2015/16 to 2017/18 - welcome to the · pdf fileand marketing programs and our ability to...

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2015/16 to 2017/18

LCBO

MARCH 26, 2015

LCBO Three-Year Strategic Plan

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Table of Contents

I. Introduction & Approach to Planning ……………………………….. 5

II. Assessment of LCBO Performance ……………………………………..

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III. LCBO Strategic Plan 2015/16 to 2017/18 …………………………..

• What We Want to Accomplish ………………………….….…...

o Strategic Direction

- Mission - Vision - Brand - Core Values - Employee Value Proposition

o Objectives

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• How We’ll Measure It – Our Goals ………………………..……

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IV. LCBO Enterprise Risk Management ………………………………….… 30

• Appendix – Three-Year Financial Plan………………………...

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I. Introduction & Approach to Planning

At the LCBO, strategic planning is a continuous process that allows the organization to review performance, fine-tune goals, incorporate new and emerging ideas and leverage its intellectual capital.

As a provincial government enterprise, our ultimate goal is to strike the appropriate balance between responsible retailing and profitable growth. Our Mission, re-crafted in 2013, provides a clear perspective of what the LCBO stands for and its purpose within the social and economic landscape of Ontario.

LCBO Mission We make a difference in Ontario by being a best in class,

socially responsible, customer focused and profitable retailer of beverage alcohol.

Throughout LCBO’s history, we have partnered with our stakeholders to build a strong, vibrant organization that provides the people of Ontario with trusted and responsible products and services, while delivering significant revenues to the province to help fund important government priorities such as health care, education and investment in public infrastructure.

Approach to Planning

The LCBO transitioned to a rolling three-year strategic plan in March of 2013. This was the result of the government’s new Guide to Developing Business Plans for Classified Agencies. Prior to this time, we utilized a five-year strategic plan with annual business plans designed to achieve targeted goals.

Our first three-year strategic plan covered LCBO’s fiscal year of 2013/14 through to fiscal 2015/16. It was approved by our Board of Directors in February of 2013 and by the Ministry of Finance in January of 2014.

This new strategic plan was over a year in the making and involved management and employees from across the organization. It was supported with internal and external research, content from subject matter experts, input from customers and stakeholders, and incorporated best practices from leading retailers and business practitioners. It represents a compilation of a significant amount of effort, expertise and collaboration and as such, it continues to serve us well today.

Listed on the following page, is a summary of the significant strategic affirmations and evolutions that occurred from this planning process.

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Summary – Significant Strategic Affirmations & Evolutions – LCBO 3-Year Strategic Plan 2013/14-2015/16

• We asked WHY the LCBO existed, and used this information to re-assess and evolve our Mission and our Brand.

• We developed a new Employee Value Proposition which expressed our partnership with our people, where the employer and the employee both contribute to success.

• We reviewed and reworked our objectives, goals and strategies to ensure their continued relevance toward our efforts to maximize customer engagement and profitability, in a socially responsible manner.

• We re-assessed our dynamic stretch goal of achieving excellence in the customer experience and excellence in operational efficiency and confirmed its significance and relevance to our future.

• We launched our new corporate vision, one that encourages us to continue to evolve, and clearly identifies the position and status we aspire to achieve as a government enterprise by the year 2020.

• We backed up the long-term strategic plan and corporate vision with three-year plans by business unit, ensuring integration and support to our long-term objectives, goals and strategies.

In consideration of these strategic affirmations and evolutions, we implemented this new 3-year strategic plan in fiscal 2013/14 and are currently completing its second year. Additional consumer and employee research has been provided and environmental scanning continues as a critical component of our planning process (e.g., economic trends, retail trends, consumer trends, etc.). In addition, this year we conducted a detailed review of LCBO’s Corporate Social Responsibility strategy, including a thorough internal assessment and review of external best practices, both were utilized as key input to the further development of our Corporate SR strategy with regards to Telling our Story and Responsible Retailing & Moderate Consumption (formerly known as Responsible Retailing & Consumption). Furthermore, the LCBO strategies incorporate the recommendations on the Premier’s Advisory Council on Government Assets. The LCBO will continue to work with the Ministry of Finance and the Council on further comprehensive strategies, which will incorporate the Council’s final recommendations on beverage alcohol.

