vintages trade day - doing business with lcbo€¦ · spirits business unit ... leo wigglesworth...

Presented by Tom Wilson & the Vintages Category Team

APRIL 15, 2009

VINTAGES TRADE DAY

AGENDA

Welcome - Bob DowneyVintages Team & 2008-09 in Review - Tom Wilson

Vintages 2009-10 Plans - Kate Mallett-Thomas

Vintages Inventory Management - Bob Davio

Vintages Submission Process - Greg Dunlop

Questions and Answers - Tamara Jakes & Greg DunlopQuestions from the Floor - Moderator, Tom Wilson

Vintages INTRODUCTION

Tom Wilson, Vice President, Vintages

What is Vintages?

❖ Vintages is the LCBO’s fine wine and premium spirits business unit

❖ Vintages is an international leader in buying, marketing and retailing fine wines and premium spirits

Discoverour Latest

with Vintages

Vision

Mission

To provide our customers with the optimum assortment of fine wine and premium spirits with an intense quality focus at every price point and at every customer touch point.

Who is Vintages?

Sales Events Inventory Licensees

System Improvements

Tom WilsonVice President,

VINTAGES

Robin Sirutis

Associate Manager, Licensee Programs

Kate Mallett-Thomas

Director, Sales & Purchasing

Rose HolnessEvents Manager

Bob DavioInventory Manager

Amal GavrosBusiness Analyst

Sales & Purchasing Team

Source and purchase 6,000+ fine wines and premium spirits❖ Vintages Retail Releases and Essentials❖ Direct Sales Programs – Classics Collections, Futures, VSO and Virtual

Kate Mallett-Thomas

Director, Sales & Purchasing Jim Brown

VINTAGES Programs Analyst

Laurie HarveySupervisor, VINTAGES

Sales Center

Tamara Jakes

Category Manager, New World Wines &

Spirits

Greg DunlopCategory Manager,

European Wines

Susan WheelerAssociate Manager,

VINTAGES Programs

Allan CraikVINTAGES Reception

European Wines Category Team

Greg DunlopCategory Manager,

European Wines

Igor RyjenkovProduct Manager,European Wines

David Beauroy Product Advisor,European Wines

Lisa Chapman

Category Administrator

New World Wines & Spirits Category Team

Tamara JakesCategory Manager,

New World Wines & Spirits

Tony D'AlessioProduct Manager, New World Wines

Alanna BaileyProduct Advisor

Kosher and Specialty

Liam DohertyCategory

Administrator

Paul FarrellProduct Manager,

Spirits and Ontario Wines

Inventory Team

Responsible for managing Vintages Inventory

Bob DavioInventory Manager

Gord FronerStore Allocations

Nancy PybusTeige Reid

Ruth Simpson

Publications Team

Responsible for developing and producing content for all Vintages publications (28/year), website

and Virtual Offers (~50/year)

