Re: LCBO Merchandising Sales Targets effective April 1, 2011

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1 May 26, 2011 To: All Trade Associations Re: LCBO Merchandising Sales Targets effective April 1, 2011 Spirits & Beer: LCBO Spirits & Beer enjoyed another successful year of sales growth and I would like to thank you for your continued dedication to growing our mutual business. Key to this ongoing success is our ability to bring your new and exciting products to the consumers. To support this process, last year a set of sales targets by product groupings were established and products that did not meet those targets were reviewed for potential discontinuation. Please find attached the updated sales targets for LCBO fiscal 2011/12. These targets have been updated to reflect the sales trends over the past year. Please also note that there are some changes to the structure of the product groupings: Spirits price bands have been updated in the Canadian Whisky product groupings. This has resulted in an increase in the sales target of Whisky Canadian Premium/Standard and a decrease in the target for Whisky Canadian Deluxe. Beer product groupings have been consolidated into larger groupings by county of origin and format. WINES: The WINES category underwent a huge portfolio transformation over the last two years that has resulted in positive sales growth in New World, European and Ontario Wines. A big part of the assortment change stemmed from our initiative to update our sales targets and clear out slow sellers to make room for exciting new products. In order to continue with this success, there is a need now to update our sales targets to reflect the current WINES business. The logic used to set the targets has not changed. Our goal is to protect 90% of our margin in all of our wine segments. Where appropriate, we have factored out large dominate brands that drive targets up to levels that don t support a broad enough product selection.

2 This year, you will see we have broken down the targets to a subset level to ensure they are a true reflection of our business. We look forward to working with you to continue offering our customers a world-class assortment that delivers great sales results. If you have any questions regarding the sales target system, please do not hesitate to contact ourselves, or any of the applicable Category or Product Managers. Sincerely, Chris Robertson Director, LCBO Spirits & Beer Kathy Cannon Director, LCBO WINES cc: Bob Peter Bob Downey Shari Mogk-Edwards Tom Wilson Patrick Ford Bill Kennedy Kate Mallett-Thomas Kathy Cannon Spirits & Beer staff

3 LCBO 2011/12 Sales Targets Effective April 1 st, 2011 SPIRITS & RTD Brandy $465,000 Cognac $315,000 Tequila Deluxe $175,000 Tequila - Premium/Standard $675,000 Single Malts $200,000 Whiskey American Deluxe $120,000 Whiskey American - Premium/Standard $590,000 Whiskey Irish Deluxe $140,000 Whiskey Irish - Premium/Standard $350,000 Whisky Canadian Deluxe $150,000 Whisky Canadian - Premium/Standard $1,200,000 Whisky Scotch - Blended Deluxe $535,000 Whisky Scotch - Blended Premium/Standard $685,000 Grappa, Armagnac, Eau De Vie, Fruit Spirit $155,000 Liqueurs Classics $445,000 Liqueurs Cocktail Mixers $280,000 Liqueurs Exotic Mixers $295,000 Liqueurs Sippers Bitters $265,000 Flavored Vodka, Gin & Rum $535,000 Gin Deluxe $160,000 Gin - Premium/Standard $840,000 Rum - Deluxe & Cachaca $185,000 Rum - Premium/Standard $835,000 Soju/Shochu $500,000 Vodka Deluxe $500,000 Vodka - Premium/Standard & Alcohol $1,800,000 Mini - 50 ml $250,000 Mini ml $400,000 Cocktails-to-Go & Coolers $1,200,000 One Pour Cocktails $500,000

4 LCBO 2011/12 Sales Targets Effective April 1 st, 2011 BEER Annual Sales Litres Target Domestic Beer - 6Pk Cans (> 355 Ml) 310,000 Domestic Beer - 6Pk Cans (355 Ml Or Less) 300,000 Domestic Beer - Multi Btls (> 6 Units) 55,000 Domestic Beer - Multi Btls (6 Units Or Less) 115,000 Domestic Beer - Multi Cans (> 6 Units) 60,000 Domestic Beer - Single Bottle 30,000 Domestic Beer - Single Can 210,000 Imported Beer - Multi Cans (355 Ml Or Less) 70,000 Imported Beer - Multipack Bottles 70,000 Imported Beer - Multipack Cans (> 355 Ml) 160,000 Imported Beer - Single Bottle - Non-Specialty 40,000 Imported Beer - Single Bottle - Specialty 10,000 Imported Beer - Single Can 100,000 CIDER Cider - Domestic $80,000 Cider - Import $330,000

