VINTAGES OVERVIEW - Doing Business with LCBO · VINTAGES Essentials Program Sales Targets Update...

Drinks Ontario Shari Mogk-Edwards

VP Merchandising & VINTAGES

November 24, 2011

VINTAGES OVERVIEW

Agenda

VINTAGES Overview

Team Updates

VINTAGES Program

Review

Purchasing Overview

Questions

More Questions

Vision

Discover our Latest with

VINTAGES

To provide our customers

with an optimum assortment of

premium wines and spirits

with an intense quality focus at every

price point and customer touch point.

Mission

What is VINTAGES Responsible For?

Retail programs and Direct Sales Programs (Classics Catalogue, Bordeaux Futures, Virtual, vintagesshoponline.com)

Developing and producing content for all

VINTAGES Publications and Internet

Inventory Management (both Warehouse and

Retail)

Merchandising Strategy

Event Management (25+ annually)

Supplier relationship management

Stores

Five VINTAGES stores

account for $59.6 M;

14.5% Market Share

Each store carries

between 1,500 and

2,000 SKUs at any time

VINTAGES Retail Network

Toronto Summerhill $ 18.0 M

Toronto Queens Quay $ 13.8 M

Ottawa Rideau $ 10.3 M

Toronto Bayview $ 10.1 M

Oakville $ 7.4 M R13 2011-P8

Boutiques

62 VINTAGES boutiques in

LCBO stores account for

$166M; 40.4% market

share

Each store carries

between 800 and 1,500

SKUs at any time and are

located in major centres

throughout the province


R13 2011-P8

Corners

147 VINTAGES corners in

LCBO stores account for

$144M; 35.1% market

share

Corners carry between

50 and 800 SKUs at any

time and are located in

LCBO stores throughout

the province


R13 2011-P8

Net Sales - Last Five Years $

Millio

n

8.6% 1.5%

18.7%

15.4%

10.7%

Plan 2011-12

16.0% $425

Total Products Released #

of P

rod

ucts

VINTAGES Share

LCBO Imported Wine Market

LCBO

WINES $869 M

71% Market

Share

VINTAGES $360 M

29% Market

Share

Net Sales R13 2011-P8 Total Imported Wine: $1,229 Million

Wine Net Sales and Market Share

Top Countries

Italy

$74.28M

22.6% Growth

20.0% Market Share

USA

$82.19M

31.6% Growth

22.1% Market Share

Australia

$31.70M

(3.3%) Growth

8.5% Market Share

Canada

$22.23M

8.2% Growth

6.0% Market Share

New Zealand

$26.81M

26.0% Growth

7.2% Market Share

France

$72.41M

8.29% Growth

19.5% Market Share

Fiscal R13 2011-P8

Net Sales by Program YTD

58% Market Share

110 products released every 2

weeks (effective March 2012)

Focus and engage our

customers on a “Discovery” of a

country, region, grape varietal

or other themes

Driven by Buying/Thematic Calendar

Synergize with LCBO calendar where appropriate

43,100 people on the mailing list (English and French)

VINTAGES Retail Program

VINTAGES Buying/Thematic Calendar

Developed to attract new customers to premium products ($17.95 to $26.95)

Provides exceptional price/value and VINTAGES stamp of approval

Mitigates customer risk

Successful program

Two wines released every four weeks selling 1,000 to 1,800 cases each

Retail - Wines of the Month

Commencing January 2012: “Marie’s

Pick” taking over from Alanna

One Ontario VQA wine every second

release

Full page focus

Product selection based on value

proposition

Table wines: $14.95 to $19.95

Icewines: $29.95 to $54.95

Retail - Ontario VQA Wine

Marie’s Pick

Synergize and leverage VINTAGES and Food & Drink brands

Six times per annum

High visibility in-store promotions

Purchase 2,000 to 5,000 cases

Value priced: $17.00 commencing April 2012 (up from $15.00)

Sales to date: $22.26 Million

Retail - Food & Drink Feature

• 37% Market Share

VINTAGES Essentials Program

100 world renown products

Churn ~ 10% of the portfolio annually

Grow licensee sales

Increase Trade tastings

Continue successful Summer Store program


Sales Targets Update

• Sales targets had not been updated since initial launch many years ago.