Susan WheelerAssociate Manager,

VINTAGES Programs

Phoebe DuongPublications Coordinator

David ChurchillGreg MacDonaldLeo WigglesworthDouglas Webster

Writers

Events Team

Responsible for producing Vintages Events20+ annually

Rose HolnessAssociate Manager,VINTAGES Events

Emily HuiEvents Coordinator

Felix Silva & Tricia LahdeEvent Specialists

Vintages Net Sales vs General Purchase 2008-09

Category VINTAGES Sales

General Purchase

SalesVINTAGES

Market Share

Imported Wines $293.0 M $830.0 M 26.1%

Ontario Wines $15.7 M $289 M 5.2%

Imported Spirits $17.1M $687 M 2.4%

Domestic Spirits ----- $887 M ----

Beer and Ready-to-Drink ----- $1,040 M ----

Total $325.8 M $3,734 M 8.0%*Private Stock Excluded

Net Sales 2008-09 by Major Product Category

Red Wine$212.4 M

9.9% Growth65.2% Market Share

White Wine$72.9 M

6.2% Growth22.4% Market Share

Spirits$16.4 M

4.8% Growth5.0% Market Share

Sparkling Wine$11.66 M

(6.9%) Growth3.6% Market Share

Rose$3.5 M

14.4% Growth1.1% Market Share

Fortified Wines$4.5 M

5.4% Growth1.4% Market Share

Other Products$4.1 M

23.4% Growth1.3% Market Share$325.8 M, up 7.8%

Net Sales 2008-09by Major Country

Italy(1.7%) Growth

USA18.8% Growth

Australia(10.5%) Growth

Canada15.6% Growth

Other9.6% GrowthFrance

16.7% Growth

$325.8 M, up 7.8%

$52.8M16.2%

$60.0M18.4%

$76.2M23.4%

$86.3M26.5%

$18.6M5.7%

$31.9M9.8%

Vintages Net Sales 2008-09

$175M

$350M

PlanActual

(4.4%)

$325.8 M$345.0 M

7.8%

$302.1 M, 2007-08

Front Line Essentials Internet Classics Futures Virtual

1.3%

16.5%

28.2% (0.7%) 173.5% (29.4%)

$325.8 M, up 7.8% 2007 2008

$200M

$100M

Net Sales by Program

$25M

$50M

New World Ontario Icewine European Spirits

25.5%

41.2% (8.4%)

5.0%

(7.4%)

$97.4M, up 14.2% 2008 2007

Essentials - Net Sales

Net Sales by Buyer 2008-09

Sales $ Net % Change

European Wines $95.5 M (0.2%)Essentials - European Wines $40.9 M 5.0%

New World $108.1 M 1.0%Essentials - New World $66.3 M 24.9%

Futures And Directs $19.0 M 84.0%Total $329.8 M 8.1%

*Includes GP Kosher Portfolio

Net Sales 2008-09Period 1-8 vs. Period 9-13

Periods Sales $ Net ChangePeriods 1 - 8 $190.9 M 12.8%Periods 9 - 13 $138.9 M 2.2%

Fiscal Year $329.8M 8.1%

*Includes GP Kosher Portfolio

Wine Net Sales by Price BandP1-8 vs. P9-13

Price Range Period 1-8 Change vs. LY Period 9-13 Change

vs. LY P9-13 vs.

P1-8

$0.00 - $9.99 $506.2 K (50.0%) $567.4 K (28.2%) 21.8%

$10.00 - $14.99 $21.4 M (3.7%) $11.4 M (18.6%) (14.9%)

$15.00 - $19.99 $71.0 M 15.9% $47.9 M 12.7% (3.2%)

$20.00 - $24.99 $20.9 M (0.2%) $17.6 M 8.8% 9.0%

$25.00 - $29.99 $12.6 M 11.7% $9.6 M (4.2%) (15.9%)

$30.00 - $49.99 $18.4 M 19.6% $15.4 M (8.6%) (28.2%)

$50.00 - $99.99 $15.3 M 15.5% $13.3 M (0.1%) (15.6%)

$100.00 and above

$16.3 M 41.6% $9.2 M (4.3%) (45.9%)

Total $176.3 M 12.4% $125.0 M 1.4% (11.0%)*Excludes Bordeaux Futures

Net Sales by Top Sets

Sets2008-09

Net Sales Change Market Share

France - Red $49.5 M 22.6% 15.0%Italy - Red $41.3 M (1.1%) 12.5%United States - Red $39.3 M 13.9% 11.9%Australia - Red $28.2 M (9.7%) 8.5%New Zealand - White $14.6 M 12.5% 4.4%Italy - White $14.2 M 1.6% 4.3%Subtotal $187.0 M 6.8% 56.7%

Net Sales by Top Subsets

Subset 2008-09 Net Sales Change Market

ShareCalifornia Red - Cabernet Sauvignon $22.4 M 26.0% 6.80%Australia Red - Shiraz $15.6 M (0.8%) 4.75%France Red - Bordeaux-Medoc $11.7 M 37.1% 3.54%Italy White - Pinot Grigio $11.4 M 2.1% 3.47%New Zealand White - Sauv. Blanc $11.3 M 11.8% 3.44%Champagne $8.5 M (3.7%) 2.59%Subtotal $81.1 M 21.1% 24.59%

*Total Subsets 250

Net SalesTop Performing Subsets

Subset 2008-09 Net Sales Change

Argentina Malbec $7.1 M 128.6%Veneto Ripasso $6.6 M 40.2%California Shiraz $2.8 M 58.5%South France Red $2.7 M 43.5%Ontario VQA Pinot Noir $1.4 M 84.6%

