Supply Chain Division Mandesh Dosanjh

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3 Supply Chain Division Mandesh Dosanjh Logistics Grocery Operations Supply Chain Quality Assurance Retail Service Centres Space Management Laboratory Traffic & Customs Specialty Services Measurement & Analysis Quality Services

4 New Programs, New Regulations, New Business Opportunities! Specialty Services Products of the World Specialty Boutique Sections (in select LCBO stores) E-Commerce Quality Assurance Updates on value and requirements

5 SUPPLY CHAIN NETWORK SUPPLIERS FROM OVER 86 COUNTRIES 5 RETAIL SERVICE CENTRES 1,500+ STORES/DEPOTS Domestic/US/Mexico Durham London Ottawa Overseas Thunder Bay Toronto

6 Department Highlights Total Sales $236 Million Consignment/Private Orders - $125 Million Kegs - $111 Million

7 Highlights continued... Wholesale customers Partnership and Collaboration with Agents Unparalleled access to niche products Infrastructure in place for rapid growth

8 Specialty Boutique Sections and E-Commerce

9 Products Of The World Specialty BOUTIQUE Sections & e-commerce Increased Product Selection Increased Commercial Opportunities SUCCESS

10 Products Of The World POTW Boutique Sections POTW E-Commerce Consignment Brands/Agents Non- Consignment Brands/Agents Consignment Brands/Agents Non- Consignment Brands/Agents SYNERGY

11 POTW Boutique Sections and e-commerce are connected.

12 Products Of The World: Specialty Boutique Sections

13 Opportunities: Expanded sales opportunities for agents and suppliers More brand visibility Introduction of beer In store tastings On-line Marketing collaboration

14 THE CUSTOMER EXPERIENCE Build mass awareness and demand for the Products of the World program by promoting our best in class product collections that allow the customer to enjoy unique products from distinct locales around the world, available in-store and online. Leverage Cultural occasions and festivals Continue to drive mass awareness to designated stores and online Continued store enhancements and product expert support Support new store openings Transit shelter ads, multicultural radio spots, in store enhanced signage, enhanced tastings Radio, trade shows, integration into existing marketing materials, lcbo.com, digital Identify an expert, interview for lcbo.com, name tags, shelf talkers picks In store signage, transit shelter ads, radio, lcbo.com, social for lcbo.com, name tags

15 Integration into Shopping guide Out of home advertising Community Ethnic papers Social media owned channels Bag Stuffers

16 Boutique Section Performance Summary

17 Brand Selection Targeted sku levels have been exceeded in all stores Products of the World (POTW) Country Initial Target Launch Today Difference (target to current) Greece Portugal Spain Kosher Argentina New Zealand East Asia Chile Australia South Africa Germany Italy California Total

18 Looking Ahead Next Steps: Review sales performance data to date E-commerce primary focus Shift to regional focus? Additional locations? Products Of The World Country Store Store Location Launch Date East Asia 703 Toronto May 11th

19 Agent Opportunities Focus on diversified product mix and price points Maintain strong partnerships with boutique stores and store staff. What about sales to licensees?

20 New Opportunities Continued evolution of this exciting program In-store tasting opportunities for POTW Pilot Programs Single bottle purchase Gift kits

21 E-Commerce Sales Products Of The World Only

22 Questions...? General Inquiries: Products of the World Team: Retail Operations Supply Chain Sales, Marketing & Insights Store Development and Real Estate Corporate Communications

23 QUALITY ASSURANCE UPDATES AT A GLANCE

24 Quality and Safety

25 Sensory analysis Quality Programs Compliance Testing Label review Chemical analysis Packaging review

26 Submissions Testing Lifecycle New Products & Annual Review Customer Complaints Retail Investigations

27 32,000 Samples Processed Number of Tests 633, ,000 Laboratory Testing 30,000 28,000 26,000 24, , ,900 23,899 23, ,252 24,561 28, , , , , , % - # of samples 14.3% - # of tests 22, ,000 Lab turnaround: 3.5 days 20, Fiscal Year 300,000

28 Laboratory Analyses New analyses introduced since : Metals: cadmium, cobalt Caffeine Artificial sweeteners

29 Investment in Technology Alcohol analysis NIR Analyzers for wine, beer testing Distillation units for spirits

30 Laboratory Testing Fees Effective July 10, 2017 Wine/beer: $225 Spirits: $200 Invoices posted on isupplier

31 40,000 Label Reviews Packaging Reviews Label and Packaging Compliance Testing 35,000 30, Samples Processed 25,000 20,000 15,000 10,000 5, , , ,114 28,550 18% # label reviews 9% # packaging reviews Fiscal Year

32 Product Quality and Safety : 80,000 Product quality complaints 781 Flagged for investigation 216 Full investigation 29 Product Recalls

33 Quality Services Efficiencies Durham RSC QA Expansion Non-compliant loads Corrective work Labelling Packaging 2016/ ,317 cases corrected 12 %

34 Quality Services Fees Effective June 1, 2017 Product recall Re-work services Non-compliant pallets Packaging Labelling

35 Regulatory Updates

36 Food Labelling Modernization Initiative Safe Food for Canadians Act Food safety Consumer protection Fair and secure marketplace

37 Public Consultation Clear, simple, concise, and easy to understand language & format Improved legibility Ingredient lists Common name Reveal ingredients in class names

38 Changes Ingredient Lists Grouping sugars Naming dyes Readability Format requirements

39 Changes Allergen declarations Nutrition facts tables Nutrition claims Artificial sweeteners Single serve sizes

40 Compliance Timelines New regulation in force as of: December 14, 2016 Full compliance at point of sale/ retail: December 14, 2021 LCBO Implementation A staged approach Communication Preparation Label examinations against new requirements Submission stage Product-in-hand Corrective work

41 Resources CFIA - Food Labelling for Industry website Food and Drug Regulations Labelling Consultants

42 Modernized Beer Standard CFIA Beer Canada Food Labelling Modernization Initiative Public consultation: 2014 Stakeholders review:

43 Changes Sugars: max. 4% w/v Sugars analysis Elimination of separate standard for: Stout Ale Porter Malt Liquor Addition of (under review): Herbs, spices Flavouring preparations not resolved

44 Other Updates LCBO Product Packaging Standards & Guidelines for Chemical Analysis LCBO Product Packaging Standards LCBO Chemical Guidelines

45 Thank you