• Will be revised annually in line with LCBO updates

• Need to capitalize on strong growth opportunities by updating VINTAGES business practices to ensure the assortment is kept fresh and relevant to customers

• New base sales targets to reflect current sales thresholds

Methodology:

• Adopt a strategy to measure against 90% of sales target

• Develop consistency with LCBO WINES as a continuity particularly where suppliers cross over

• Ensure transparency and simplicity

• Essentials that don’t achieve sales targets have possibility of moving into the Collaborative program or returning to the Front Line Release program. This is at the discretion of the Category Manager.


Sales Targets Update

Buyer Set Revised Target

Europe

France – Red $900,000

France - White $750,000

Italy Red $1,000,000

Italy White $700,000

Portugal Red $600,000

Spain Red $750,000

Sparkling $550,000

Fortified $700,000

Eau du Vie $300,000

Scotch $375,000

Liqueurs $100,000

VINTAGES Essentials Program:

Sales Targets - Details



Buyer Set Revised Target

New World

Canada White $350,000

Canada Red $425,000

Australia Red $1,000,000

New Zealand White $1,000,000

New Zealand Red $750,000

South Africa Red $750,000

Chile Red $850,000

California White $1,000,000

California Red $1,000,000

Argentina Red $1,000,000

Rosé $300,000



Buyer Set

Targets

Ontario

White $300,000

Red $400,000

Icewine $350,000

Rosé $300,000


Sales Target Details

• April 2012 implementation date.

• Notices will be distributed to suppliers/agents

whose products are not meeting the new sales

targets.

• Products not at base target have until April 1, 2012.

• All products will be reviewed monthly.

• Underperforming products will be replaced.

• New products have 12 months to reach sales target.


Licensee Sales Targets

New Scorecard Metrics

Sets Within Tier

Licensee sales % target:

10%

•California Reds and Whites

•French Reds and Whites

•Italian Reds and Whites

•Australian Reds

•Chilean Reds

•New Zealand Whites and Reds

•Argentina Reds

•Portuguese Reds

•Spanish Reds

•South African Reds

Essentials: Scorecard Elements

New Scorecard Metrics

Sets Within Tier


5%

•Ontario Reds and Whites

•BC Reds and Whites

•Fortified Wines

•Imported Sparkling


2.5%

Spirits:

•Eau de Vie

•Cognac,

•Armagnac

•Scotch


Licensee Sales Targets


Bottle Weight for <$15:

- 420g by Jan 2013

Bottle Weight for <$20:

- Negotiate target

• 1.5% Market Share

Ultra-premium direct marketing

catalogue program launched in

1994

Migrated to a web-based “Classics Online” strategy with poor results

Re-launched a scaled down version of the Classics Collection Catalogue

Currently three Classics Catalogues per year

Strategy under review

Direct Programs: Classics Collection

Market Share varies with vintage

VINTAGES is one of the largest

buyers and retailers of Bordeaux

Futures

Products are offered for sale 12-

18 months before they are

available

Customers pay a deposit

Sold in 3 bottle lots

Size of offer varies depending on

the strength of the vintage

Direct Programs: Bordeaux Futures

Virtuals are a risk free

way to expand product

assortment

Extremely high

average price per SKU

and $ per order

High customer

satisfaction

Direct Programs - Virtual Offers

1.4% Market Share

VINTAGES Shop Online (VSO)

VINTAGES Internet selling channel launched on Oct 28, 2008

Premium assortment focus ($25-$65)

Depth of inventory: 5 – 25+ cases


0.4% Market Share

Specialty (Ethnic)

Kosher

Saké

Other Programs

1. “Needs letter” or Open Call for products 2. Direct & Ad Hoc

• Allocations • Past exceptional sales performance • Strong third party and journal accolades • Supplier meetings • Trade Tasting events