Net Sales Ontario Wines

Category 2008-09 Net Sales ChangeWhite Table $4.9 M 35.1%Red Table $4.4 M 36.1%Rose $457.0 K 57.9%Sparkling $187.7 K 34.0%Subtotal $9.9 M 36.4%Icewine $5.8 M (7.5%)Ontario Total $15.7 M 16.0%

Net Sales Bordeaux Futures

0M

5M

10M

15M

20M

2005 2006 2007

$16.9 M

$6.6 M

$2.1 M

Vintage:

Average Expenditure per Order

VINTAGES Orders Average $ Order

Retail Stores 6,213,950 $57.57Classics 9,394 $1,089.88Bordeaux Futures 2005 14,481 $1,157.72VSO (Internet) 4,202 $314.99VINTAGES Total 6,245,973 $62.10General Purchase 110,017,515 $32.40

Retail Inventory March 31, 2009 (Cost $)

Actual Budget Variance %Variance % Last Year

$26.57 M $20.20 M $6.26 M 30.8% 36.2%

❖ Retail inventory at historic high level❖ Over-weighted with “high” price points❖ “Lump” will take some time to normalize❖ Stores receiving what they order -

no “forcing”

Warehouse Inventory March 31, 2009 (Cost $)

Actual Budget Variance %Variance % Last Year

$33.30 M $28.58 $4.72 16.5% 19.2%

Front Line Program❖ Over 700 “active” front line release product

available; 1301 total skusDirect Programs - Classics, VSO, Futures❖ 1,881 skus in total❖ 94% pick slot utilization

❖ Unprecedented change in business from end of October; uncharted waters

❖ Huge currency swings - USD, Euro❖ Inventories backing up; overweighted in

high-end products❖ Suspended buying❖ Variety of discounting and sales❖ 2005 Bordeaux Futures❖ Economic impact likely longer term

Vintages

2008-09 in Review

Vintages

2009-10 Plan

Kate Mallett-Thomas, Director, Vintages

Financial❖ Achieve sales of $323 million❖ Zero planned growth over 2008-09 results❖ Deliver $144.5 million in margin dollars❖ Manage inventory/investment to sales ratio❖ Maintain inventory turns

Vintages

2009-10 Objectives

Non-Financial

1.Adapt buying direction to meet market needs❖ Expand offerings of exceptional price quality

in products in the $15-$29.95 range❖ Decrease purchases of premium and ultra-

premium products

2.Continue to expand the Retail network for Vintages

Vintages

2009-10 Objectives

Non-Financial3. Look for new ways to maximize potential of the

Essentials portfolio❖ Drive sales; new products❖ Improve inventory metrics❖ Target new customers

4. Grow Ontario Wines❖ Continue to captialize on growth of table wine

segment with exceptional 2007 vintage❖ “Go Local” trend❖ Develop new Icewine strategies

Vintages

2009-10 Objectives

Non-Financial

5. Leverage Technology to improve process efficiencies

❖ Automated Letter of Commitment (LOC)❖ Enhancements to New Item Submission System

(NISS)❖ Move to web-based Purchase Orders

6. Enhance Vintages Internet experience❖ Vintages Shop-on-Line improvements❖ Redesign of www.Vintages.com

Vintages

2009-10 Objectives

Non-Financial7. Continue to make the environment and Social

Responsibility part of Vintages fabric❖ Target high volume products for light-weight glass

bottles❖ Grow depth of offerings produced organically,

biodynamically and/or sustainable agricultural practices

8. Continue to focus on growing niche segments of Vintages portfolio

❖ Specialty and Kosher❖ Spirits❖ Licensee offerings

Vintages

2009-10 Objectives

Global Economic Crisis

Economy has changed since LCBO’s 5-year plan completed:❖ Collapse of world financial

markets❖ Big business going bankrupt❖ Unemployment rising❖ Consumer confidence falling

The accepted wisdom is that alcohol is recession-proof, EXCEPT when unemployment risesFACT: Alcohol tends to weather general economic downturn better than other productsFACT: Alcohol sales DO fall in value when times are toughFACT: Alcohol sales DO fall in volume and value when unemployment rises

Ontario Situation Accepted Wisdom:True or False?