5 LCBO 2011/12 Sales Targets Effective April 1 st, 2011 WINES Ontario Wines VQA Table Wines, VQA Late Harvest, VQA Sparkling $150,000 Fruit Wines $150,000 Ontario ICB - White & Red $400,000 Ontario ICB Rose $375,000 Flavoured Wines $375,000 Sparkling Non-VQA & ICB $250,000 Fortified Icewine, Port Style & Sherry Style $250,000 Digestive/Aperitif, Vermouth & Cocktails/Flav. $250,000 New World Wines Australia Red Shiraz Cabernet $500,000 Australia Red Shiraz, Cabernet Sauvignon, Merlot $500,000 Australia Red Blends, Pinot Noir $400,000 Australia White $350,000 Australia Rose Table Wines & Sparkling $300,000 California Red Merlot, Syrah, Zinfandel, Pinot Noir $450,000 California Red Blends $350,000 California Red Cabernet Sauvignon $500,000 California White $500,000 California Rose $450,000 Argentina Red Blends, Malbec, Cabernet Sauvignon, Merlot $400,000 Argentina Red Syrah/Shiraz $350,000 Argentina White $350,000 Chile Red Cabernet Merlot $500,000 Chile Red All Other Varietals & Blends $350,000 Chile White $350,000 South Africa Red Blends, Syrah, Cabernet Sauvignon $300,000 South Africa Red Merlot & Other Varietals $250,000 South Africa White $250,000 New Zealand Red $150,000 New Zealand White Sauvignon Blanc $300,000 New Zealand White Chardonnay & Other Varietals $250,000

6 B.C. VQA/Non-VQA Red & White $200,000 Other USA Red & White $200,000 Sparkling Wines White $300,000 Sparkling Wines Red & Rose $250,000 European Wines France Red Beaujolais $400,000 France Red Burgundy $250,000 France Red Rhone & Chateauneuf De Pape $300,000 France Red South & Bordeaux $350,000 France White Burgundy $300,000 France White Rhone, Alsace, Loire, Beaujolais $150,000 France White South & Bordeaux $200,000 Vin de France Red & White $400,000 Vin de Table Red & White $500,000 Italy Red Ripasso, Amarone, Primitivo, Barbera & Syrah $300,000 Italy Red Sangiovese, Negroamaro & Pinot Noir $350,000 Italy Red Barolo, Barbaresco & Other Varietals $350,000 Italy Red Valpolicella, Montepulciano & Chianti $400,000 Italy Red Blends, Merlot $400,000 Italy White Blends $400,000 Italy White Pinot Grigio $450,000 Italy White Soave $350,000 Italy White - Chardonnay, Moscato, Other Varietals $300,000 Spain Red $350,000 Spain White $200,000 Portugal Red $300,000 Portugal White Vinho Verde $300,000 Portugal White Other $250,000 Germany Red $150,000 Germany White Blends $350,000 Germany White Riesling & Other $300,000 Other Europe Red & White $150,000 Champagne Rose & White $300,000 Sparkling Wines Italy Asti $250,000

7 Sparkling Wines Prosecco, Cava, Sekt, Cremant, Other $350,000 Sparkling Wines Red & Rose $250,000 European Rose Table Wines $200,000 Other Specialty Wines Flavoured Wines $850,000 Fortified Vermouth $400,000 Specialty Wines European Aperitif $300,000 Fortified - Sherry, New World Port Style, White Port $250,000 Fortified - European Red Port $300,000

8 Net Sales $ Calculation Net Sales $ = ( Retail price bottle deposit ) / 1.13 (to back out HST) x case volume x pack size Example for a product with a retail price of $24.95: $24.95 retail deposit ($0.20 for 750 ml) = $24.75 $24.75 / 1.13 (HST) = $21.90 (basic price) Basic price $21.90 per unit X case sales volume X units per case = Net Sales $