Requirements • At least 10% of total containers of beer & wine on display is WINE • At least 10% of wine on display is manufactured by SMALL W winery https://www.ontario.ca/law At least 50% of wine containers on display must contain • s/regulation/160232 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

Wine Catalogue Committee • Reviews all wine submissions for inclusion in grocery catalogue • Meets Monthly WCC Issued By: Requirement Quality Assurance Appellation Regime Wine Governing Body Gov’t Institution OR Country Production Independent auditor Producer Size Gov’t Institution OR (winery size) Independent auditor

Cases Net Sales Received Beer 1,056,992 $48,139,171 The Numbers Cider 60,605 $3,638,974 Fiscal 16/17 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

Product Type Wine Wine Market Share Cider 6% Wine In dollars 20% ON non- VQA VQA Import 47% 1% 52% Beer 74%

Ontario Product Cases Cases 95.7% Type Ordered Shipped Ontario 40,081 38,339 Fill Rates Imports 48,558 45,091 Imports Fiscal 16/17 92.9% Vintages 2,782 2,557 Total 91,421 85,987 Vintages 91.9% Total 94.0%

Existing eligible wine products : Making Products Enter into NISS under: • Available Product Need #2427 Existing Eligible Wines - Grocery Channel The Process New Ontario wine products: Enter in to NISS under: • Product Need #2426 Ontario Wines – Grocery/Wine Boutique

Product Recalls CLASS 1 CLASS 2 Record Year

1) Out of market for days to weeks or longer 2) Impact to Brand Product Recalls 3) Fees for: Impact on • Lab testing your Business Vendor • QA Admin fees Experience • Retail Destruction of inventory $1,000 - $200,000 • Repatriation of product from grocery • Warehouse destruction of inventory • Freight, recycling fees • Risk of Fines by CFIA

Product is withdrawn from all sales channels 1. Product Recalls Grocery inventory is Repatriated to LCBO 2. What for destroyal happens? Retail stock destroyed 3. Warehouse stock returned or destroyed 4. Investigation launched with CFIA 5.

To identify faults only and prevent defective product from Sensory Evaluation going to market Risk Mitigation

Grocer Top 3 Pain Points 1. SKU Changes → minimum two weeks notice required 2. Consistent Supply 3. Products going below floor

How to add value in the channel Education 1. • Product Knowledge • Industry and consumer trends 2. Build relationships

LCBO’s commitment for continuous improvement Enabling a smooth transaction • Collecting feedback from suppliers and grocers • Continuous improvement through IT enhancements • EDI transactions • GMS portal enhancements • System & Process enhancements

Available Resources 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

LCBO Resources Available to You Questions ? Email: wholesaleservice@lcbo.com

Contingency plan for grocery www.lcbonegotiations.com

Questions?