Vintages Impact❖ Continued softness of the

Canadian dollar, negative impact on prices

❖ Vintages premium and ultra-premium price point products are most exposed

❖ 2008 Bordeaux Futures program to be scaled back

Sales Change by Price Band P1-8 vs. P9-13

Price Range Period 1-8 Change vs. LY

Period 9-13 Changevs. LY

$0.00 - $9.99 $506.2 K (50.0%) $567.4 K (28.2%)$10.00 - $14.99 $21.4 M (3.7%) $11.4 M (18.6%)$15.00 - $19.99 $71.0 M 15.9% $47.9 M 12.7%$20.00 - $24.99 $20.9 M (0.2%) $17.6 M 8.8%$25.00 - $29.99 $12.6 M 11.7% $9.6 M (4.2%)$30.00 - $49.99 $18.4 M 19.6% $15.4 M (8.6%)$50.00 - $99.99 $15.3 M 15.5% $13.3 M (0.1%)

$100.00 and above $16.3 M 41.6% $9.2 M (4.3%)Total $176.3 M 12.4% $125.0 M 1.4%

Release Program❖Target key price bands, in particular the $15-$29.95 with exceptional quality products

❖ In short term, reduce depth of the release purchases. Breadth to be enhanced from previous Releases, VSO and Classics

❖Explore novel ways to promote and highlight Vintages Release programs to a broader audience

❖Eliminate Releases from the calendar where necessary to help manage inventory levels

What Vintages is DoingChanges by Program

Essentials❖Reviewing the portfolio to ensure a relevant collection to drive sales

❖Developing a more robust promotional program for agents and suppliers to leverage and drive sales eg. being able to participate in General Purchase FSIs

❖Creating a novel communication piece targeted at high potential Vintages customers

❖Reviewing and implementing new sales targets

What Vintages is DoingChanges by Program

Vintages Shop On-Line (VSO) and Classics❖Broadening the customer target group to include customer shopping in remote areas

❖Enhancing the on-line experience to improve search and navigation

❖Exploring ways to promote products to the customer, through recommendations, collection offers and the opportunity to offer BAMs and LTOs as well as Value Adds

❖Deploying residual inventories to Retail to enable assortment to remain fresh and relevant

What Vintages is DoingChanges by Program

Leveraging this strategic channel:❖ Organize and initiate large taste and buy

events which allows Vintages to sell “virtually” and mitigate purchase risk

❖ Design and create educationally focused events such as Wine 101, scaleable to smaller communities

❖ Hold Chateaux and Estate tastings and dinners. Allowing iconic suppliers interact with customers in the Ontario market place

Vintages EVENTS

Vintages Tasting Program

Good News...

Vintages Tasting Program application will be moving to a web-based platform.

Stay tuned...

Vintages Licensee Program

Robin Sirutis (Toronto) and John MacKinnon (Ottawa) look for novel ways to support the licensee channel. ❖ Looking for new customers to service and

sell Vintages brand and products❖ Work with the Vintages Event team to

execute dinners in novel locations to build relationships

❖ Helping to ensure that VSO can service Licensee customers in the future

What Does This Mean for Agents & Suppliers?

❖ Visit the LCBO Trade website and become familiar with information offered

❖ Visit the site frequently, as this is how Vintages communicates:

✦ Announcements✦ How to Grow Your Business with Vintages

✦ How to improve your success with Vintages

✦ Links for applications: NISS, MPTS, SOD - Narrowcast

✦ Vintages Needs Letter

❖ Submit products that are laser-focused on buyers’ needs:

✦ Offer best price possible up front✦ Offer to better the payment terms✦ 3rd Party scores that can be validated✦ Outline your plan to support the product at

Retail✦ Highlight product availability limitations✦ Review quantities ordered by the category

teams - ensure that it is appropriate to achieve sell-through

ZERO tolerance on incomplete/inaccurate submissions

What Does This Mean for Agents & Suppliers?