What follows is an assessment of LCBO’s performance for fiscal 2014/15; and, we are pleased to provide our new strategic plan, covering the three-year period from April 1st 2015 to March 31st 2018. It is designed to maintain the momentum of LCBO’s evolution as a dynamic, customer focused, socially responsible and profitable retailer of beverage alcohol for the people of Ontario.

Enterprise Risk Management (ERM)

In relation to LCBO’s Strategic Plan and at a Divisional level, the LCBO conducts regular risk identification, assessment, mitigation planning and implementation followed by risk mitigation testing and control. These risks and mitigation strategies are contained within the context of this strategic plan

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II. Assessment of LCBO Performance

2014/15

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II. Assessment of LCBO Performance - 2014/15

The LCBO had a successful second year of our three-year strategic plan. Fueled by the improving economy, we performed solidly and met expectations. As we revisit this year, we can see that we made great strides on many fronts.

Our results (provided on the next page), were achieved with a focus on LCBO’s seven strategies, designed to provide excellence in the customer experience and excellence in operational efficiency. These strategies included significant store network improvements, a product portfolio that offered the best beverage alcohol assortments in North America, successful merchandising and marketing programs and our ability to target our programs and services to meet the needs of our customers.

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LCBO Performance - Fiscal 2014/15 (f)* - At a Glance

LCBO Achieved Record Breaking Financial Performance in an Improving Economic Climate

Sales Growth: LCBO achieved $5.2 billion in sales, representing 4.1% growth over last year, while the Ontario retail market grew by 4.6%. LCBO surpassed its sales plan by 1.1%. The LCBO operated in an environment where economic conditions were more positive than last fiscal year. Despite record high household debt, consumer confidence was fairly strong and disposable income increased in the latter half of 2014/15.

Expense Management: LCBO’s efforts to provide excellence in operational efficiencies continue as a component of our stretch goal and key corporate strategy. Despite rising labour costs, both Retail and Logistics demonstrated effective expense management by using technology, labour scheduling and other strategies to help off-set the upward pressure on costs. Based on total expenses, LCBO came in at 4.9% below plan and 16.2% of net sales.

Net Income: The LCBO achieved another record breaking year, realizing $1.8 billion in net income. We were over last year by 3.8% and over plan by 1.9% This fiscal also marks our 21st year of record dividends to the province of Ontario.

Customer Engagement; LCBO’s focus on our customers and understanding their needs couldn’t be more important. LCBO’s Customer Engagement Score for fiscal 2014/15 is 6.7 and Customer Satisfaction increased to 82%

At the LCBO we track Customer Satisfaction and Engagement. Customer engagement is a deeper measure of the customer’s involvement with the LCBO. It’s made up of rational and emotional variables. LCBO’s strategy is to strengthen the emotional connection and drive profitable growth by empowering customers and enriching their social occasions. Store Network Expansion: During fiscal 2014/15, the LCBO added 19 new and/or replacement stores, bringing the network total to 651 stores. The in-store shopping experience is an important component of shopping enjoyment and customer engagement; it also contributes to generating increased profits.

Corporate Social Responsibility; This is the essence of the LCBO and a critical component of our reason for being

Challenges & Refusals: LCBO store staff challenged approximately 12.6 million people and refused service to 409,413 YTD Period 12 2014/15. We continue to make a difference in Ontario through this program. It is a testament to the vigilance of our store staff, whose responsibilities include preventing sales to minors, those appearing intoxicated and second party purchases. Community Support through Fundraising: This year, the generosity of LCBO customers and staff is evident from our continued success in fundraising. For fiscal 2014/15, we raised over $8.9 million (close to 14% more than last year) for Charities and Community Support. This is another way that the LCBO, together with our customers, can make a difference in Ontario.

