LCBO Sales Trends and Insights Carolyn O Grady-Gold, VP Merchandising
Agenda LCBO Sales & the VQA Customer Grocery Beverage Alcohol Product Trends Bag-in-Box Sales E-commerce Zoning Centralized Assortment Planning Update
LCBO Sales Trends
Sales by Business Unit BEER & CIDER $1.427B +3.4% VINTAGES $571M +6.7% SPIRITS & RTD $2.32B +5.5% WINES $1.55B +4.0% R13 P11
Market Share $ by Business Unit BEER & CIDER 24% -0.3% VINTAGES 10% +0.2% SPIRITS 40% +0.3% WINES 26% -0.2% R13 P11
R13 P11 Retail Market Share $ of Sales Trend By Business Unit
LCBO & VINTAGES Wine Sales New World Wines NEW WORLD $832M, WINES 4.8% $868,651,025, +3.6% EUROPEAN WINES $723,186,842, +5.7% ONTARIO WINES $506,306,787, +5.3%% VQA $157,864,170, +8.3% NON VQA $45,592,715, +4.5% ICB $302,849,902. +4% R13 P11 Total = $2.09B
LCBO Wines & Vintages Growth Rates by Category European Wines +5.7% New World Wines +3.6% ICB +4.0% R13 P11 VQA +8.3%
LCBO Wines Growth Rates by Category Including Grocery Excluding Grocery European Wines +5.4% +4.6% New World Wines +1.8% +0.7% ICB +4.0% +3.9% R13 P11 VQA +9.6% +1.9%
Wine in Grocery
Grocer Authorizations At the end of calendar 2017 there were 232 active Grocer authorizations. BEER & CIDER BEER/CIDER/WINE BEER/CIDER/WINE RESTRICTED WINE BOUTIQUE TOTAL 250 200 T3 232 150 100 T2 109 T1 50 53 35 35 - T1: Tranche 1, 60 Beer & Cider authorizations / T2: Tranche 2, 70 Wine, Beer & Cider authorizations / T3: Tranche 3, 80 Beer & Cider authorizations / Wine Boutiques are not allocated through the bid process, locations include Beer & Cider authorization
Millions of Litres Wine Volume Market Share 250 The provincial wine market continues to grow steadily as Grocers gain share. LCBO Wine WRS Wine DD Wine Grocer Wine 200 150 100 50 - FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018e FY2019f Note: Wine (including cider) market share by Volume (Litres). FY2018 and FY2019 estimates are based on current projections.
MARKET SHARE of Ontario Wines LCBO vs Grocery Market Share LY Sales $ Net (R13 as of P11 2016/17) $4.49M 0.9% Market Share TY Sales $ Net (R13 as of P11 2017/18) $14.9M 3.0% $476M 99.1% $491.2M 97.0% LCBO Grocery LCBO Grocery
Wine Composition Ontario wine accounts for half of Grocer wine sales compared to a quarter at LCBO Retail. Grocer Wine LCBO Retail Wine IMPORTED EURO IMPORTED NW ONTARIO VQA ONTARIO ICB IMPORTED EURO IMPORTED NW ONTARIO VQA ONTARIO ICB 1% 18% 17% 49% $29M 7% $1.87B 34% 32% 42% Note: Annualized P11 FY17 to P10 FY18 sales, LCBO Retail includes home consumer (regular) channel only, LCBO Wines and Vintages (excluding Futures)
Ontario Wines Performance Overall, Ontario Wines in the LCBO network was up 3.5% based on Rolling 13 sales as of P11 2017/18 VQA saw an increase of 1.9% while ICB saw an increase of sales of 3.9% VQA +1.9% ICB +3.9%
Grocery Impacts Unaffected Stores Ontario Wines has seen strong growth in stores that have been unaffected by grocery stores selling wine. VQA +3.4% ICB +4.8%
Grocery Impacts based on Distance LCBO store sales for Ontario wines are down -1.3% if the store is located within 1km of a licensed grocery Digging deeper, VQA sales are impacted -7% when an LCBO store is within 1Km <1km -7% 1-3km -5% 3-5km -2% >5km +2%
Who is Going to Grocery? Environics Research
Q56b Is WINE available at the grocery stores that you frequent or that are close to your home? Availability of Wine in Grocery by Region Half (53%) believe that there is wine available to purchase in the grocery stores they frequent. Those in Central Ontario were the least likely to say there is wine available at their grocery stores. Is WINE available at the grocery stores that you frequent or that are close to your home Yes No Don't know 12% % yes by region: 35% 53% Central Eastern Northern Western 48% 55% 57% 57%
