Beer & Cider Category Session. Chris Robertson, Director, Beer & Cider, LCBO LCBO PSM Trade Symposium 2017 April 25, 2017

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2 Beer & Cider Category Session Chris Robertson, Director, Beer & Cider, LCBO LCBO PSM Trade Symposium 2017 April 25, 2017

3 Beer & Cider had Another Good Year $ 906 Million + 5.5% to LY + 2.7% to plan % to LY (volume)

4 In an Evolving Marketplace

5 Beer Market Share Stores 29% Share 450 Stores 70% Share 117 Stores 2% Share

6 Top Trends in 2016

7 New Products Drive Growth $45 million in sales last year Particularly important in craft beer Seasonal listings account for about 1/3 of all SKUs

8 New Products are Being Driven by the Local Industry Almost 1,600 new submissions Resulted in almost 400 new products Increase from 31 to 133 Local breweries in past five years Now over 200 craft breweries operating in Ontario

9 Local Craft Beer is the Fastest Growing Category Sales increased by 27% in 2016 Local craft beer accounts for 10.5% of the sales Top five local craft breweries account for about 50%, but grew by only 1.3%

10 Consumer Tastes are Evolving Pale and light lagers account for 27% of SKUs, 76% sales The LCBO carries over 70 Beer Styles

11 This Year s Plan + 1.9% In net dollars

12 To offer the best Beer & Cider Experience in the Marketplace

13 Four Core Principles Offer the best craft beer assortment Deliver consistent and high service levels Enhance the shopping experience Establish the LCBO as the Beer Experts

14 Strategy 1: Focus on newness Drive craft beer loyalty by offering the best assortment Support Local Popular brand innovation High SKU churn through seasonal releases First-tomarket, exclusive beers

15 Strategy 2: Customercentric, merchandising Enhance the Customer Experience 8 pack carrier Retail Beer Experts E- commerce Gifting

16 Improve product turnover Vendor Collaboration Exit Strategies Centralized assortment

17 Beer is a Top Priority

18 Trends

19 Big Brands Mainstream $210 million +2.4% Domestic +1.8% Import +3.9% Premium $458 million +4.9% Domestic +2.6% Import +7.6%

20 Growth of Craft Total Craft Sales +12.6% Import -7.7% Macro -3.2% Ontario Independent +30.5%

21 Growth of Craft Increasingly diverse styles, sales trends driven by consumers and innovation Top Five: American IPA +32% Growth: Blonde Ale NA Lager -1% Session IPA American Pale Ale -7% Red Ale Kolsch +59% Saison Czech Pilsner +3% Sours

22 Formats Multi Bottles, $144 Single Bottles, $38 Multi Tall Cans, $202 Short Cans, $32 Single Tall Cans, $370 Trend to tall cans continues, singles are +11% and multi +15% Craft & Cider see higher tall can sales Bottles trending -8% 355ml cans still relatively small and growing +2.4% Rolling 13 Sales $ - 000,000 s

23 Cider Total Cider +9% to $79 million Flavoured/Traditional +6% Ontario Craft +39% Trend is to less sweet Sweeter liquids are -1.4%, less sweet are +25%

24 Assortment Priorities and Planning

25 Mainstream & Premium Competitive assortment Maintain SKU count Breadth not additional formats Bring brand and partnerships to life in-store Impactful promotions

26 Craft Higher churn with new products and seasonal releases Import maintain assortment size, look for new opportunities brand, format, packaging Ontario looking for craft customer appeal, store sales productivity and sustained growth Effective execution

27 Cider Maintain SKU count in Flavoured/Traditional Reflect trend to less sweet Expand assortment of Ontario Craft Seasonal opportunities

28 Assortment Planning Innovation schedule with calendar for product releases and volumes Upcoming years promo plan Planned delists

29 BEER AND CIDER SEASONAL PROGRAM OVERVIEW

30 Overview of Seasonal Call Program What is the Seasonal Beer Program Reflecting seasonal diversity What to submit in the program How to be successful with submissions Overview of Submission Process How the program works

31 What is the Seasonal Beer Program? Follows the natural seasonal progression Beer Styles appropriate to the season Part of the specialty beer program 100 top craft beer stores Fast Sell through Appropriate Product format

32 What to Submit into the Program Review the seasonal call requirements Best in Class Products How to be successful Submit an appropriate product Meet LCBO requirements Commit to program deadlines Chances of selection ~1 : 10 based on current submission volumes

33 Overview of Submission Process Review Call Submissions NTP issued Select shortlist for tasting panel Final selection and approval Evaluate tasting panel results

34 OCB BEER BUYING PROGRAM

35 OCB Beer & Cider Programs Permanent Listings Existing Suppliers New Suppliers Seasonal Listings All Suppliers Cider Programs All Import & Domestic, New Ontario Cideries, Ontario Craft Specialty

36 Trade Day Successful Submissions/Best Practices to Gain a Listing Best Practices to gain a Listing Permanent Listing Seasonal Listings New Brewery Listing

37 Trade Day 2017 LCBO New SKU s Consumers Demand for New SKU s Importance of New SKU s to the LCBO Refreshing LCBO s Portfolio

38 Trade Day 2017 By the Numbers, and Notes By The Numbers How the Numbers Affect Listings Following program timelines Niss/Retail Quotes Growler Program

39 Thank You! Chris Robertson Mark Wilson John Tyler Neal Boven