Product Quality & Safety: LCBO’s ISO Certified Quality Assurance Laboratory has conducted testing on more than 23,000 product samples this year, ensuring the products on our shelves are free of contaminants and meet or surpass federal, provincial and LCBO beverage alcohol standards.

Diversion Rate: Through the Blue Box Program and the Ontario Deposit Return Program, the LCBO has diverted 93% of wine, beer and spirit containers away from landfill. That’s one of the best diversion rates in the world.

Energy Efficiency: In 2010/11, LCBO set a five year target to reduce energy consumption across the Retail store network by 10%. This goal was reached by year three and continuing strides are being made to continue reducing our consumption.

The LCBO takes pride in supporting our local beverage alcohol industry, it’s another way that we make a difference in the Province

LCBO Ontario Wine and Craft Beer Sales: The growth in LCBO Ontario wine sales was up 6.5% to last year, reaching $421 million in sales. VQA sales are up 4.5%. International Canadian Blend (ICB) wines are up 8.0%. Ontario craft beer grew 33.7% over last year to $67.1 million. Growing the sales of Ontario wine, craft beer and micro distilleries remains a key priority and strategic objective for the LCBO.

* Fiscal results forecasted as of February 2015. The LCBO fiscal year runs from April 1 through March 31.

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III. LCBO Three-Year Strategic Plan

2015/16-2017/18

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What We Want To Accomplish

LCBO Strategic Direction & Objectives

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LCBO Strategic Plan 2015/16 to 2017/18

What We Want To Accomplish

LCBO Mission Statement We make a difference in Ontario by being a best in class,

socially responsible, customer focused and profitable retailer of beverage alcohol.

Our Brand

Vision: let’s get together

Essence: Responsible

Personality: The Generous and Responsible Host

Welcoming, Responsible, Outgoing, Creative, Connected

Promise: Inspire, Guide, Delight

Core Values

1. Customer Service 2. Social Responsibility 3. Excellence 4. Integrity 5. Health & Safety

Employee Value Proposition We are an influential, best in class retailer, making a difference in the Province of Ontario and within the communities in which we work and live. At the LCBO:

We are socially responsible; We provide a strong, supportive culture that maintains respect for

balance in both work and life; We provide career development opportunities; and We are inclusive, respectful and strive to ensure a safe work

environment. Our employees contribute to our core values by ensuring:

Excellence in the customer experience; Corporate social responsibility; Integrity and ethical conduct; A healthy & safe workplace; and Personal leadership and a collaborative team orientation.

Objectives:

1. To continuously improve the

customer experience, increasing engagement and satisfaction.

2. To be a socially responsible retailer, recognized by Ontarians for our actions that support:

Responsible retailing and moderate consumption of alcohol; Product quality and safety; Environmental sustainability; Community involvement and

fundraising.

3. To maximize returns to the people of Ontario by generating a total of $5.9 billion in net income over the next 3 years (2015/16 – 2017/18).

4. To be a great place to work with a culture of engagement and excellence.

5. To provide ongoing support to grow the sales of local Ontario products.

6. To improve operational excellence through continued and improved collaborative planning with internal and external stakeholders and trade partners.

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How We’ll Measure It – Our Goals

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Measuring Performance – LCBO Objectives in more detail - Goals

1. To continuously improve the customer experience, increasing engagement and satisfaction.

A. Customer Engagement Goals

Customer engagement is made up of four key drivers: Empowerment; Shopping Environment; Corporate Citizenship; and, Responsible Retailing. Empowerment has the greatest impact on customer engagement and offers the greatest opportunity for improvement. With this in mind, our goal is to transition customers to higher levels of engagement through improved performance on the key drivers, with a particular focus on the sub-driver of empowerment.

