Backgrounder: LCBO support for Ontario spirits
August 17, 2017
Spirits are LCBO’s largest and most profitable product category. In fiscal 2016-17, net sales of LCBO’s spirits and ready-to-drink (RTD) products were $2.24 billion, an increase of 5.1 per cent over the previous year. This category represents 40.1 per cent of LCBO sales; wine represents 26.9 per cent ($1.5 billion) and beer and cider represents 23.3 per cent ($1.29 billion).
Of total spirits sales, Whisky has led the category at +4.4 per cent with the iconic Canadian Whisky segment accounting for 62% of total Whisky sales*. Seasonal categories such as Ready-to-Drink (+13.7%), Gin (+9.4%) and Tequila (+12.1%) have also contributed to strong spirits sales. *note: excludes duty free
In partnership with the trade, LCBO leaders launched an annual Spirits Summit to collaborate on initiatives that strive to enhance the promotion and sales of spirits, and engage customers in exploring Ontario’s world class assortment.
The LCBO stocks a top notch selection of quality spirits including an expanded assortment of whiskies. Located within over 100 select stores, Whisky Shop is intended for longtime connoisseurs, as well as budding enthusiasts. It features an ever-evolving selection of renowned and rare products, artisanal and limited releases, and award-winning bottles.
The Whisky Shop concept has expanded to include flagship “whisky experience” boutiques at our Summerhill (Toronto), Queens Quay (Toronto) and Rideau & King (Ottawa) LCBO locations. Each of these stores offer an enhanced assortment of premium whisky from around the world. Whisky Shop sales in 2016-17 topped $9.6M, up 50% over last year. LCBO is looking to further expand this program in the coming year.
Whisky Shop has four releases per year -- October, January, April and July -- with the October release being the first. It comprises of about 24 products, approximately a dozen of which will be available until the following October. The rest are quarterly releases, which means the inventory is estimated to last for three months.
You can find more information on Whisky Shop and recent releases here: http://www.lcbo.com/content/lcbo/en/pages/spirits/WhiskyShopLCBO.html .
To further promote spirits, LCBO has a spirits advocate program in which 250 employees in our largest stores are designated as specially trained leaders to promote the sale of spirits. This year the program was expanded to include an additional 150 employees and all participating store managers.
LCBO has also increased the promotional opportunities for spirits and their presence in the LCBO store environment, including a larger proportion of display allocations, and other promotional activities. LCBO, in partnership with suppliers, continues to hold an annual autumn celebration of whisky.
To help consumers better understand the flavours and characteristics of spirit products, the LCBO introduced style descriptors in all spirits segments with the last category, Tequila, to be introduced this spring. These descriptors are available at the point of sale and are helping customers navigate the wide assortment available.
Small Distillers Support
There is a small but emerging trend of small distillers in Ontario. As this sector continues to grow, we expect it to attract more consumer interest and increasing sales in the future. The Small Distillers Program topped 6.25M for 2016/17 (+62.3%).
A key ongoing objective in LCBO’s strategic plan is to grow the sales of local Ontario products. This objective extends LCBO’s longstanding commitment to increase Ontario wine and craft beer sales to other local products, including spirits produced by local small distillers.
As part of this strategy, LCBO looks for opportunities to highlight local craft distilleries, through consumer, employee and media information. We are also working on enhancing the on-shelf presentation and visibility for Ontario craft spirits in addition to incorporating education on this emerging industry to our staff and customers. LCBO further supports local craft distilleries through programs designed to help small Ontario distillers sell their products to bars and restaurants.
LCBO spirits buyers are pleased to work with local distillers before they even begin their operations to discuss the process for getting their products to market. We explain federal and provincial regulations and guidelines, taxation issues, the licensing process, and more. We also provide continuous feedback to small distillers on product quality and packaging. Once a product is released, we work with the manufacturer on marketing strategies that include where the product will be placed in stores.
This year, the LCBO hosted its first Small Distillers Information session. This was met with outstanding attendance and positive feedback. The LCBO plans to continue to host further sessions as the network of small distillers continues to expand.
We recognize that the licensee channel is a key opportunity for the industry. In support of local small distillers, the LCBO recently developed a policy to allow small Ontario distillers to deliver their products directly to licensees. This policy, which came into effect in summer 2017, enables distillers to raise the profile of their products in bars and restaurants. More information on the policy can be found here