Support your products at Retail; Release programs and Essentials by visiting Stores (Managers and Product Consultants):

❖ Keep an eye on the inventory levels - encourage stores to reorder

❖ Participate in Vintages tasting program❖ Increase store distribution❖ Drive sales through use of LTOs and BAMs

What Does This Mean for Agents & Suppliers?

The Environment

❖ Light-weight Glass❖ Organic❖ Biodynamic❖ Sustainable

Agricultural Practices

Break

15 Minutes

Inventory Management

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Bob Davio, Inventory Manager, Vintages

Mandate❖ Forecasting and planning inventory targets❖ Placing and tracking orders❖ Retail release allocations❖ Develop tools and reports for early warning

of larger issues

Inventory Management

Current Climate❖ Slow down in sales relative to

plan❖ 8 month planning horizon❖ New sales channel - VSO❖ Kosher portfolio (continuous)❖ Inventory over plan at year end:

✦Warehouse - 16.5%✦Stores - 31.8%

Inventory Management

Vintages Fiscal Year End Inventory

(Cost $)

$0

$15,000,000

$30,000,000

$45,000,000

$60,000,000

WarehouseRetail

Total

Actual Plan Last Year

16.5% Variance to Plan 30.8% Variance

to Plan

22.5% Variance to Plan

Retail InventoryBy Price Band Comparison

Price Range 2008 Week 49 Inventory Cost

2009 Week 49 Inventory Cost

Cost Change

$0.00 - $9.99 $225 K $167 K (25.6%)

$10.00 - $14.99 $1.46 M $1.26 M (13.8%)

$15.00 - $19.99 $4.29 M $5.27 M 22.8%

$20.00 - $24.99 $2.30 M $2.81 M 22.0%

$25.00 - $29.99 $1.49 M $1.71 M 15.2%

$30.00 - $49.99 $3.23 M $4.66 M 44.1%

$50.00 - $99.99 $3.30 M $5.29 M 60.2%

$100.00 and above $2.50 M $4.08 M 63.4%

Total $18.80 M $25.25 M 34.3%

Issues❖ 6 pack vs. 12 pack❖ Quality assurance - destroy or return❖ Shipping on time❖ Heads up/follow up❖ Problem resolution❖ Packaging non-compliance

Inventory Management

Inventory ManagementNew Initiatives

Web Purchase Order❖ Changing how the LCBO sends purchase

orders to vendors✦More robust✦More timely✦Better communication tool for

changes/updates

Web Purchase Order❖ Place purchase order❖ Email notifications on received purchase

order❖ Vendor will respond back with purchase

order confirmation/changes❖ Purchase order status

Inventory ManagementNew Initiatives

Web Purchase Order❖ Planned implementation for August 2009❖ All Vendors

Inventory ManagementNew Initiatives

What Does this Mean?❖ Vendors Only/Not Agents❖ All your vendors MUST have Internet access

(no exceptions)❖ Includes email and browser❖ Each vendor will have an admin sign-on❖ That person can give access to others❖ Agents will continue to get information

through Narrowcast

Inventory ManagementNew Initiatives

New Item Submission System (NISS)/Letter of Commitment (LOC) Site

❖ Based on ongoing feedback we will be rolling out enhancements to the current NISS application

❖ In addition, we will be launching a web-based LOC module for the suppliers

❖ Suppliers must therefore have access to computer and an active email address (no exceptions)

NISS/LOC Initiatives

❖ Suppliers will now be able to go online to:✦ View and review their LOCs and its status ✦ Accept or decline the terms and

conditions of the LOC✦ Provide comments and reasons for

declining the terms and conditions✦ And should they accept the LOC terms,

they will be required to provide additional information

NISS/LOC Initiatives

NISS/LOC Initiatives

Vintages

Submission Process

Greg Dunlop, Category Manager, Vintages

❖ Vintages Receives 40,000+ offers annually and selects about 5,000 for tasting program

❖ The majority of our calls yield 1,000+ offers/call

❖ Vintages Buyers taste and review about 100 wines every Monday

❖ We evaluate offers and make selections based on our inventory needs and category strategies (20-30 products)