• Empowerment

o The ability of the LCBO to provide support and confidence to consumers; before, during and after the purchase decision is a powerful strength that underlies LCBO’s brand strategy and will be leveraged to move the LCBO forward. The drivers of Customer Empowerment include product assortment, merchandising presentation and marketing. Our customers want to be empowered to make better choices. The LCBO can play an important role in aiding customers to navigate our stores, by providing enhanced in-store information/promotions to better educate and inspire them.

• Shopping Enjoyment

o Investment in store environment is a priority, as it contributes directly and strongly to a deeper relationship with the LCBO brand. This includes our stores as a destination for discovery, browsing and trading up.

• Corporate Citizenship

o LCBO is viewed by customers as delivering on its strong mandate to act in a socially responsible way. We must strive to continually improve and find opportunities to tell the Corporate SR story more effectively, through an increased presence and integration at all customer touch points.

• Responsible Retailing

o LCBO is viewed by customers as delivering on its strong mandate to be a responsible retailer.

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2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18Actual Actual Actual Actual Actual Actual Target Target Target

Customer Engagement 6.8 6.8 6.6 6.7 6.8 6.7 6.7 6.75 6.8

Rational Connection 7.7 7.7 7.7 7.7 7.7 7.7

Emotional Connection 6.0 6.0 5.9 6.0 6.2 6.1

2009/10 2010/11 2011/12 2012/13 2013/14 2014/15

Actual Actual Actual Actual Actual ActualShopping Empowerment

7.2 7.0 7.1 6.9 7.2 7.2

Shopping Ease -Enjoyment

7.5 7.8 7.9 7.9 7.8 7.8

Corporate Citizenship

7.0 7.0 7.1 7.0 7.2 7.2

Responsible Retail ing N/A 8.0 8.3 8.1 8.2 8.2

KEY

DRIV

ERS

METRIC

LCBO’s performance on the key drivers of Customer Engagement are shown in the chart below:

METRIC

Measuring Performance – LCBO Goals

1. Increasing engagement and satisfaction … continued

A. Continued - Customer Engagement Targets – LCBO’s goal is to remain constant for 2015/16 and increase by

0.05 for 2016/17 and 2017/18.

The total Customer Engagement Score is a measure of eight statements, each with their own weight. These are grouped into emotional and rational variables and weighted to provide an overall measure of customer engagement.

Source: Environics Semi-annual Customer Engagement/Brand Health Study; based on two waves of results per year.

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B. Customer Satisfaction Targets – LCBO’s customer satisfaction goal is 85% by 2017/18.

Source: Annual Corporate Tracking Study

Question: “Over the past year, how would you describe the overall shopping experience at the LCBO on a scale from 1 to 10, where 10 means your shopping experience was excellent and 1 means it was poor?” The graph shows the percentage of customers rating the LCBO as an 8, 9 or 10 out of 10.

Note: Performance against current plan and targets for 2015/16 to 2017/18 will be reassessed and finalized following the results of the next Tracking Study in April 2015.

78% 80%

78% 77%

74%

79%

77%

83% 83% 84%

80%

82%

85%

72%

74%

76%

78%

80%

82%

84%

86%

88%

90%

Total Customer Satisfaction

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TotalForecast for New Stores, 2014/15 2015/16 2016/17 2017/18 End of Relocations & Expansions * (Forecast) (Forecast) (Forecast) (Forecast) 2017/18

New Stores 12 7 7 7 21Relocations 7 14 11 11 36Expansions 4 2 0 0 2 Total 23 23 18 18 59

Incremental Sales $51.2 $40.0 $35.0 $35.0 $110.0($M Annualized)

Year-end Owned Stores 231 229 228 226 226

Year-end Leased Stores 420 429 437 446 446

Year-end LCBO Store Network 651 658 665 672 672Total (new stores added)

Year-end Total Sq. Ft (M) 4.6 4.7 4.8 4.9 4.9(leased and owned)