3. Buying trips • Travel to wine regions & wine fairs

(Vinexpo,VinItaly) 4. Virtual 5. Bordeaux Futures

VINTAGES Purchasing Process

Warehouse & Retail Inventory

Turns

R13, P8 2011

Strategic component of VINTAGES business

Partner with the Trade on various events

Event Strategies:

Large taste and buy events (UGC Bordeaux , Taste the Classics) mitigates purchase risk

Educational focused, such as Wine 101; scaleable into smaller communities

Top chateaux and estates tastings and dinners

VINTAGES Events

January UGC Bordeaux 2008 Consumer Tasting

February Taste Ontario Ottawa, Ch. Montelena, Ch. Haut-Bailly, Vega Sicilia

March Marques de Murrieta, Argentina & Chile, Burgundy, Paul Hobs

April Tenuta di Biserno

May Ridge, Australia’s First Families Ottawa, Australia’s First Families

TO, Somewhereness: Old Soils, New Wines, Sake 101

June Brunello Virtuoso, Domaine Trimbach with Pierre Trimbach

July International Cool Climate Chardonnay Celebration

September Taste Ontario Toronto, Vina Montes

October Le Donne del Vino/Women in Wine, Fete de Bordeaux, Two

Hands

November Family Wineries of the Oakanagan, An Evening with Margrit

Mondavi

January ’12 Scotch Tasting, UGC Bordeaux 2009 Consumer Tasting

2011 VINTAGES Event Highlights

Deliver VINTAGES’ competitive edge to a key sector, our wholesale customers - Restaurants, Hotels, Casinos, Private clubs

Located across the province concentrated in the GTA area and in Ottawa

Meet with targeted licensees in their establishments and provide product consultation, wine list development, wine and food matching

Sell VINTAGES portfolio: Releases, Classics Catalogue, Essentials, Virtuals and VSO


VINTAGES Licensee Program

Open Call Update

The 2nd One on One Call is being held November 29th, 2011

• Call was for products that would add value to the VINTAGES

assortment

• Focus was primarily on agents who did not get a meeting last Call

• More than 250 products will be presented by more than 64 agents

across 12 team members

• Decision for selection call back will be by December 14th

• Final samples for this are due January 13th, 2012

• Products selected to purchase will be planned for releases 2012-

2013

QUESTIONS

New Ontario VQA Product

Call

• Will the new wines replace existing Ontario

VQA wines that were not excluded from the

revised sales targets, or are these new

listings?

• What is the capacity at the Toronto Warehouse currently?

• How and when outlying warehouses will be utilized by

VINTAGES?

• Can you provide an update on the Implementation of the

Central Allocation Strategy?

• How effective has the bin-end clearance sale and store-level

discounting of aging inventory been in freeing up pick slots

in the warehouse and freeing up shelf space at retail?

• What are the LCBO’s long-term plans for warehouse

support as VINTAGES sales continue to grow?

Warehouse Capacity

Inventory Holds & Deferred

Releases A Member was recently told the following by VINTAGES staff regarding the new

Collaborative distribution strategy:

• Collaboratives are not pushed to stores with the stock of the release to which they

are attached

• They are available to stores as soon as they are in the warehouse and all the QS

are cleared for the stores to draw

• Agents should create customer pull to encourage stores to continue re-ordering the

stock

This change from forced distribution to store orders is very problematic because stores

are already struggling to keep up with regular releases. They are not prepared to

order discretionary items in large quantities. As a result, the initial distribution based

on store orders is very low. It is not realistic to think that the sales force of any agency

can create a market or persuade Store Managers to order hundreds of cases of a

given collaborative SKU. The likely outcome is loss of collaborative status and a risk

of rebate. VINTAGES should analyze each collaborative SKU’s performance under this

new distribution strategy and compare each respective SKU to the respective past

performance.

A few months ago, VINTAGES pulled about 160 products from its warehouse pick

slots. These were products which had already been released and were selling well.

Products were temporarily put on a shipping hold in order to allow current releases

to ship out on time. Members were trying to obtain listings only to find that their

products were not available for shipping to stores.