Vintages

Submission Process

Vintages Retail Submissions and Purchases 2008

0

8,000

16,000

24,000

32,000

40,000

# of Submissions# of Tastings

# of Purchases

40,000

2,000

5,000

Vintages

Submission Process❖ Vintages is looking

for the best price/value ratio

❖ Vintages is looking for competitive pricing i.e., $25 wine for $19.95 retail price

❖ Will release fewer products

Regular Product Calls

Competitive Product Calls (Needs Letter)

❖ Product Call issued to trade identifies our needs

❖ Published three times per year

❖ Buy the bulk of new products through this process

Regular Product Calls

Ad Hoc Product Submissions❖ Fill in gaps in current

portfolio or react to emerging trends

❖ Must be discussed with Buyers

❖ Products sourced via:✦Trade Shows✦Buying trips✦Trade publications

Submission ProcessPre-submission

❖ Compelling case❖ Good quality, focused

information❖ A complete application

containing:✦Varietal✦Vintage✦LCBO #✦Description✦UPC #

Submission ProcessPre-submission

❖ Competitive price offering relative to the segment

❖ Promotional plan❖ Sales in other markets❖ Payment terms❖ Varietal❖ Third-party scores

Submission ProcessSelection

❖ Organoleptic assessment

❖ Price/Quality ratio❖ Packaging appeal❖ Laboratory analysis

❖Offer exceptional price and value❖Promote products through advertising, bonus Air Miles, in-store tastings, Food & Drink, neck tags, wine/trade shows

❖Agent and sales team must focus on ✦Retail Channel✦On-premise

Remember❖ Agent needs to create interest❖ Competition, large supply

How to be Successful Through Vintages

Direct Purchases

❖ Buy on reputation or score

❖ Repeat brands that have performed exceptionally well

❖ Direct purchases❖ Are not tasted❖ Are not “pre-labbed”

LCBO TRADE WEBSITE

www. lcbotrade.com

Your Primary Resource❖ Labeling Requirements❖ Q & A❖ Contact Information❖ Pricing and Quote Template❖ Meeting Request Form❖ Product Needs Letter❖ Presentation❖ Promo Tracking Link and Guide❖ Accounts Payable Form

VINTAGES Buying/Thematic Calendar

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Questions and Answers

The Vintages Team

FAQQuestions from the Trade

Q – Does VINTAGES have any published standards of performance in respect to responding to agents written and verbal (voice mail) messages?A – No, we do not have written standards. Every member of the VINTAGES team strives to respond by end of next business day. This is dependent on the quality of the information left by the agent. This is true also of email, the preferred method of communication.

FAQQuestions from the Trade

Q - My contact information has changed. What do I do?A - Send an email to the VINTAGES reception desk, listing the new contact information, and we will change it in our database

FAQQuestions from the TradeQ - I was issued a licensee number by the Alcohol and Gaming Commission of Ontario. Is that the agent number I use for submissions?A – No. We do not use the AGCO licensee number. VINTAGES will provide you with an agent number the first time a purchase is made through your agency. This agent number applies to VINTAGES and General List submissions. This number does not apply to Private Ordering.

FAQQuestions from the TradeQ - What duty do I have to pay on the samples that I bring in from my supplier?A -You will need to contact Canada Customs and Border Services for that information.

FAQQuestions from the TradeQ - The supplier has run out of the vintage listed on the Letter of Commitment. What do I do?A – Please notify the respective Category Administrator. If the respective vintage is no longer available, the offer is rescinded. VINTAGES expects that suppliers will set aside the inventory of product outlined in the LOC. If the supplier is not prepared to do this, do not present the product to VINTAGES.

FAQQuestions from the Trade

Q – Why doesn’t VINTAGES indicate the number of units it requires? A – It is the role of the agent to indicate any limitations on product availability through the NISS application. If the buyers wish to select the product for consideration they will use this information to slot it into the appropriate VINTAGES program.

FAQQuestions from the Trade

Q – Why is there limited space in NISS to provide more details on the name, awards and recommendations? A - In reviewing 1000+ submissions, VINTAGES has left sufficient room for agents to provide the critical information required for decisions to be made.

FAQQuestions from the Trade

Q - Should the final quoted retail price on the VINTAGES NISS submission form include the bottle deposit?A – YES. When using the LCBO pricing model on LCBOTRADE.com website, the bottle deposit is included.