Year-end Total Lease Liability ($M) ** $878 $966 $1,020 $1,130 $1,130

Note:

** Lease liability is calculated at the time a lease is executed, which may occur in a fiscal year prior to store opening

* The Store Network Plan does not include temporary stores



C. Store Network Expansion Goals

In addition to the store expansion goals highlighted above, the LCBO will continue to pursue a new format to further promote Ontario wine sales - “Our Wine Country Ontario Boutiques”. Our Wine Country Ontario Boutiques are located within select full-size LCBO stores, and offer customers an expanded selection of quality Ontario wines, including additional shelf space for hard-to-find wines from smaller producers. These Boutiques showcase premium Ontario wine at its best, and further our efforts to educate and engage customers in discovering these great home-grown products. We launched 20 Our Wine Country Ontario Boutiques during fiscal 2013/14 and 2014/15.

Building on this success, the LCBO will also pursue other new formats this fiscal year - Craft Beer Destination Boutiques, Specialty Spirits Shops and Niche Product Selections in key stores. These formats will be located in LCBO stores and respond to a consumer desire for a greater selection of specialty products. We are targeting to launch four Craft Beer Destination Boutiques (with another four - six in subsequent years) and two Specialty Spirits Shops in 2015/16.

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2. To be a socially responsible retailer, recognized by Ontarians for our actions that support:

• Responsible Retailing and Moderate Consumption • Product Quality and Safety • Environmental Sustainability • Community Involvement and Fundraising

Overall Corporate SR Goals

To provide Corporate SR leadership in beverage alcohol retailing through best practices in responsible retailing, promoting responsible consumption, product quality and safety, environmental sustainability, and community involvement and fundraising.

A. Develop an overarching Corporate SR strategy that aligns and integrates all four Corporate SR pillars.

B. Continue the work of the Corporate SR Council and our working groups, to increase the presence and integration of Corporate SR in all aspects of LCBO’s operations.

C. Achieve targeted key performance indicators (KPI’s listed on following page) under each of the four Corporate SR Pillars, and ensure reporting mechanisms are open, transparent and credible.

Corporate SR Pillars: • Responsible Retailing and Moderate Consumption; • Product Quality and Safety; • Environmental Sustainability; • Community Involvement and Fundraising.

D. Generate public awareness and support for LCBO Corporate SR actions by telling our Corporate SR story more effectively. Develop an integrated, holistic, multi-channel communications strategy, clearly explaining to Ontarians and LCBO employees; our goals, successes and challenges in becoming an increasingly socially responsible retailer. The focus and messages included in the corporate SR communications will be based on consumer research.

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2. To be a socially responsible retailer … continued

Corporate SR Key Performance & Progress indicators

RESPONSIBLE RETAILING & MODERATE CONSUMPTION Weighting – 55%

ENVIRONMENTAL SUSTAINABILITY Weighting – 10%

Metric/KPI: • Annual Totals – Challenges and Refusals.

Metric/KPI: • 1% reduction in same store energy use per

year.

Key Progress Indicators: • Continue to implement an integrated

promotional calendar for Responsible Retailing & Moderate Consumption (and broader Corporate SR). All Corporate SR related initiatives will be guided by the new Corporate SR promise: Always Taking Care.

• Continue the corporate integrity shopping program and uniformly apply results to support correct practice and guide training program enhancements.

• Continue “Deflate” Drinking & Driving Prevention Campaign, including extended on-line options and post-implementation tracking.

Key Progress Indicators: • Expand Lightweight glass standard and rollout

marketing/communications strategy. • Review carbon (greenhouse gas) emissions

annually. • Rollout store waste audit program. • Produce integrated online environmental

sustainability report and update as appropriate.

PRODUCT QUALITY & SAFETY Weighting – 30%

COMMUNITY INVOLVEMENT & FUNDRAISING Weighting – 5%

Metric/KPI: • Number of customer complaints requiring

investigation. • Average investigated customer complaint

response time.

