Market trends:

How do they touch the beverage alcohol industry?

Pamela Lawson

Marketing Director, Customer Insights and CRM

September 23, 2010

The Economic Crisis effect – still on the table

Consumers:• Still cautious and more likely to continue consuming at home

• Apprehensive to premiumize their consumption (still buying cheaper brands)

• The aversion to risk and spending concerns are still stressing the “tried and true” over experimentation.

• “Upscale” was the trend between 2005 and 2008, but priorities have changed:

• Environmental choices (i.e. light weight, packaging)

• Ethical and safety worries are also rising

• Re-review of the value proposition and communication messages

• Local and craft products will continue to experience growth

• “Healthy” or products with “functional benefits” will continue to get the buzz and interest of consumers

• Value for the money (this does not equate cheap)

OPPORTUNITIES

Which is Which is the next big the next big

idea?idea?

A cross-industry mindset can become the source for the next big thingNo doubt…

• Healthy, green and organic alternatives are still hot topics

• Competition’s moves/launches are also a driver of the industry

HOWEVERHOWEVER……

Looking at our industry is no enough Looking at our industry is no enough to predict market opportunitiesto predict market opportunities

• Our competition could be anyone: other beverages, other entertaining options, other gifting solutions.

• Customers are spending their “play money” on goods and services that enhance their experiences, their excitement, their satisfaction at a given moment (i.e. iphone4 is sold-out)

• Risk: resting on laurels- becoming a follower, not an innovator

Market Opportunities: Value generosity, sharing and collaboration

Tesco Wine Finder App.Tesco Wine Finder App.

Market Opportunities: Value generosity, sharing and collaboration

Lonely Planet offers its iPhone travel apps freeLonely Planet offers its iPhone travel apps free

EMOTIONAL CONNECTION SEGMENTSB.HEALTH

LCBOB. HEALTH OVERVIEW

How to reach the Emotional Connection?

Market Opportunities: Never stop surprising your customers

Schweppes reSchweppes re--vamped its packagingvamped its packaging

Market Opportunities: Local: your world is where you live

Absolut Cities SeriesAbsolut Cities Series

What can we What can we leverage for leverage for our market?our market?

Lovemarks

Lovemarks

What is expected from Spirits?The Spirits market is forecasted to have steady sales during the coming years.

• Top performers continue to be vodka and rum

• Spiced rum is one of the big drivers of flavored spirits

The cocktail trend has been fueled by the rediscovery of the classics

• Licensees: opportunity to have their signature cocktails (distinction) and to include alcohol as part of their menu ingredients

• Female market: fashion, health and overall uniqueness can be build by creating unique and tasty cocktails and mixed drinks

P6 Civic Holiday Sale FSI

• Featured product sales were up 279% from the previous weekend.

What to expect from the wines category?

• Wines market is expected to continue growth, particularly Ontario wines and New World wines.

• Consumers are still trading down in price point; LTO and Air Miles a positive tactic for mid range price wines.

• Shopping the WINES category can be confusing and causes some anxiety. The LCBO will continue to promote strategies to relieve stress (i.e. shelving, education)

Beer… summer shine!

Beer continues to have strong sales. Hot summer, the large product assortment, and its overall value proposition.

Beer Trends:

• Single serve beer: important to the LCBO sales

• Continued explosion of Ontario craft beer

• Beer gifts and sampler packs gaining popularity

• Customers returning to value - Lower priced imports and single serve domestic brands

How can we better How can we better communicate with communicate with

our customers?our customers?

LCBO customers are not all the same

One category purchasers (19%):• Almost half of those buying one category

buy wine exclusively.• Only 3% of annual revenue

Cross-category purchasers (81%):• 56% of customers buy three or more

categories during a given year.• Represent 83% of annual revenue

19%

28%

28%

24%

One cate. Two cate.Three categ. Four cate.

Distribution of cross purchasers

The Future –Segments, Geo Demo’s and Products

CUSTOMERSegments

Adventurers Moderates

Inexperience Party People Homebodies

PRODUCTPPGs

Global RootsBig Brands

Mainstream SpiritsCool Convenience

Premium DestinationBeer & Chasers

Up-spend Mainstream

Active Retailing: Linking Shoppers with Active Retailing: Linking Shoppers with Products Faster, for Greater ProfitsProducts Faster, for Greater Profits

GEO DEMOGRAPHIC

Segments

Prizm - MapInfo

THANK YOU!