• Why was the trade not advised of this situation and notified of the affected

products?

• What is the current status of these wines? Will agents be advised when the

products are once again available?

• How will this affect a product's future consideration when the VINTAGES team looks

at sell-through? Will the sales history of these products be flagged in your system?

Inventory Holds &Deferred

Releases

VINTAGES has also recently deferred the release of a number

of collaborative and rapid release SKUs in order to free up

capacity at the Toronto warehouse. These SKUs have been

temporarily shipped to Durham until they are forced out to

stores prior to Christmas.

• Will products ship out from Durham or will they shipped

back to Toronto first?

• Will stores receive any special signage to help them

merchandise these large shipments that will probably

require floor display?

Inventory Holds &Deferred

Releases

Our understanding is that this program is being revamped to

allow stores to order inventory of these products. This will

allow for the sale of these products to licensees and direct to

consumers at store level.

• When will VSO products be made available for stores to

order?

• We also understand that VSO may be used to market

remnants. If so, when will this begin?

VINTAGES Shop Online (VSO)

Program

In-Store Discovery Program

Similar to the above point regarding inventory backlog at Retail, there is

evidence that stores are not ordering ISDs. Without forced distribution,

these products will not get out of the warehouse and will not meet

performance criteria. This is impacting the sales performance of proven

past performers.

Our understanding is that this program is being revamped to allow

stores to order inventory of these products. This will allow for the sale

of these products to licensees and direct to consumers at store level.

• What actions is the LCBO taking to differentiate price bands and

product positioning between the VINTAGES and LCBO Wines, Spirits &

Beer sales channels?

• Would you ever consider having LCBO Category Managers purchase

products for both sales channels?

• Is the Ontario “How to Get More for Less” offer in the latest VINTAGES

catalogue going to be a regular program?

• What is the policy when a supplier has products in the same brand

family across both channels (LCBO and VINTAGES)?

VINTAGES Strategy

Currently, Essentials product displays and shelving are at the discretion

of the Product Consultant. This often leads to hit-and-miss sales

performance for these products across the store system.

• Will Vintages develop a set of display standards to mandate what is

in cut-case displays and where Essentials should be shelved if not

on display?

• Has Vintages considered permanent shelving for Essentials

products to eliminate this problem?

• Implementation of Essentials and ethnic marketing programs at

Retail (installation of LTO and BAM shelf talkers) is not as good as

the LCBO channel. What can be done to improve it?

VINTAGES Essentials

Some wines are not being released for

tasting with Product Consultants and the

media. Drinks Ontario has previously asked

Vintages for a list of products not making the

release. This could be circulated to

Members, allowing agents to then address

the problem as appropriate.

• Is this possible?

Wine Released for Press and

Product Consultant Tastings

• What is the strategy for the purchase and

display of VINTAGES products in these

categories in relation to the LCBO display of

these products?

Spirits, Ethnic and Kosher

Products

Communications continue to be a problem. Suppliers often hold product for

months after a tasting before being advised what the order quantity is.

• Why are agents not advised of the order quantity at the same time they

receive notification that a purchase will be made?

• Whenever there is a change in the status of a product purchased by VINTAGES

(change of release date, change of release program), is there a way that

agents can be advised?

Vintages often asks agents for additional samples (e.g. for photography) without

providing sufficient lead time.

• What can be done to ensure that agents receive sufficient lead time to better

respond to Vintages’ requests for additional samples since agents often do

not have samples in their offices?

Communications

• Is there background sales data the LCBO can share demonstrating the

enhanced value of fridge displays?

• What percentage of fridge space is accounted for by paid-space vs.

discretionary space?

• What percentage of fridge space is being plannogrammed for imported

wines? VQA wines and ICB wines?

• What percentage of discretionary space will be directed to imported

wines? VQA wines and ICB wines?

• How many facings and what position will one secure in the wine fridge?

• What is meant by “premium shelf positioning”?

Wine Fridge

Thank You

VINTAGES OVERVIEW - Doing Business with LCBO · VINTAGES Essentials Program Sales Targets Update...

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