The Ontario Market

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• The Ontario Market American Craft Beer
• Presented By Leanne Rhee
• LCBO
• Category Manager, Beer

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Agenda

• Introduction to the LCBO
• Ontario Beer Market
• LCBO Beer Category
• American Craft Beer Opportunities
• How To Do Business with the LCBO
• Resources
• Questions

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Introduction

• LCBO is a Crown Corporation
• Report into the Provincial Government
• Ministry of Public Infrastructure Renewal
• 2006/07 Revenue 3.895 billion
• 2006/07 Dividend 1.275 billion
• Transfer to the Ontario Government that is used
  to support health care, education and other
  government priorities

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Introduction

• Largest single buyer of beverage alcohol in the
  world Wines, Spirits and Beer
• Represent 50.2 share of Ontarios alcohol
  beverage market
• Remainder of market is made up of The Beer Store,
  winery retail stores, Other Legal sales and
  Illegal sales

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Introduction

• Operate approximately 600 retail stores
• Portfolio of over 7000 products
• Source products from 72 countries

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Introduction

• Mission Statement
• We are a socially responsible,
  performance-driven, innovative and profitable
  retailer, engaging our customers in a discovery
  experience of the world of beverage alcohol.

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Introduction

• Brand Vision
• Discover The World

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Ontario Beer Market

• The Ontario beer market is
• Competitive
• Dynamic
• Highly regulated
• Dominated by two retailers

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Ontario Beer Market

• The Beer Store is
• Privately owned by MolsonCoors, Inbev (Labatt),
  and Sleeman Sapporo.
• 2006/07 volume 6.65 million hectolitres
• Market share is 81.93 by volume
• Steadily losing market share to LCBO

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Ontario Beer Market
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Ontario Beer Market

• Current beer trends
• Domestic beer sales declining
• Imported and locally crafted beer continue to
  gain popularity
• Value beer segment is reaching maturity
• Canned sales have increased by 27 while bottles
  have decreased by 6

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LCBO Beer Category

• Responsible for all domestic and imported beer
• 2006/07 Revenue 493 million
• 2006/07 Volume 1.45 million hectolitres
• Market share is 18.07 by Volume
• Source over 340 beers from 40 countries

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LCBO Beer Category
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LCBO Beer Category

• Share of Beer Segments

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LCBO Beer Category

• LCBO beer trends
• Increased customer awareness of and interest in
  specialty, niche and premium imported and
  domestic beer.
• Demand for locally crafted beer.
• Single serve formats preferred over multipacks
  especially aluminum cans

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American Craft Beer

• Current American Craft
• Breweries

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American Craft Beer

• New breweries - May 2008

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American Craft Beer

• The LCBO is interested in American Craft Beer
  because our customers
• Are trading up to premium products
• Have a great desire for choice
• Enjoy exploring and discovering beer from around
  the world
• Are demanding American craft beers

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American Craft Beer

• The LCBOs American Craft Beer Strategy
• Gradually increase assortment over the next 5
  years
• Year round beers flagship brand of brewery
• Seasonal beers one time limited quantity
  purchase of specialty/niche products
• Promote through LCBO promotional programs
• Highlight in store through merchandising and
  signage

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How To Do Business

• Supplier of Record
• The supplier must have the legal right to sell
  the product for which it is applying to sell to
  the LCBO

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How To Do Business

• Agent of Record
• Often a supplier may which to use an Agent in
  Ontario to deal with the LCBO for the purposes of
  making an application to sell product to the LCBO
  and for promotions and marketing
• Contact Trade Associations for more information

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How To Do Business

• Needs Letters
• The LCBO publishes annual letters (needs letters)
  setting out the types of products that are of
  interest and the respective date by which the
  application must be submitted for consideration
• Needs letters are available at www.lcbotrade.com

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Beer Product Needs
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How To Do Business

• Application Requirements
• Online application submission
• One page marketing plan
• Supplier quotation
• Four bottles of each product

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How To Do Business

• Evaluation of Product Submissions
• Sound business principles are considered in
  evaluating product submissions including the
  following
• Satisfies category product needs
• Marketplace demand and trends

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How To Do Business

• Evaluation of Product Submissions (contd)
• Tasting (Organoleptic Assesment)
• Packaging
• Marketing and promotional plans
• Sales and marketing data from other markets
• Inventory availability

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How To Do Business

• Label and Consumer Unit Examination
• The supplier is responsible for ensuring
  compliance with all applicable packaging
  laws/regulations/requirements of both Canada and
  Ontario.
• A sample of the label design and consumer unit
  must be submitted for review

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How To Do Business

• The following declarations are mandatory on
  labels and/or consumer selling units
• Common name
• Net Quantity
• Alcohol Content
• Dealer Name Address
• Ingredient List (if not standardized)
• Bilingual

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How To Do Business
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How To Do Business

• Shipping Carton Examination
• The supplier must adhere to LCBO Product
  Packaging Standards and any Canadian product
  identification standards pertaining to the
  distribution of beverage alcohol
• A shipping carton sample and markings must be
  submitted for review

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How To Do Business

• Shipping Carton Examination (contd)
• Bursting strength of shipping tray/carton
• Height of shipping tray
• Shrink wrapping
• Bottle dividers
• Carton markings

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How To Do Business

• Chemical Analysis
• Liquid samples must be submitted by the supplier
  for chemical analysis in accordance with the LCBO
  Quality Assurance guidelines which reflect the
  standards of Health Canada
• The lab analysis is performed by the LCBOs
  Quality Assurance department to ensure the liquid
  is chemically sound

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How To Do Business

• Purchase Order
• When the conditions of purchase have been met,
  the LCBO will initiate a Purchase Order to the
  supplier which will outline specific directions
  for shipping and the dates for shipment arrival
  at the LCBO

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How To Do Business

• Logistics
• LCBO controls all freight from brewery to our
  warehouse
• Brewery works with assigned carrier based on ship
  date
• For less than truck load orders a consolidating
  warehouse may be used

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How To Do Business

• Pricing
• Retail price for products is calculated by the
  LCBO based on the wholesale purchase price and
  standardized pricing formulas

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Resources

• Trade Association Information
• Ontario Imported Wine-Spirit-Beer Association
  (OIWSBA) website
• www.oiwsba.com
• Brewers of Canada website
• www.brewers.ca

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Resources

• LCBO Information
• LCBO website
• www.lcbo.com
• LCBO Trade Resources website
• www.lcbotrade.com

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Resources

• LCBO Beer Category contacts
• Leanne Rhee Category Manager
• 416-365-5889 leanne.rhee_at_lcbo.com
• Mike Halliday Inventory Manager
• 416-365-5888 michael.halliday_at_lcbo.com

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• Thank You!