SellingBeeronthePrairies

By Mike Tessier and Bo Vitanov

•  Mikehaslivedandbreathedcraftbeerfor20+yearsasabrewer,writer,agent,beertravellerandmostrecentlyabeeractivist

•  HiswifeBodoesn’tbreathecraftbeer,shejustdrinksit•  OurcompanyArtisanAlessolditsfirstcasesofbeerinAlbertaandSaskatchewanin2009

•  95%ofoursalesareinthosetwoprovinceswithManitobaandNWTmakinguptherest

•  Thecompanymottois:

“Ifwedon’twanttodrinkit,wedon’twanttosellit”

AlbertaQuickFacts•  Populationof4.3million•  Concentratedin:•  Calgary1.4mm•  Edmonton1.3mm

•  Albertahasthehighestpercapitaincomeofallprovinces(2015StatsCan)

•  Generaleconomicdownturnhasimpactedliquorsales•  Beervolumeshavedecreasedfortwoyears

•  2017marketindicatorstrendingbackup•  BeerMarket•  LessMature(~10yearsbehindQuebec)•  Butfermentingrapidly

AlbertaLiquorSystem

QuickFacts•  9514liquorlicensees•  2136liquorretailers(stores)•  ~5300restaurantsandbars(licensed)

•  24,369productsorSKUsavailable•  4169ofthesearebeerproducts

•  Liquorsalesgenerate$2.5Bninrevenue•  43%ofrevenuegeneratedbybeerproducts•  72%ofvolumesoldgeneratedbybeerproducts

•  2ndhighestpercapitaliquorrevenuegeneratorinCanada

SalesStatistics

ShareofVolume VolumeHL $MM

Beer 73% 2,756,429 1,127,155

Wine 12% 453,192 601,670

Spirits 7% 278,574 763,792

Cider/Coolers 8% 291,593 141,639

2015/2016

AlbertaLiquorSystem• Wasprivatizedin1994•  Distributionsystemcentralized•  Itswarehouseisoneofthemostadvancedliquorwarehousesintheworld•  Alberta’sRetailsystemisfullyprivate•  Agentorwholesalepartofthesystemisalsoprivate

•  Anybarorstorecanorderanyproductwithexceptionofallocations•  Alloutofprovincebeermustgothroughthemainwarehouse

AlbertaLiquorSystemPlayers•  AGLC•  AlbertaGamingandLiquorCommissionistheGovernmentagency

responsibleforliquoroversight

•  ConnectLogistics•  Centralizedwarehousinganddistributionsystemformajorityofliquor

productssoldinAlberta

•  BDLBrewers’DistributorLtd.•  JointventurecompanyownedbyInBev,SleemansandMolson-Coors

thatwarehousesanddistributestheirdomestic(Canadianbrewed)productswithinthefourwesternprovinces

•  Licensees•  Retaillicensees(liquorstores,restaurants,pubs,barsetc.),whopullor

purchaseliquorproductsfromConnectLogisticsandBDLforresaletocustomers

•  AlbertaMicrobreweries•  Growingrapidlyinthelastcoupleofyearswithover60intheprovince

AGLC

TypicalFlowforOutofProvinceSupplier

Supplier Shipper ConnectLogistics Licensee

Agent

Agent

ApproachtoSalesinAlberta•  Youcanonlyberepresentedbyoneagentatatime*

•  Option1:GowithanAlbertaapprovedagent•  Negotiateyourpaymenttermsandcontractwithagent•  Agentbecomesownerofproduct•  Agenttakestheriskonsales

•  Option2:Beyourownagent•  Hireyourownstaff•  Manageyourownproduct•  Getpaidweeklyasproductsells•  Brewerytakestheriskonsales

•  Option3:Commission•  Hireanagent•  Breweryownstheproduct•  Getpaiddirectlyasproductsells•  Payagentcommissiononproductsold•  Brewerytakestheriskonsales

DistributionConnectLogistics(AGLC)

LifecycleofProductinConnectSystem

SKUisregistered:•  Onetimefee•  Nolabtest•  Notastingpanels•  AgentsetsCIF

priceforSKU

ProductReceivedatConnectWarehouse:•  Agentassessedreceiving

feeforproduct•  AdditionalPotential

Services(fees):•  Allocation•  AveryMarking•  SpecialPackaging•  Reports

ProductStoredinConnectWarehouse:•  Choiceofrefrigerated

orambientstorage(15degrees)