Reasons for Grocery Store Purchases of Wine Convenience In-store Product Assortment I purchased wine at the grocery store because it was convenient 45% Purchasing wine in a grocery store was easy I found the grocery checkout easy and convenient for wine I knew exactly where to find the wine in the grocery store The product selection suited my needs The grocery store was well stocked with wine The grocery store staff were knowledgeable and could help guide me when purchasing wine The product selection met my expectations There was a wide variety of wine to choose from 23% 22% 22% 20% 18% 34% 34% 38% The most noted reason for purchasing wine in a grocery store was for convenience. Several instore items such as ease of the purchase and familiarity with the store were also factors. I enjoyed browsing for wine in the grocery store 17% The grocery store provides useful written product information in the wine section 16% I felt cheered up after my grocery shopping experience buying wine 16% Wine is part of my one-stop grocery store trip Q58B. Thinking about your last trip to the grocery store to purchase WINE, please indicate how strongly you agree or disagree with the following statements. Base: Have purchased wine from grocery store W15+16 (n=815) 15%
Growing the Ontario Wine Market The most noted reason for purchasing wine in a grocery store was for convenience. Several in-store items such as ease of purchase and familiarity with the store were also factors. Opportunities: Increasing overall sales: Exclusivity Breadth of offering Engaging retail theatre & value adds Educated and knowledgeable staff
Product Trends
Alternative Packaging
Augmented Reality
No-Alcohol/Low Alcohol
Low Calorie
Fresh and Authentic Flavour
Sustainable
3L Bag in Box Wines
Background There are currently new nine 3L bag in box wines with recorded sales as of PD11, 2017/18. Customer Insights & CRM, February 2018
Demographics Compared: 3L versus 4L Bag in Box Wine Customers 3L More Male Higher Education & Income 4L More Female More Likely to be married Customer Insights & CRM, February 2018
3L BIB Customers are Spending More on: 4L BIB White 4L BIB Red 473mL OCB 473mL Coolers Other 3L BIB Overall +11% YoY Customer Insights & CRM, February 2018
3L BIB Customers are Spending Less on: 750mL Aussie Red 6-pack Coolers 1.5L Italy White 750 ml Argentina Red 473m: Domestic Beer Customer Insights & CRM, February 2018
Over the past 13 periods: Of Note 47% of 3L customers also bought 4L ICB wines 25% of those customers who bought a 3L BIB went on to buy a 4L BIB for the first time 3L customers don t appear to be trading on their 4L purchases but are incorporating them into their overall wine spend. There s a high degree of cross purchasing amongst all of the 3L BiB wines. Additionally, 3L products are often purchased with 750 ml formats of the same liquid, other varietals in the same brand family, and other products in the same Subset. Customer Insights & CRM, February 2018
E-commerce
P10 YTD E-commerce Sales ADV $ PERCENTAGE (%) TOTAL ORDERS $212 100% Store Pickup $164 56% Standard Home Delivery Next-Day Home Delivery $264 37% $311 5% Cancelled/Refunds 2%
YTD E-commerce Order Types E-commerce Orders 45,558 94% M-commerce Orders 2,864 6% 179 Orders/Day
YTD Category Performance Product Sold % Units % Dollar Value 56% 56% 37% 28% 16% 7% Wine Spirits Beer
Holiday P9+10 Performance 18,164 Total Orders $3.78M $208 AOV
Holiday P9+10 Total Orders $4,000,000 $3,79MM $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,83MM LY TY Orders TY LY %Diff P9 8,515 4,164 104% P10 8,649 4,145 133% $1,500,000 P9+10 18,164 8,309 119% $1,000,000 $3.79M $1.83M 107% $500,000 $- P9+10 P9 P10
Cyber Monday Sale
Cyber Monday on Mobile
