Drinks Ontario Fall Members Meeting 22 November 2013 Shari Mogk-Edwards Vice President, Products, Sales and Merchandising Kathy Cannon Director, VINTAGES Dave Misetich Inventory Manager, VINTAGES Kelly Taylor Director of Operations, VINTAGES
Agenda Products, Sales and Merchandising overview VINTAGES trends, objectives and new initiatives VINTAGES Central Allocation and Durham move VSO Questions
LCBO Shari Mogk-Edwards Vice President Products, Sales and Merchandising Drinks Ontario Presentation November 22, 2013
The way it is
To provide the best beverage alcohol assortment in North America, while providing value to the customers of Ontario and effectively managing LCBO assets Goal
Who we are We are a high performing team that delivers a superior customer experience through our unrelenting focus on world class assortment, superior inventory management and strong supplier collaboration
What we do Plan and implement strategies to grow sales and profitability Buy and manage inventory for LCBO and VINTAGES Select and manage in-store supplier programs Provide direction on shelf management and planograms
Current sales
Annual sales growth in billions
Category sales and growth plan 4,000 2,000 3.4% 3.1% 2.4% 2.3% 3.7% 2.8% 4.1% 3.0% SPIRITS 1,800 1,600 1,400 1,200 4.2% 3.0% 3.9% 4.1% 4.5% 4.4% WINE 1,000 800 600 3.8% 3.4% 5.0% 3.8% 6.0% 7.0% BEER 400 200 0 2011/12 (A) 2012/13 (A) 2013/14 (F) 2014/15 (F) 2015/16 (F)
Sales by Business Unit- last fiscal
SKUs by Business Unit - last fiscal
Margin per litre by business unit- last fiscal
Sales by Channel last fiscal Billions $4.0 $3.5 $4 $3.0 $2.5 $2.0 +4.1% $1.5 $1.0 $0.5-0.1% $0 +3.5% $0 +3.0% $0 $0.0 Retail Licensee The Beer Store Other
Central Eastern Northern Western Revenue distribution by Region- 36% last fiscal 24% 25% 15%
Revenue by Region last fiscal 55% Northern 36% 34% 34% Eastern 27% 24% 21% 28% 24% 23% 24% Central 13% 16% 8% 16% 18% Western WINES VINTAGES SPIRITS BEER & CIDER
VINTAGES release for Period 4 sellthru at 72%
LCBO Kathy Cannon VINTAGES Director Drinks Ontario Presentation November 22, 2013
VINTAGES goal The boutique merchant within the LCBO Vintages takes the world of wine and delivers a diverse, hand selected ever changing portfolio of unique limited and high sought after wines. Vintages experts deliver the total wine experience, empowering customers to explore and shop the globe with confidence.
VINTAGES sales are growing Sales 4.1%
Trends
New World wines are most popular with our customer 5% 53% 42% New World (+4.5%) Ontario (+11.8%) European Wine (+2.8%)
California dominating growth $9M $5M $20M $9M $14M $15M $22M $46M $60M $46M UNITED STATES +11.5% FRANCE -0.1% ITALY +1.4% NEW ZEALAND +17.5% AUSTRALIA -14.8% CANADA+8.2% SPAIN+13.2% ARGENTINA -10.4% CHILE -17.4% OTHER -0.6%
White wines are gaining share $3M $72M RED +1.8% $156M WHITE +5.6% ROSE +21.9%
Consumers are buying more premium Average Price per litre + $0.40/L
Essentials are very productive VINTAGES Retails sales growth Number of skus 98 Sales 41.2% 58.8% 10,898 Frontline Essentials
Consumers very excited by new products Week 1-13.7% Week 2 17.2% Week 3 10.8% Week 4-7.2% 49% after 4 Weeks 67% after 8 weeks
Key objectives
We are predicting VINTAGES sales to grow faster than total LCBO
Provide our customer with a world class portfolio of products
Improve efficiencies of the VINTAGES inventory VINTAGES Central Allocation (VCA) Moved VINTAGES to Durham
Increase the awareness of the VINTAGES releases and broaden the customer base
Improve the efficiencies and the customers experience with our Direct Program
Move customers forward in their wine experience and encourage them to take risk in their wine purchases
New initiatives
Cycle through release products in 8 weeks January 2014 Rebate = 75% after 8 weeks
Rebate target
We rebate less than 10% of the SKU s we release Each release = 120 SKU s Rebate 12-20 SKU s a month
Residual clearing December 16 th purge 20,000 cases January 25 Sale
Increase the Essentials Collection 98 skus = 40% of Sales 130 SKU s 45%-50% of Sales
Increase the awareness of the Globe & Mail ads Every 2 weeks Aug 29 Dec 15 Thursdays Life section pg.2 Continued support in new year VINTAGES release
