The following describes the evolution of the LCBO from a staid distributor of beverage alcohol products to an innovative, customer-focused and award-winning retailer.

We’ve been asked: Why change? You are a monopoly.

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The LCBO in fact has several competitors in the Ontario beverage alcohol marketplace. These include the privately-run Beer Store network, Ontario retail winery stores, U-Brews and U-Vints and cross-border shopping. LCBO sales represent half the $9.2 billion Ontario beverage alcohol market.

The LCBO also competes for “share of wallet” – money that consumers may decide to spend with other retailers for things like Christmas gifts or pizza and a movie instead of a bottle of wine with dinner.

So it’s important that customers visit our stores because they want to, not because they have to. Unlike other retailers, however, we can’t offer deep price discounts. That would not be socially responsible.

We’ve had to look for other ways to increase customer satisfaction, mainly by upgrading our stores, improving product selection and training staff to offer friendly, knowledgeable, and engaging customer service.

Succeeding in a shared marketplace and providing the best possible customer service have been integral to our vision and strategic plans.

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Key objectives of our strategic plan for 2008-13 are:

● Increasing customer engagement and satisfaction by focusing on:

Discovery: Engaging customers in a discovery experience and inspiring, guiding and delighting them responsibly at every point of contact.

Learning: Removing the intimidation from product selection by helping customers choose and serve products with confidence and ease.

Entertaining: Providing solutions that make all customers’ entertaining occasions a success.

Giving: Providing inspiring and affordable gift solutions for all of life’s special occasions.

Interacting: Communicating effectively with customers across all media – in-store, print, Internet, e-commerce websites and so on. Increase the tools and confidence of every employee to inspire, guide and delight.

Caring: Demonstrating leadership in corporate social responsibility – promoting responsible consumption, fundraising to support Ontario communities, lessening our environmental impact, and ensuring the products we import and sell are safe.

• Expanding our role as a socially responsible retailer by:

- integrating corporate social responsibility into all our operations

- building on the good works being done throughout the organization in four key areas: responsible consumption of alcohol, product quality and safety, environmental sustainability and community involvement and fundraising

- establishing baseline measurements and targets in these four key areas

• Maximizing returns to the people of Ontario by:

- generating a total of $6.6 billion in net income

- growing sales from $4.21 billion in 2007-08 to $5.3 billion in 2012-13 and net income from $1.4 billion in 2007-08 to $1.7 billion in 2012-13

- maintaining a “hurdle” rate of 12 per cent (minimum rate of return) on all capital projects

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Growing Ontario winery sales by:

- increasing customer engagement and promoting the Ontario wine experience

- emphasizing local advantages, including environmental benefits, cool climate viticulture, food-friendly styles, winery tourism and grape varieties that grow well in Ontario

- promoting pride in home-grown excellence

- growing Ontario winery sales to $410 million by 2013

- continuing to enhance our collaborative partnership with the industry through participation in joint LCBO/Wine Council of Ontario working committees

Improving employee engagement and performance and building leadership capacity by:

- offering employees a career that includes the opportunity to be part of a world-class organization in which they can learn, grow and achieve their full potential

- building leadership capacity to ensure a continuous supply of qualified talent

- enhancing health and safety to achieve an accident-free workplace

- promoting a harmonious and inclusive work environment

Improving collaborative planning with stakeholders and trade partners by:

- building strong relationships supported by information exchange systems and processes

- leveraging pride in the unique aspects of Ontario wine and the wine experience

- achieving business goals and objectives that solve common business issues.

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If you examine our customer research and look at our financial performance, you’ll see the LCBO is doing very well on all counts.

Customer feedback continues to be positive. Customers like the changes we have made. Our large-scale customer satisfaction surveys show that 77 per cent of our customers rate their overall shopping experience as an eight or higher on a 10-point scale while dissatisfaction barely registers only one per cent.

A Customer Tracking Study, conducted annually and based on in-depth interviews with 2,500 people across Ontario who say they are the primary LCBO customer in their household, consistently reports satisfaction levels in the high 70s. This compares with 74 per cent when the study began in 1999.

The survey also tells us four out of every 10 customers say the LCBO is one of their favourite places to shop.

Some of the highest rankings are for staff friendliness and professionalism.

Similar findings are reported by a more frequent Omnibus Survey known as Project SCORE. This is a monthly survey that asks about 450 randomly selected LCBO customers across the province to rate their satisfaction with their most recent shopping trip to our stores and the reason for their rating.

Another way of assessing the shopping experience is our Mystery Shopper program, which involves visits to our stores by unidentified shoppers reporting on customer service and the appeal of stores. This program gave stores an average overall score of 95 per cent in 2008-2009. Mystery Shoppers visit larger LCBO stores four times each year, smaller ones once a year.