Cyber Monday Free HOME Delivery with minimum $200 order Biggest e-comm sales day since launch, 607 Total Orders $190,490 total order value (+318% over LY) 52% of orders were home delivery, representing 78% of total dollar value 70% new customers $296 AOV 30% returning customers, $367 AOV
Promotions for lcbo.com: Wine Wednesday DATE: Wednesday, January 25, 2018 OFFER: Buy Peller Estate French Cross Pinot Grigio 4L Wine Box and receive a Free T-Shirt and Luggage Tags PRICE: $42.95 Promoted via CRM and Online
What s Next
New Enhancements Expanded Assortment Supplier Revenue Entire Vintages Front Line Release online to buy Click & Collect Improved Site Navigation Adobe Experience Manager Enhanced merchandising & promotions Mega-menu Customer Convenience Product Curation
New Mobile Enhancements Reduce Friction Improve Analysis & Reporting Credit Card Image scan Improved Search Click & Collect Adobe Analytics
Zoning
Current State Vs Future State Wine Beer Spirits RTD In Q3 2016 we tested Zoning in 10 stores this positively impacted sales
Define Zones for the Customer to Explore Create a Spirits Zone, Wine Zone, Cash, Front of Store and Cold Room. Zone merchandising makes replenishment more effective. Zone backrooms. Build attributes in each zone that are consistent, flex assortments based in the aisles Drive turns and engage customers with Seasonal and occasion presentations.
Zones create opportunity for better Wayfinding
Drive Traffic with Clear Wayfinding
Evolve and Align Zoning to Existing Work We will zone as we have work in stores to execute New Stores Relocations Aisle Alignments New Initiatives New Store Concepts Going forward zone in all store models Building the foundation for growth. 2018 we will build a 30 store group to measure and plan for future.
CAP Update
What is CAP? Centralized Assortment Planning
Why CAP?
Actions to Date
CAP Pilot Execution High Level Timeline The pilot soft launched on May 21 st (P3) and continued through P6 with limited changes to in-store execution April 21 New assortment finalized for pilot stores and sent for planogramming May 15 Store resets substantially complete / product ship-out underway June 9 th Executive store visits / execution checks August 15 th New signage / space blocking signage in place in test stores Nov 4 th (P8 End) Extended end of pilot May 9 th Planograms delivered to stores May 21 CAP Pilot Live in stores (P3 2017) Start of pilot measurement / score carding Ongoing Centrally driven new product introductions and light list / delist of product Sept 9 th (P6 End) Original end of pilot however pilot extended to end of P8
CAP Pilot Goals Based on our initial diagnostic, we identified a straightforward set of operational and financial ambitions for CAP 1 2 3 Create an executable assortment that could be managed from the centre Drive productivity gains at store level both assortment and labour Do no harm to the customer franchise
Where are we now?
Looking Beyond CAP To enable merchants through rhythmic process of assortment planning To cluster stores based on analytics customer shopping behaviours To responsibly manage the right amount of inventory in various store sizes To enable financial oversight with financial planning process To credibly and accurately conduct analytics with master data A Merchandise Management System is the Solution
National Product Registry Merchandise Management System Customer-Centric Merchandising Demand Master Data, Performance Item Management Macro Space Space Constraints Assortment Merchandise Financial Planning (MFP) Bottom Up Performance Category Roles and Targets Central Assortment Planning (CAP) Assortment Segments, Clusters, CDTs, Transference Market Data Customer Insights Space Planning System Pricing & Promotions Systems
Building a Foundation for CAP Laying the foundation for CAP: MDM (National Product Registry) Analytics Clustering Location Planning Store Analysis
Thank You Carolyn O Grady-Gold, VP Merchandising