Flagship release program
Timelines for event applications
SCC Reminder SCC Format All Fines waived until January 2014 receivals Check SCC format with the lab Stephen Cater
Thank you
LCBO Dave Misetich Inventory Manager VINTAGES Drinks Ontario Presentation November 22, 2013
VCA process Commenced with the May 25 release Allocations based on historical sales data of model SKU s and subset sales Right store, right brands, right quantities VCA will allocate 80% of the purchase quantity of each SKU to stores in advance of the release
VCA sales update Overall case sales of VINTAGES release products have increased Average case sales per week have increased by 12.3% over a 12 week window
VCA sales update 2013 Vintages Releases Weeks 1-4 Sum Weeks 1-8 Cum Weeks 1-12 Cum Release Date SKU Count Quantity Purchased % Allocated Cases Allocated Sales Cases Sell-Thru Cases Sales Cases Sell-Thru Cases Sales Cases Sell-Thru Cases 05-Jan-13 102 44,231 77.7% 34,367 21,635 48.91% 29,281 66.20% 33,074 74.78% 19-Jan-13 123 42,280 77.5% 32,786 20,221 47.83% 27,914 66.02% 31,670 74.91% 02-Feb-13 113 44,121 83.4% 36,789 21,152 47.94% 28,265 64.06% 32,121 72.80% 16-Feb-13 113 37,434 86.4% 32,330 17,909 47.84% 24,393 65.16% 27,407 73.21% 02-Mar-13 104 38,263 86.7% 33,184 17,182 44.90% 25,016 65.38% 29,295 76.56% 16-Mar-13 110 28,783 89.1% 25,637 14,738 51.20% 19,673 68.35% 22,171 77.03% 30-Mar-13 104 35,985 85.0% 30,575 18,700 51.97% 25,149 69.89% 27,562 76.59% 13-Apr-13 102 32,781 86.0% 28,197 16,711 50.98% 22,368 68.23% 25,102 76.57% 27-Apr-13 110 42,292 86.1% 36,400 21,840 51.64% 28,275 66.86% 31,949 75.54% 11-May-13 107 39,428 85.4% 33,659 21,009 53.28% 28,019 71.06% 31,271 79.31% 25-May-13 113 44,008 77.5% 34,096 21,711 49.33% 29,309 66.60% 33,057 75.12% 08-Jun-13 117 47,406 78.9% 37,414 22,040 46.49% 30,631 64.61% 35,314 74.49% 22-Jun-13 122 52,101 80.6% 42,004 23,901 45.87% 33,987 65.23% 39,278 75.39% 06-Jul-13 116 42,080 78.5% 33,036 18,844 44.78% 27,293 64.86% 31,492 74.84% 20-Jul-13 120 42,421 66.5% 28,190 18,323 43.19% 26,125 61.58% 29,760 70.15% 03-Aug-13 120 42,050 84.7% 35,623 18,033 42.88% 26,032 61.91% 30,638 72.86% 17-Aug-13 120 47,335 76.5% 36,188 20,166 42.60% 28,366 59.93% 32,670 69.02% 31-Aug-13 109 47,847 72.1% 34,495 20,122 42.05% 28,545 59.66% 32,902 68.76% 14-Sep-13 129 41,865 59.1% 24,723 15,150 36.19% 22,635 54.07% 24,775 59.18% 28-Sep-13 130 50,971 67.8% 34,569 21,430 42.04% 28,763 56.43% 28,763 56.43% 12-Oct-13 129 48,112 71.8% 34,547 21,137 43.93% 25,620 53.25% 25,620 53.25% 26-Oct-13 162 75,323 66.7% 50,226 19,886 26.40% 19,886 26.40% 19,886 26.40% 09-Nov-13 132 55,411 69.4% 38,480 11,310 20.41% 11,310 20.41% 11,310 20.41% pre VCA 109 38,560 32,392 19,110 49.6% 25,835 67.0% 29,162 75.6% post VCA 125 48,995 35,661 20,273 41.4% 28,431 58.0% 32,748 66.8% change 16 10,435 3,268 1,163 2,596 3,586 % change 14.5% 27.1% 10.1% 6.1% 10.0% 12.3%
VCA update Program still in its infancy and we have experienced issues with SKU modeling Working to minimize this risk by placing more emphasis on each store s recent subset sales when determining allocations With the exception of the initial VCA releases, we have not been able to achieve our goal of an 80% allocation of each release
VCA store capacities Disconnect between store s VINTAGES holding capacity vs. the number of SKU s purchased and the purchase quantities We cannot always approve the proposed allocation
VCA how are addressing the capacity issues? District Managers reviewed store capacities in September Revised capacities used for the November releases allowing for a marginally increased allocation These capacities were again increased, specifically for the December 07 release, and the purge allocation in December
A January sale to help clear residual inventory is planned VCA how are addressing the capacity issues? Store capacities will be reviewed again with Retail Release purchase quantities have been reduced VINTAGES is reviewing the number of SKU s being purchased for future releases
Working with LCBO Logistics to get these orders delivered within one week (or less) VCA secondary allocations Secondary allocations to the top 40 VINTAGES stores in the network from the December 7 release VCA will be re-run with additional inventory centrally allocated based on initial sales, remaining inventory, and current capacity available
