Canada Market: Insights on

Exporting to AlbertaCategory Manager – Rob Singleton

Canada Market: Insights on Exporting to Alberta

▪ Liquor Stores North America (LSNA) Overview

▪ Alberta Business Overview

▪ Beer Trends in Alberta

▪ Summary

About LSNA

Our Business:

▪ Sale of beer, spirits and wine through 247 retail stores

▪ North America’s largest publicly traded liquor retailer (by number of stores and sales)

▪ LSNA total sales in 2014 - $694 million

Our Markets:

▪ Canada (BC and AB) 75% of total LSNA sales

▪ U.S. (KY and AK) 25% of total sales

About Alberta

Alberta has an estimated population of 4.1M as of July 1, 2014. With 75% of the population being above LDA

The majority of its residents are located in the main centers of Calgary and Edmonton

Alberta’s growth rate was 2.86% between 2013 and 2014 which is double the Canadian average

It also has the highest male to female ratio in Canada with 103 males for every 100 females

Alberta has the lowest median age in Canada of 36.5 years

About Alberta Retail

There are currently 1,340 retail liquor stores in Alberta.

▪ 362 Calgary (1 store for every 2,914 LDA)

▪ 320 Edmonton (1 store for every 3,113 LDA)

▪ The Alberta average is 1 store for every 2,307 LDA

Rural Alberta traditionally has had less demand for craft beer than urban centers.

Most small town consumers are price conscious and less willing to experiment with beer styles.

Privatization and Change

▪ Alberta is the only province in Canada with a fully privatized retail liquor system

▪ Privatization was fully implemented in 1994

▪ Product selection expanded quickly and now there are over 40,000 adult beverage items available to the Alberta consumer

▪ 4,590 Beer items are currently listed in the Connect warehouse (BDL & DD not included)

2014 LSNA Alberta Retail Beer Segment

The Craft Beer Boom

▪ Alberta Craft Beer sales with LSNA grew 10.89% from 2013 to 2014

▪ Leading styles are IPA, Wheat, Pale Ale and ISA

▪ The segment is healthy and the Alberta consumer is looking for more choice and variety

▪ Selection is key, consumers see what is available online and want the same products available in their local store

Focus On Craft

While not all stores currently have a high demand for craft beer, in Alberta LSNA has 57 locations with an expanded craft beer selection.

We have made a concerted effort to allocate space in all new store development to this growing and profitable segment.

The Growth of the Growler

In key craft locations, LSNA has developed a diverse selection of Draft on Tap including up to 34 taps at our largest location.

We are working with craft brewers to source new and unique items for the Alberta consumer.

Local Craft Beer Boom

▪ Recent changes in Brewery licensing restrictions have made a favorable climate for the Alberta small craft brewer to develop

▪ Minimum capacity of 5,000 hectoliters a year for brewers was removed in 2013

▪ Local brewers that produce less than 20,000 HL are charged a reduced tax rate of $0.20 per liter compared to $1.20 per liter for producers brewing 200,000 HL or more

▪ There are currently 24 breweries and brew pubs licensed in Alberta at this time

Distribution Opportunities

▪ Alberta has a four tier system made up of the Brewer, Agent, Distributer and Retailer

▪ Canadian brewers are allowed to distribute Canadian produced beer products directly to retailers but all foreign brewed products must be distributed through the Connect warehouse

▪ Liquor Connect is a 3rd party distribution warehouse located in St. Albert, Alberta

Distribution Opportunities

▪ There is only one warehouse for the entire province

▪ Liquor Connect charges a flat distribution fee to retailers and storage fees to Agents

▪ Liquor Connect does place restrictions on what is in its warehouse

▪ Out of 4,590 beer skus available there are currently 1,201 American beer item skus in Connect

Find The Right Agent

• There are currently 315 Agencies in Alberta and growing

• Make sure they are committed to your Brewery and to the distribution and promotion of your beer

• Verify the size of their sales force and in province representation

• Be conservative on quantities for initial distributions

Pricing And Shipping Challenges

▪ Large shipping costs and need for temperature controlled containers

▪ Price discrepancies between imported craft items and locally brewed products

▪ Price discrepancy has been compounded recently due to falling Canadian dollar

▪ Extreme temperature shifts in the winter can lead to unforeseen quality issues

And now for the other side…

▪ Customers always want to have the freshest and best tasting beer available

▪ Significant issues regarding the large number of skus available and the true velocity of the Alberta craft beer market

▪ Major problems with expired product in the market

And now for the other side…

▪ It is left to each individual Agency to verify the freshness and expiry dates of the items in the Connect warehouses

▪ Many instances of product arriving at the store already expired

Summary

▪ LSNA is North Americas largest publicly traded liquor retailer (2014 - $694 million)

▪ LSNA currently has 247 retail location

▪ Alberta is the only province in Canada with a fully privatized retail liquor system

▪ Alberta Craft Beer sales with LSNA grew 10.89% from 2013 to 2014

Summary

▪ Leading styles are IPA, Wheat, Pale Ale and ISA

▪ LSNA has made a concerted effort to allocate space in all new store to craft

▪ LSNA is always looking to source new and unique items for the Alberta consumer

▪ Alberta is experiencing the beginning of its craft beer boom

Questions?