In fiscal 2008-09, we delivered our 15th record dividend – $1.40 billion – to the provincial government. This figure, which does not include taxes, was $55 million (four per cent higher) than the previous year. Our net sales were also a record at $4.27 billion, 4.9 per cent higher than the year before.

The provincial, federal and municipal governments also received $848 million in taxes, import duties and payments to municipalities.

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How did we know what changes would work? Customer research. We learned and we continue to learn more about our customers – who they are and what they want. 

We went beyond standard demographic research into segmentation studies. These studies separated our customers into distinct groups based on shopping behaviour and lifestyle, as opposed to age. This has helped us better understand customer interests and shopping habits and tailor our retail and marketing strategies accordingly.

We've also done large and small telephone and in-store surveys. We have done everything we can to learn more about the products and services the buying public wants. Research also guides the LCBO’s major social responsibility campaigns.

We measured what was important and behaved like a private sector company, observing other retailers and adapting successful ideas without compromising good public policy or social responsibility.

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In 1998, the LCBO – with the support of its board and government – embarked on a bold modernization plan – to be Ontario's Source for Entertaining Ideas. We listened to our customers and were poised to take action.

We made major changes to the store network by:

We also looked at value-adds for our customers. In larger, destination stores we offered a full range of products and services including tutored tastings.

In smaller communities that couldn’t support a regular LCBO store, we partnered with existing private sector retailers to open agency stores to fill in service gaps.

Since 1962, privately-owned agency stores had provided beverage alcohol service to smaller Ontario communities, mostly in Northern Ontario. There was an expansion in the 1990s, making beverage alcohol retailing more convenient, cost efficient and socially responsible while serving a broader consumer base. By extending its services, the LCBO brought additional revenue to communities and increased their overall business base by giving rural consumers another reason to shop locally. A further expansion was undertaken in 2002.

The number of agency stores at the end of fiscal 2008-09 was 216, representing 2.1 per cent of total LCBO sales.

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How do we continue to leverage our vision to help grow the business and increase our revenues? Customer research, of course.

For example, LCBO sales trends have shown that the interest in mixed drinks and cocktails is growing but our research also shows many consumers mistakenly think making mixed drinks is difficult and time-consuming.

So the LCBO, together with our suppliers, launched annual promotions in our 608 stores across Ontario that include demonstrations and shaker cocktail recipes for hosts.

These promotions show that spirits are fun and ideal for entertaining because of their mixability, diversity and ease of preparation.

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Great stores and selection alone don't win over customers. You need great service too; so we invested in our people.

We made product knowledge courses mandatory for all retail employees. A program called Service Knowledge better prepares them to answer questions from customers with confidence.

We partnered with the Wine Council of Ontario to educate our employees more about products and developed a program called World of Ontario Wines, in which more than 300 employees in our biggest stores are designated WOW Leaders to promote the sale of Ontario wine.

Other employees have become “Beer Guys” and “Beer Gals” to promote consumer beer knowledge and interest while a Spirits Advocate program does the same for spirits. Ongoing training is provided to update employees’ product knowledge.

We also undertook large-scale employee attitude/engagement surveys and learned our employees must contribute to and understand our vision to embrace it. They must understand our goals and what they can do to help achieve them. They must know our core values – customer service, social responsibility, excellence and integrity – and how they can bring them to life.

This approach defines what customer service means to an organization that subsequently trains and motivates staff to provide that service. There is a one-to-one correlation between employee trust and profitability: The more employees believe management supports quality service, the more profitable that organization will be.

Employees must be engaged which, at the LCBO, means being part of a world-class organization where they can learn, grow and maximize their potential.

This includes leadership development programs and a coaching culture to identify the leaders of tomorrow, ultimately making sure they have the skills and knowledge required to take the LCBO into the future.

It means transferring corporate experience and knowledge to the next generation through mentoring and job-shadowing and making succession planning a top priority throughout the organization.

It also means promoting a harmonious and inclusive work environment and enhancing health and safety to achieve an accident-free workplace.

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Selling beverage alcohol responsibly is a public trust the LCBO has taken seriously since its creation in 1927. Over the years, LCBO has had a strong and consistent commitment to socially-responsible programs, practices and actions:

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• responsible retailing

• promoting responsible consumption through education and advertising

• reducing our ecological footprint by eliminating plastic bags, increasing lightweight packaging and encouraging customers to return containers for a refund

• making sure products sold by the LCBO meet the highest quality and safety standards

• fundraising to support charities and community organizations in Ontario.