Metric/KPI: • Total fundraising dollars raised (with detailed

breakdowns).

Key Progress Indicators: • Maintain ISO 9001 and 17025 Accreditations. • Conduct product recalls (Class 1 and Mock

Recall) within established timelines. • Produce training material to improve the

“Return to Stock” process, with a full rollout completed prior to end of 2014/15.

Key Progress Indicators: • Enhance the recognition of customer and

employee contributions to fundraising. • Increase reporting and storytelling of the

actions, accomplishments, results and people behind the successes, at multiple consumer touchpoints.

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2013/14(Actual)

2014/15(Plan)

2015/16(Forecast)

2016/17(Forecast)

2017/18(Forecast)

Total Rolling 3-Year Plan

2015/16 to 2017/18Net Sales $4,998 $5,204 $5,424 $5,700 $5,957 $17,081

Y/Y % increase 2.2% 4.1% 4.2% 5.1% 4.5%COGS 2,492 2,584 2,697 2,833 2,961 8,490

Y/Y % increase 2.4% 3.7% 4.3% 5.1% 4.5%Gross Margin 2,506 2,620 2,727 2,867 2,996 8,591

Y/Y % increase 1.9% 4.5% 4.1% 5.1% 4.5%GM % 50.1% 50.3% 50.3% 50.3% 50.3% 50.3%

Divisional Expenses 675 685 719 749 782 2,249Y/Y % increase 5.1% 1.5% 4.9% 4.2% 4.4%

as % of Net Sales 13.5% 13.2% 13.3% 13.1% 13.1% 13.2%Other Expenses 143 157 167 177 185 528

Y/Y % increase 2.7% 10.0% 6.0% 5.9% 4.4%as % of Net Sales 2.9% 3.0% 3.1% 3.1% 3.1% 3.1%

Total Expenses 818 843 886 926 966 2,777Y/Y % increase 4.7% 3.0% 5.1% 4.5% 4.4%

as % of Net Sales 16.4% 16.2% 16.3% 16.2% 16.2% 16.3%Operating Income 1,688 1,778 1,841 1,942 2,030 5,813

Y/Y % increase 0.6% 5.3% 3.6% 5.4% 4.5%Other Income 57 34 35 35 35 105

Y/Y % increase 67.4% (40.4%) 3.3% 0.1% 0.0%Net Income 1,745 1,811 1,876 1,977 2,065 5,918

Y/Y % increase 2.0% 3.8% 3.6% 5.4% 4.5%Profit Ratio 34.9% 34.8% 34.6% 34.7% 34.7% 34.6%Capital Expenditures 79 91 85 85 85 255

Income Statement ($ 000,000's)


3. To maximize returns to the people of Ontario by generating a total of $5.9 billion in net income over the next three years.

A. Income Statement Goals

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$ 000,0002013/14(Actual)

2014/15(Plan)

2015/16(Forecast)

2016/17(Forecast)

2017/18(Forecast)

Spirits $1,966.1 $2,010.3 $2,060.1 $2,126.0 $2,204.0Y/Y % change 1.2% 2.2% 2.5% 3.2% 3.7%

Wine 1,333.6 1,385.6 1,444.4 1,526.4 1,590.5 Y/Y % change 2.3% 3.9% 4.2% 5.7% 4.2%

Beer 1,001.0 1,056.2 1,118.3 1,185.4 1,250.9 Y/Y % change 4.1% 5.5% 5.9% 6.0% 5.5%

VINTAGES 440.3 473.3 504.5 542.3 577.8 Y/Y % change 1.3% 7.5% 6.6% 7.5% 6.5%

Private Stock, Direct Delivery, Other 256.6 279.1 296.4 320.1 333.6 Y/Y % change 3.0% 8.8% 6.2% 8.0% 4.2%

Total Corporate 4,997.8 5,204.5 5,423.7 5,700.3 5,956.8 Y/Y % change 2.4% 4.1% 4.2% 5.1% 4.5%


‘3. Maximizing returns … continued

B. Sales Targets

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A. Increase Employee Engagement striving for a four percent increase over the next three years. Note: We will also review best practices regarding the use of full vs. targeted surveys with recommendations presented in 2015/16.

