Introduction to Grocery Wholesale Operations May 27th, 2016 Chris Dini – Director of Grocery Operations

Grocery Operations

Agenda Grocery Operations Team Evolution & Mandate of Grocery Wholesale

Roles & Responsibilities

Current State & Continuous Improvement

What’s Next & The Road Ahead

Resources Available

Questions

Chris Dini – Director Leanne Rhee – Operations Holly Garner – Operations Jim Sheridan – Operations Matt Lopez – Inventory & Supply Chain Jamie Fazekas – Finance IT Cross Functional team

Grocery Operations Team

April 2015 • Premier’s Advisory Council on

Government Assets (PAC) – Striking the right balance: Modernizing

Beer Retailing/Distribution in Ontario – 150 grocer licences before May 2017 to

sell beer to the public – Maximum of 450 total

June 2015

• Ontario Budget – Province announced it would proceed with

this recommendation

September 2015

• LCBO RFB 2015-010 Wholesale Supply Agreements for Beer

– Up to 60 grocery stores before end of year 2015

Evolution of Grocery Operations

November 2015 • LCBO RFB 2015-010 Closed

– 13 successful respondents with 60 locations December 2015

• Grocery Management System (GMS) Launched

– On December 15th, authorized beer grocers placed orders

February 2016

• Premier’s Advisory Council on Government Assets (PAC)

– Striking the right balance: Modernizing Wine & Spirits Retailing/Distribution in Ontario

– Existing authorized grocery stores (60) licenced to sell beer can sell cider

– Initial allocation of 70 wine, beer and cider licenses; competitive process to begin mid-2016

– Winery Retail Stores permitted to operate inside grocery stores before May 1, 2017 and grocers will be granted beer and cider licenses

Evolution of Grocery Operations

• Enabling you to pursue sales opportunities

• Here to serve as a conduit for you to grow your business in a new channel

• Increased Mandate – An operational enterprise of the

Province. – Importer of record for all beverage

alcohol products in Ontario – Wholesaler of record for all

beverage alcohol sold by grocers

Our Mandate

• What we are involved in… – Business-to-Business wholesale transactions – Access between suppliers and grocers – Listing and order flow – Financial processing – Fulfillment facilitation

• What we are NOT involved in

– Targeted consumer marketing Access between suppliers and grocers

– Product category management – Grocer sales & marketing plans – LCBO sales and promotions – Determining wholesale product mix

Our Responsibilities

• Regulates the laws pertaining to the sales, service and consumption of alcohol

• Enforces Ontario regulation on Government stores 290/15 as per but not limited to the following – Types of products eligible – Shelf space requirements – Hours of operation – Advertising rules – Trade spend restrictions – Sampling rules

• WWW.AGCO.ON.CA

AGCO Responsibilities

Key Partners

Roles

INDEPENDENT PHARMACISTS

PATIENTS

PHARMA NEWCO Grocers

Suppliers

Wholesaling “eligible beverage alcohol products

in grocery” Program

GROCERY OPERATIONS

SOURCE OF SUPPLY

BUSINESS CUSTOMERS

Joint Activities

INDEPENDENT PHARMACISTS

PATIENTS

PHARMA NEWCO Grocers

Suppliers

Wholesaling “eligible beverage alcohol products

in grocery” Program

PRODUCT LISTING

PRODUCT ORDERING & FULFILLMENT

MARKET OPPORTUNITY

• Providing product catalogue to grocers

• Receive orders for beverage alcohol from authorized grocers

• Filling grocers orders through various supplying sources

• Supplying source for all imported beverage alcohol

• Invoice grocers for product received

• Pay suppliers for products grocers receive

LCBO Responsibilities

INDEPENDENT PHARMACISTS

PATIENTS

PHARMA NEWCO Grocers

Suppliers

Wholesaling “eligible beverage alcohol products

in grocery” Program

PRODUCT LISTING

PRODUCT ORDERING & FULFILLMENT

MARKET OPPORTUNITY

• Manufacturing and listing products for wholesale through the LCBO

• Setting retail prices • Pursuing sales and

marketing opportunities with grocers

• Supplying source to grocers for domestic beverage alcohol

Supplier Responsibilities

INDEPENDENT PHARMACISTS

PATIENTS

PHARMA NEWCO Grocers

Suppliers

Wholesaling “eligible beverage

alcohol products in grocery” Program

PRODUCT LISTING

PRODUCT ORDERING & FULFILLMENT

MARKET OPPORTUNITY

INDEPENDENT PHARMACISTS

PATIENTS

PHARMA NEWCO Grocers

Suppliers

Wholesaling “eligible beverage alcohol products

in grocery” Program

PRODUCT LISTING

PRODUCT ORDERING & FULFILLMENT

MARKET OPPORTUNITY • Purchasing decisions on

brands and quantity of products ordered

• Brand and marketing relationships with suppliers

• Paying LCBO for beverage alcohol received

Grocer Responsibilities

• Delivered a B2B wholesale solution to enable Beer sales in grocery

• 60 grocery stores now have access to Beer sales

• Over 150 beer producers now have access to the grocery channel

• Over 600 beer items available for grocery

• Fulfilled over 1,500 orders from grocers from December to April

It’s a new business!

• Importance of data integrity

• Need for simplicity of replenishment and delivery operations

• Plentiful assortment

• Finance considerations

What we’ve learned

• Collecting feedback from suppliers and grocers

• Continuous improvement through IT enhancements

• EDI transactions • GMS portal

enhancements • Process enhancements

LCBO’s commitment for continuous improvement

Enabling a smooth transaction

• Use resources available

• Data integrity • 80% of new item submissions were

incorrect and cannot be processed • Invalid UPC/SCC codes may lead

to product refusals and payment opportunities

• Simplifying delivery operations

• Build relationships with grocers

How you can be successful in this channel

Doingbusinesswithlcbo.com

- Grocers legally permitted to start selling Cider on June 24th

- Release of RFB to Grocers for Wine licenses

- Info sessions this summer for Wine manufacturers and agents

- Closure of RFB and announcement of new grocery partners

- Grocers to start selling wine in late fall 2016

What’s next

The road ahead

Summer 2016 • Cider Assortment available to 60

existing authorized grocers

Fall 2016 • Wine licenses will be granted up

to 70 grocery stores through formal bidding process

• Winery Retail Stores will be permitted to co-locate and operate in grocery stores

• All grocery stores selling wine will have Beer and Cider licenses

Spring 2017 • By spring of 2017, there will be

up to a total of 150 stores selling Beer and Cider, and up to 90 of which will be selling Wine

• Striking the right balance • www.ontario.ca/page/striking-right-balance-modernizing-

wine-and-spirits-retailing-and-distribution-ontario

• Grocery Website

• www.doingbusinesswithlcbo.com • Online webinars • Procedure Manual • Power point presentations • Key Contacts

• Ontario Liquor Control Act Regulation 290/15

• https://www.ontario.ca/laws/regulation/150290

• Grocery Operations team

• wholesaleservice@lcbo.com

Available Resources

Questions?