Today, consumers expect a higher standard of corporate social responsibility and a greater commitment to the environment from the companies they do business with. The LCBO is evolving and working to integrate social responsibility into all points of contact with our customers beyond what has been achieved in the past.

Social responsibility practices are as important as our mandate to provide a high level of customer service and maximize dividends for the provincial government.

Corporate social responsibility at the LCBO includes:

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• All LCBO retail employees participate in an award-winning training program, produced by the LCBO, called Strategies for Managing Age and Alcohol-Related Troubles (SMAART) to enable them to challenge and refuse service to anyone who appears underage and cannot provide valid proof of age or appears intoxicated. They challenged more than 2.4 million would-be customers in 2008-09 and refused service to 148,886. Most refusals were for age-related reasons.

• To help prevent underage drinking, the LCBO and MADD Canada have a website for parents of pre-teens with tools and tips to promote dialogue with their children about alcohol, helping them make informed and smart choices.

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• To take the social responsibility message into high schools, LCBO develops safe prom and graduation campaigns that include posters, prom tips for students and parents, information resource packages and web-based resources for teens, parents, teachers and counsellors.

• Every year since 1995, LCBO has conducted major advertising campaigns, in partnership with MADD Canada, to raise awareness about the responsible use of alcohol and the dangers of impaired driving and to encourage people to take action to prevent drinking and driving. These innovative, award-winning advertising campaigns have included TV, radio, print, cinema, bar washroom and outdoor advertising across Ontario.

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• Helping to protect the environment through a deposit return program and support of the Blue Box program, working with suppliers to offer more products in lightweight packaging, and encouraging the use of reusable bags. The LCBO also recycles corrugated cardboard, fine paper, polystyrene, newspaper, batteries, printer cartridges, data tapes and other materials, as well as working to reduce the use of energy in stores, warehouses and offices.

• In 2008-09, LCBO customers and employees raised more than $2.7 million for a variety of worthy causes.

  More than half these funds were raised for the United Way. Employees rallied behind this annual campaign, raising more than $1.5 million through payroll deductions, special fundraising events and customer donations. These funds support social and health services to deliver community programs and tackle social issues.

  The additional funds – $ 1.25 million – were raised by customers through prompted donations and cash boxes at store checkouts. These were donated to other LCBO-supported charities – including MADD Canada, Friends of We Care and Camp Oochigeas which helps children with cancer. A variety of in-store activities were also held in aid of local organizations. LCBO employees are also actively involved in many individual fundraising efforts in their communities.

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Donation boxes are placed at checkouts each month to collect funds for two designated charities and customers are sometimes invited to make a donation at the checkout. 

Local charities also benefit twice a year from the donation box program.

These charities include organizations fighting impaired driving – such as MADD Canada and Ontario Students Against Impaired Driving – as well as the four hospitals for sick children across Ontario, the United Way, the Canadian Cancer Society and many others.

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The LCBO is helping to protect the environment in several ways:

• The Ontario Deposit Return Program – Bag it Back – was launched in February 2007. Through this program, consumers pay a deposit on LCBO containers and receive a refund when returning containers to The Beer Store. The deposit is 10 cents and 20 cents depending on the size of the container.

The Bag it Back program is helping to divert significantly more glass and other beverage alcohol containers from landfill sites and results in more glass being recycled into higher-end uses, including new glass bottles, fibreglass and polar fleece.

It is also freeing up space in the Blue Box program, giving municipal governments an opportunity to expand recycling programs.

• The LCBO has also been a leader in supporting Ontario’s Blue Box recycling program and has contributed more than $40 million to date to Ontario’s cities and towns as well as helping develop new markets for coloured glass.

• The LCBO has become a recognized leader in the promotion and sale of lightweight packaging for beverage alcohol, including Tetra Pak containers, PET (polyethylene terephthalate) plastic bottles, aluminum cans and, increasingly, lightweight glass.

• In May 2008, the LCBO phased out plastic bags in all its stores in an effort to reduce reliance on disposable shopping bags and encourage customers to opt for reusable alternatives. This initiative has eliminated 80 million plastic bags. Customers now have three reusable bags to choose from or they can bring their own reusable bags. Customers can also opt for free single or double-bottle paper bags or take supplier cardboard boxes for larger orders.

• Cloth Envirobags are available in LCBO stores in place of disposable shopping bags and 50 cents from the sale of each four-bottle cloth bag, together with proceeds from other fund-raising efforts, go to the LCBO Natural Heritage Fund, which supports community-based projects to preserve or restore wildlife habitat.

• Suppliers are encouraged to minimize packaging and the LCBO recycles corrugated cardboard, fine paper, polystyrene, newspapers, batteries, printer cartridges, plastic wrap, data tapes and other materials, as well as working to reduce the use of energy in LCBO facilities to reduce greenhouse gas emissions.