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B. To continually strive for an accident free workplace.

• By the end of calendar 2017, reduce the number of Lost Time Injuries by at least 72%, as compared

to the 2009 base year. Note: LCBO’s original goal was to achieve a 50% reduction in Lost Time Injuries by 2015; this goal was achieved in 4 years, 2 years ahead of target.

Note: All Lost Time Injury Numbers represent Calendar Year End Totals. Lost Time = Classified as “LT” claim, no “Denied” claims, no “NFA” claims, no “Reoccurrence” claims, and Days Lost is greater than “0”

Creating an Accident Free Workplace – Lost Time Injury Reduction Targets

Target Area Base Year 2010 2011 2012 2013 2014 2015 2016 2017

2009 Actuals Actuals Actuals Actuals Actuals Actuals Goal Goal Goal

Head Office 6 6 4 5 3 5 3 3 0

Logistics Division 81 75 37 36 15 18 15 15 15

Retail Division 300 258 276 182 150 105 99 96 93

Total LCBO 387 339 317 223 168 128 117 114 108

% Reduction from 2009 -12.4% -18.1% -42.4% -56.6% -66.9% -69.8% -70.5% -72.1%

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$ 000,0002013/14(Actual)

2014/15(Plan)

2015/16(Forecast)

2016/17(Forecast)

2017/18(Forecast)

Ontario VQA $123.1 $128.6 $134.6 $142.7 $149.6Y/Y % change 2.2% 4.5% 4.7% 6.0% 4.9%

ICB 234.6 253.3 268.8 293.5 314.9 Y/Y % change 6.4% 8.0% 6.1% 9.2% 7.3%

Ontario Craft Beer* 50.2 67.1 84.4 113.5 137.6 Y/Y % change 26.8% 33.7% 25.8% 34.5% 21.2%

SALES


5. To provide ongoing support to grow the sales of local Ontario products.

A. Grow the sales of Ontario VQA Wines, International Canadian Blends (ICB) and Craft Beers.

*An Ontario Craft Brewer (OCB) is defined as a small (under 400,000 hectolitres in annual production), independent brewer that brews and sells the bulk of their production in Ontario. Contract brewers must identify their host brewery, which must also be an OCB member.

B. Promote the development of Ontario produced craft spirits.

6. To improve operational excellence, through continued and improved collaborative planning with internal and external stakeholders and trade partners.

A. To build strong relationships with internal and external business partners, supported by the exchange of information, leveraging opportunity and innovation, within an environment that solves common business issues and increases the successful attainment of business goals and objectives:

Suppliers – e.g., Sales and Marketing promotional calendar, collaborative inventory planning, gifting, web-based purchase orders, dock scheduling/inbound management system, sale of data process improvements, etc.;

LCBO Internal – e.g., improve collaborative sales and operations planning and implementation between Sales and Marketing, Logistics, Retail and Finance & Administration on supply chain initiatives, tracking tools and new systems implementation.

B. Continue to expand the use of corporate scorecarding to measure the performance of these and

other collaborative relationships, allowing for a review of processes and direction, to manage and ensure the integrated effectiveness of the business units and their strategic undertakings.

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Measuring Performance – LCBO Stretch Goal

LCBO Stretch Goal - The Next Three Years Our experience has shown us the importance of achieving Excellence in the Customer Experience and Excellence in Operational Efficiency. While economic conditions in Ontario continue to improve, consumer confidence remains fragile and, our ability to stay the course and maintain a diligent focus on this overarching stretch goal continues as a critical priority to success. As we move to 2018, this goal, supported by the four strategic themes, which continue to capture the diversity of our objectives and strategies, will sustain us and contribute to meeting the customer, employee and financial goals of the organization.