FAQQuestions from the Trade

Q – Completing NISS submissions is highly repetitive and time consuming. Why doesn’t the NISS system allow us to retain and recall Agent and Vendor info? A – It does. When using the vendor or agent number in the appropriate fields, detailed information will populate the respective fields automatically.

FAQQuestions from the Trade

Q – Why does NISS not allow agents to save product profiles permanently, so that it can be simply submitted each time? A – NISS was not designed as a database system for use by agents. It is a web-based tool to be used to submit vital information about a specific product to VINTAGES, without the use of paper. Data related to product changes frequently from vintage to vintage making it vital for the information to be accurately updated.

FAQQuestions from the TradeQ – Will VINTAGES consider abandoning its charge – back clause in its supplier commitment letter? This discourages suppliers from doing business with VINTAGES.A - The charge-back clause was introduced for two reasons:

1. To share the risk of the bringing the product into the market place by ensuring the agent takes an active role in driving sales of the product2. Ensuring product continues to move through the Retail channel, so that VINTAGES can continue to purchase. If inventory does not sell through, then VINTAGES will not be able to purchase new items.

FAQQuestions from the Trade

Q – Why doesn’t VINTAGES copy the agent on P.O.s, payment notices and other communications sent to the supplier?A – VINTAGES legally does business with the vendor, hence the information going directly to them. The agent can track all purchase orders issued through the Narrowcast Report. This STET information is found on the Trade Website. Under Quick Links, click on Inventory Management, then Information Sharing.

FAQQuestions from the TradeQ - Why does VINTAGES keep so much inventory in the central warehouse when that product is first release? Further when a location quickly sells out of a given product, why does VINTAGES not automatically replenish the stock?A - VINTAGES does not control the inventory levels of the individual stores in the network. This is the responsibility of the store manager and staff. Initial release orders are reviewed by VINTAGES and in “normal” times orders are increased to hit release ship-through targets of 85-90%. “Forcing” products is currently suspended. It is the responsibility of the store to re-order products after they are released.

FAQQuestions from the Trade

Q - Some Agents are interested in receiving data from VINTAGES regarding the number of submissions to its tenders, the number of tastings and number of products purchased. Can this be provided on a regular basis?A - VINTAGES does not have the resources to be providing statistical summaries of the numbers of submissions, tastings and purchases the team makes. We can provide high level data at future Trade presentations.

FAQQuestions from the Trade

Q - VINTAGES promotional sales in December reduced product transfers from the warehouse and more frequent releases in January have placed added pressure on Agents to meet sell-through deadlines. Please comment on rebate clause enforcement in light of unexpected developments in the Ontario marketplace. Is this being done on a by-request case-by-case basis?A - As highlighted in the presentation, the market place took a negative change in the Fall. Review of the sell-thru has been done, and will be done, at the discretion of the buyers on a case-by-case basis.

FAQQuestions from the Trade

Q - What is VINTAGES current inventory turn rate? A - 4.9 turns overall for the business for 2009-10

FAQQuestions from the Trade Q - Since the end of February, Product Consultants in VINTAGES corners

have indicated that they are under pressure from their Store Managers and District Managers to watch their days-on-hand inventory. As a result, many are restricting or eliminating orders from the Toronto Warehouse Residual inventory. There was added pressure not to transfer in inventory for year-end closing so as not to have to count it. It is difficult for agents to drive sales when stores will not order in wine from the warehouse.

A - Retail inventories are at historic high levels. Until retail inventories return to “plan” and the excess “lump” of inventory is resolved, there will pressure by retail management to manage their inventories down. The cancellation of the April 25th release was designed to draw down residual warehouse inventories. Once retail inventories return to plan levels, VINTAGES will resume “allocating” release orders, improving the release ship-thru levels. Agents should be continuing to partner with Retail managers and product consultants to draw down their inventories and expand their store distribution.

FAQQuestions from the Trade

Q - Will VINTAGES fund and operate up to four Trade tastings annually, each with 50 agents and ~250 products? A - VINTAGES is not in a position to fund or operate these tastings but like other trade tastings buyers would attend, if available.

Questions and AnswersFrom the Floor

Tom Wilson, Moderator

Thank You