•  Agentischargedweeklyforstorage

•  Fastmovingproductsgetareducedstoragerate

ProductSellstoLicensee:•  Licenseepays

wholesaleprice,•  Incl.,Postagestamp

deliveryrate•  Mustpayinfull

beforeproductships

Agent:•  OrdersProductfrom

brewery•  Co-ordinatesshipping

ofproducttoConnect

ProductOrderedbyLicensee:•  Handlingcharge

assessedtoAgent

Agent:•  Marketsproductto

relevantlicensees

Agent:•  Receivespayment

(CIFprice)forproductsoldfromAGLC

LiquorconnectPortal

LiquorconnectPortal

RetailStores

Stores-Variability• Mustbestand-aloneliquorstores:•  Largegrocerychains(detachedbutaffiliated)•  TheBIGplayerschains(LiquorDepot,LiquorBarn,WillowParkandmore)•  Smallmom&pop/cornerstores•  Specializedwineboutiques•  Growlerbars

UniquePackagingforAlberta• Bombers(650ml)• Mixedpacks• Multi-brewerypack

Restaurants,BarsandLocalMicros

Restaurants&Bars• CanorderdirectlyfromConnectorthroughanotherLicensee• Bottlesinrestaurants•  Smallerisbetter(500mlorbiggerbottlesbecomeveryexpensiveinrestaurants)•  Interestinhavingmoreinterestingbeerselectionsisgrowing

• Draftspecificrestaurantsalsoareagrowingtrend

AlbertaDraftMarket• Untilveryrecentlydominatedbydomesticandlargeimportbrands• Allonewaykegsareapproved,thishaschangedthedraftscenesignificantly• ManydraftfocusbarshaveopenedinAlbertainthelastfiveyears•  Substantialportionofdraftmarketcanbesubjecttobigbreweryinducements

MicrobreweryScene•  Localmicroscan•  Sellthroughtheirowntaproom•  Deliverthemselves,60+breweries/contractbreweries•  TheycanusetheConnectsystem•  Dependingonlicensecanhaveguesttaps

It’ssoeasy,what’sthecatch?

ProsandCons• Verycompetitive•  Shelfspacelimited• Mark-updisadvantaged•  Muchhigherthanlocals

•  IconicbrandslikeNewBelgiumandStonehavestruggledgainingmarketshare

•  Fullyopen•  Easytonavigate• VeryeasytoworkwithConnect• Nobarriertoentry•  Segmentofmarketnotpricedriven•  Onetimebuyer(ticker)

Saskatchewan/Manitoba&BoardtoBoards

LiquorBoardtoBoards•  Thereareweeklyboardtoboardstoeveryprovince• Beerissentwithoutmark-uptaxtootherboardsandthatprovincetaxesaccordingly• Workswellforsmallorders(minimizesshipping)•  ThemajorityofoursalestoSaskatchewanareintheformofweeklytransfers

SaskatchewanSLGA•  Saskatchewanliquorsystemisexperiencingabigtransition

•  686liquorretailers•  Mixofgovernmentandprivatestores•  Governmentismovingtoprivatizemorethan

halfofgovernmentstores(40outof75)

•  Privatestorescouldnothavethesameproductsasgovernmentstores•  Thisisphasingout

•  Privateorders(notthroughagent)arepossible

•  BoardtoBoardtransfersareacosteffectivewaytosellinAlbertaandSaskatchewan

QuickFacts•  Populationof1.1million

•  300,000inSaskatoon•  235,000inRegina

ManitobaMBLL•  Hasamixedsystem

•  GovernmentStoresandPrivatestores

•  MBLLdoesseasonalbuys4times/year•  Usuallyonepalletofabeer

•  MBLLdoesdraftpurchasesfortheirgrowlerbarprogram2time/year•  Usually1000LperSKU

•  Bars/restaurantscanbringanydrafttheywant

•  Alldraftmovesthroughauthorizedprivatedistributors,notMBLL

•  Productscanbeingovernmentandprivatesystemsimultaneously

•  Preferenceforbombers,orsingleserveformats

QuickFacts•  Populationof1.3million

•  MorethanhalfofpopulationisinWinnipeg

•  ManitobahasthelargestFrench-CanadianpopulaceofanyprovinceoutsideofQuebec•  TheyenjoyQuebecbeers

Merci!Questions