LCBO Strategic Themes

1 Connect Emotionally Enhance innovation, deepen customer engagement and their sense of empowerment.

3 Raise the Bar Continue to improve on the key dimensions of operational performance and efficiency.

2 Always Taking Care Social responsibility at the forefront of everything we do. This strategic theme has evolved from “Take Care Everyday” to “Always Taking Care”. It was selected, as the LCBO is always looking for ways to expand our dedication to initiatives that make people and communities thrive by being more responsible and more caring each and every year. Further details on this evolution are included in our Corporate SR Strategy.

4 Engage & Empower People Continually work to engage our People and cultivate a culture of strong personal leadership.

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IV. LCBO Enterprise Risk Management

How we’re going to protect the achievement of LCBO objectives

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LCBO Enterprise Risk Management

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Enterprise Risk Management Overview

The LCBO has an Enterprise Risk Management (ERM) program that consists of a risk framework, an ERM assessment process, continuous monitoring of key risks and semi-annual reporting to the Audit Committee of the Board of Directors. In fiscal 2013/14, twenty-three risks that could negatively impact the LCBO’s performance were identified and ranked. Senior management is responsible for developing and implementing risk mitigation strategies for these enterprise risks. The following are considered LCBO’s top three risks: 1. Government policy and legislative change

2. Long-term economic pressure – cost control versus customer service

3. Talent/succession management and compensation competiveness

Government Policy and Legislative Change

The LCBO must anticipate and respond quickly to changes in legislation and regulation, interprovincial and international trade agreements, public service directives and standards, and changes to the beverage alcohol structure, carefully balancing its roles as a public agency and a customer-focused retailer. To mitigate these challenges, the LCBO remains focused on providing excellence in socially responsible retailing, customer service and operational efficiency. The LCBO provides input and advises government on the potential impacts on LCBO’s financial performance and operations of any policy and legislative changes.

Long-term Economic Pressure – Cost Control vs. Customer Service

Economic factors such as unemployment levels, household debt, commodity price changes, fluctuations in interest rates, exchange rates and inflation all impact consumer spending patterns. Given its discretionary nature, consumer spending on beverage alcohol is vulnerable to changes in the economy. Economic uncertainty, coupled with continued pressure to maximize revenues while reducing costs, could negatively impact LCBO’s long-term business objectives and undermine customer service levels. Management regularly monitors global and domestic economic conditions and estimates their impact on LCBO’s operations, factoring in these estimates into its strategic, business and financial plans with a view to achieving excellence in customer experience as well as operational efficiency.

Talent/Succession Management and Compensation Competiveness

The significant number of management staff reaching retirement eligibility within the near term gives rise to a number of risks including the loss of corporate knowledge and history, lack of continuity for key program areas and potential losses of management skills needed to effectively implement corporate programs. In addition, attracting, retaining and engaging top talent for key positions is becoming increasingly challenging, particularly given LCBO salary levels and government compensation constraints. This is particularly the case for management in our larger stores where bargaining unit wage increases

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have intensified the degree of wage compression between management and bargaining unit staff. To manage these risks, the LCBO has implemented succession planning initiatives across divisions including a mentoring program for newly-appointed store managers and a corporate succession plan that facilitates knowledge transfer from near retiring senior-level managers. The LCBO will continue to manage these risks and is committed to the continuous advancement of the ERM process to protect and support the achievement of LCBO objectives. The LCBO incorporates effective risk management programs into LCBO’s strategic planning process to mitigate risks and leverage opportunities that could impact LCBO’s ability to meet its objectives.

Enterprise Risk Management

Strategic Planning

How we’re going to protect the achievement of LCBO objectives

2015/16 to 2017/18 - welcome to the · pdf fileand marketing programs and our ability to...

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