VCA when will we be back on track? Current allocations are in the 65-70% range (aggregate) Aiming to be in a position to allocate 80% of every release SKU by late May 2014 Many SKU s are, or will, achieve 80% (or higher) allocations in coming months
Internal system issues resulted in some delayed post-release order shipments/deliveries Durham Warehouse re-location VINTAGES releases commenced from Durham on August 17th There have been some short shipment and delivery issues related to this move with short shipments in the 1.0% 4.0% range. Durham is identifying and fixing causal issues
Store ordering concerns addressed Concern: Stores are unwilling to place orders for residual inventory Solution: Stores are actually placing orders for residual inventory
Store ordering concerns addressed Concern: Stores claim not to know what they will be getting, so they will not place an order Solution: Stores do know exactly what they are getting. To help them find it we will be sending them e-mail notifications on every allocation
Store ordering concerns addressed Concern: Short shipments do stores need to re-order, or will these brands be re-allocated centrally? Solution: VINTAGES will re-allocate short shipments of program wines. We will be sending a communique to remind stores of the order process details and timelines for placing all VINTAGES orders
Store orders and delivery Working with LCBO Logistics, Retail, and IT to review the order processing timelines to ensure the quickest possible turnaround and delivery of VINTAGES post-release orders to all Durham-serviced stores Delivery frequency will increase from biweekly to weekly for the 19 top-selling London and Ottawa stores
LCBO Kelly Taylor Director of Operations, VINTAGES Drinks Ontario Presentation November 22, 2013
VSO update Scaled back release of products on a two-week cycle The Bin End section is the most visited area based on recent changes to the selection
Customers want to pay online 75% of VINTAGES Classics currently use the online form
VSO launch February 2, 2014
Current VSO, Direct Programs and licensees Primary customers
Ordering process Simple, generates e-confirmations, receipts and pick up notifications Advise customers of shipping changes easily Add to order Clear documentation
VSO will feature: February Classics UGC Event Offer Scotch Virtuosity Event offer Open BF orders Launch programs
Benefits of VSO Enable a quicker sale of programs by shifting to First Come, First serve model. Customers will know at time of ordering what they are getting (no allocation) Enable licensees to make online purchases of Vintages Direct program products. Agents can be sub users with Licensee authorization. Visibility of accurate inventory information for all users Regular customers, retail and agents
Initial launch Focuses on maintaining current VSO customers and our high value Classics, Bordeaux Futures (BF) and Virtual offer customers Classics & BF customers pre-register, prepare for the February launch date.
February Classics February Classics the last allocated program. From April 3, Classics will move to First Come, First Serve program with the exception of limited allocation products
Online exclusives Monthly release of 10 20 products. Online exclusives buying has slowed down in preparation for the cut over. Combined with monthly classics, every two weeks customers can expect something NEW!
Bordeaux Futures
Virtual Offers
Seamless event ticket sales Choose, pay, print Easy process wait list options, broadcast emails
Recent Bin End sale saw traffic and sales increase by 200 % Bin Ends
Communication plans Phased approach: Migrating current Attracting new Emphasizing VSO as a destination Direct Mail, proprietary tools
Continuous Improvement Post launch assessment of sales Customer, Trade & Retail Feedback Opportunities for improvements throughout the year
Thank you- Questions Shari Mogk-Edwards Vice President, Products, Sales and Merchandising Kathy Cannon Director, VINTAGES Dave Misetich Inventory Manager, VINTAGES Kelly Taylor Director of Operations, VINTAGES