LCBO environmental strategy has five specific goals:

• Reducing package waste generated by LCBO sales

• Increasing the rate of material diverted from landfill to recycling and re-use

• Improving all aspects of environmental management

• Reducing consumption of energy and utilities at LCBO facilities

• Promoting re-use and conservation.

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Products sold in LCBO stores must first be tasted, tested and certified by the LCBO’s Quality Assurance laboratory.

This means they are safe to consume, authentic and meet standards set out in Canada’s Food and Drugs Act and Consumer Packaging and Labelling Act and their related regulations.

Every year, more than 492,000 tests are performed on more than 22,000 products.

The lab is world-renowned and meets the high standards set by the Geneva-based International Organization for Standardization. It is registered under ISO 9001:2000 as well as under ISO/IEC 17025, a designation specific to chemistry laboratories.

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As a government agency, LCBO has worked very hard to support our domestic wine industry and craft brewers. We have:

•	Partnered with the Wine Council of Ontario and the provincial government to develop an overall wine strategy.	Click to Enlarge Click to Enlarge
•	Developed a craft winery program to help smaller wineries establish their brands so they can better compete.
•	Increased shelf space in our stores for Ontario wines.
•	Launched an in-store program that highlights two “Ontario Superstar” wines each month.
•	Trained some 300 employees in our stores to act as specialists in Ontario wine – WOW Leaders – who can help customers and colleagues alike learn more about the value and versatility these wines offer.
•	Worked with the Ontario Craft Brewers to make these beers more visible in LCBO stores through new signage and displays designed to showcase them.
•	Developed promotional material highlighting some of the many craft beers available at the LCBO and how Ontario’s craft brewers pride themselves on their traditional brewing practices.
•	Introduced "Beer Guys" and "Beer Gals" to promote consumer knowledge and interest.
•	Developed thematic promotions and special displays to help small brewers grow and, with the goal of doubling sales volume, create more jobs and stimulate economic growth in their communities.

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The transformation of the LCBO has been a success by any measure.

In 1991-92, the LCBO’s annual revenue was $1.8 billion and the dividend was $675 million.

In 2008-09, annual revenue was $4.27 billion and the dividend was $1.4 billion. This did not include $398 million in PST, $104 million in GST and $346 million in excise taxes and import duties. When payments to municipalities were included, the total was $2.5 billion. (As of June 2009, these figures were unaudited.)

Our strategic plan for 2008-13 projects at least $6.6 billion in dividends by the fifth year.

Dividends help pay for health care, education and other important social programs and major capital projects.

The LCBO has also been successful in containing costs, as reflected in expenses-as-a-percentage-of-net-sales.

This figure was reduced to 15.9 per cent in fiscal 2008-09, down from 16 per cent a year earlier. Each one per cent reduction in operating expenses translates into $40 million in savings.

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New and renovated LCBO stores are designed to be bigger, brighter and better located than the stores they replace. This not only increases customer satisfaction in measurable ways but increases sales that ensure a solid return on LCBO’s capital investment.

All real estate decisions are guided by extensive customer research and market analysis to ensure they meet the needs of urban and rural communities of all sizes, and by rigorous financial analysis. 

The business case developed for each capital project includes a forecast of incremental expenses and sales – netting out both current sales growth trends and negative impact on sales at nearby stores in the trade area – to ensure an accurate forecast of the project’s return on investment. All major capital projects must show a projected return on investment of at least 12 per cent to proceed.

Following completion, financial performance is reviewed annually and compared to the forecast. Eighty-one of 93 stores tracked during an eight-year period were performing on forecast or better than forecast.

Our integrated marketing initiatives, which include in-store displays, newspaper inserts, broadcast advertising and web-based promotions, have played an important role in building customer traffic, increasing sales of featured products and enhancing the LCBO brand.

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Staff at the LCBO store on Steeles Avenue East in Brampton celebrate receiving a Brampton Outstanding Business Achievement Award.

As a socially-responsible retailer, LCBO can benchmark its success, not only through customer satisfaction surveys and financial results, but also through the recognition it has achieved, often in open, juried competitions. To date, LCBO has won well over 200 awards for store design, staff training and development, innovative retail practices, marketing and communications.

In 2005, a survey of nearly 1,000 readers of Canadian Business magazine named the LCBO one of the top 10 best-managed brands in Canada and a 2009 Corporate Reputation Study conducted by an independent survey company placed the LCBO 15 out of the top 100 companies in Ontario.

Below is a list of some of LCBO’s more prestigious awards:

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