Appendix

LIQUOR STORES NA IN WESTERN CANADA

Alberta Consumer Price Index

Top 1000 Beers (2014)

(ranked by case sales)

Rank SKU Product Unit Size ML Unit Price Country Type Segment

46 752209 KS VARIETY PACK BEER 8496 35.42 United States STANDARD MICRO

100 307330 SAMUEL ADAMS LAGER (BOTTLES) 2130 11.40 United States STANDARD MICRO

128 762865 NEW BELGIUM BREWING FAT TIRE 2130 13.49 United States STANDARD MICRO

176 809798 BARD'S TALE GLUTEN FREE BEER 2130 12.90 United States STANDARD MICRO

230 580209 ANCHOR STEAM BEER 2130 12.75 United States STANDARD MICRO

246 762867 NEW BELGIUM BREWING RANGER IPA 2130 13.49 United States STANDARD MICRO

252 765641 SAMUEL ADAMS MIX PACK 4260 22.50 United States STANDARD MICRO

294 897967 LAKE FRONT NEW GRIST -NON GLUTEN BEER 2130 13.89 United States STANDARD MICRO

421 728442 ANCHOR LIBERTY ALE 2130 12.75 United States STANDARD MICRO

423 762866 NEW BELGIUM BREWING FAT TIRE 58674 312.56 United States STANDARD MICRO

428 754997 DESCHUTES MIRROR POND 2130 14.34 United States UNPASTEURIZED MICRO

430 755000 DESCHUTES CHAINBREAKER 2130 14.34 United States UNPASTEURIZED MICRO

443 722428 BROOKLYN LAGER 2130 13.53 United States UNPASTEURIZED MICRO

445 741071 SAMUEL ADAMS OCTOBERFEST 2130 11.40 United States STANDARD MICRO

450 761853 SAMUEL ADAMS COLD SNAP 2130 11.40 United States STANDARD MICRO

464 735138 ROGUE DEAD GUY 650 7.00 United States STANDARD MICRO

468 762869 NEW BELGIUM BREWING SNAPSHOT WHEAT 2130 13.49 United States STANDARD MICRO

472 720260 SAMUEL ADAMS WINTER LAGER 2130 11.40 United States STANDARD MICRO

474 745978 ROGUE DEAD GUY ALE 30000 179.93 United States STANDARD MICRO

503 740427 SAMUEL ADAMS BOSTON LAGER 30000 140.75 United States STANDARD MICRO

519 765737 GOOSE ISLAND MATILDA 765 6.99 United States STANDARD MICRO

521 765735 GOOSE ISLAND SOFIE 765 6.99 United States STANDARD MICRO

533 331850 SAMUEL ADAMS SUMMER ALE 2130 11.40 United States STANDARD MICRO

542 757528 HAT TRICK IPA 1892 10.56 United States STANDARD MICRO

549 765053 SAMUEL ADAMS REBEL IPA 2130 11.40 United States STANDARD MICRO

568 748184 ANCHOR BREKLE'S BROWN ALE 2130 12.75 United States STANDARD MICRO

Top 1000 Beers (2014)

(ranked by case sales)

Rank SKU Product Unit Size ML Unit Price Country Type Segment

569 101915 ANCHOR PORTER 2130 12.75 United States STANDARD MICRO

577 721873 ROGUE DEAD GUY 2130 16.12 United States STANDARD MICRO

601 754999 DESCHUTES INVERSION 2130 14.34 United States UNPASTEURIZED MICRO

620 721874 ROGUE HAZELNUT BROWN NECTAR 650 7.00 United States STANDARD MICRO

628 754572 KENTUCKY BOURBON BARREL ALE 1420 11.65 United States STANDARD MICRO

630 760317 KLINGON WARNOG ROGGEN DUNKEL ALE 1892 10.39 United States STANDARD MICRO

649 765402 OMMEGANG GOT FIRE AND BLOOD 750 9.50 United States STANDARD MICRO

650 754998 DESCHUTES BLACK BUTTE 2130 14.61 United States UNPASTEURIZED MICRO

653 723716 BROOKLYN EAST INDIA PALE ALE 2130 13.59 United States STANDARD MICRO

659 760318 VULCAN ALE - SEASON ONE - EPISODE ONE 1892 9.69 United States STANDARD MICRO

670 757529 YARD SALE AMBER ALE 1892 10.22 United States STANDARD MICRO

693 699652 FRESH SQUEEZE 2130 15.58 United States UNPASTEURIZED MICRO

694 756026 OSKAR BLUES DALES PALE ALE 2130 12.92 United States UNPASTEURIZED MICRO

713 716119 LAGUNITAS INDIA PALE ALE 2130 15.75 United States STANDARD MICRO

732 761709 ANCHOR CALIFORNIA LAGER 2130 12.75 United States STANDARD MICRO

734 721871 ROGUE CHOCOLATE STOUT 650 7.00 United States STANDARD MICRO

747 755002 DESCHUTES OBSIDIAN STOUT 2130 14.34 United States UNPASTEURIZED MICRO

748 763593 GOOSE ISLAND HONKER'S ALE 58600 244.42 United States STANDARD MICRO

761 750238 PIGS ASS PORTER 2130 12.90 United States UNPASTEURIZED MICRO

764 723525 ROGUE BRUTAL BITTER 650 7.00 United States STANDARD MICRO

766 723717 BROOKLYN BROWN ALE 2130 13.52 United States UNPASTEURIZED MICRO

769 130054 HOPWORKS IPA 650 5.51 United States UNPASTEURIZED MICRO

775 712583 ANCHOR CHRISTMAS ALE 2130 15.75 United States STANDARD MICRO

776 762932 VOODOO PRETZEL RASPBERRY & CHOCOLATE ALE 750 12.27 United States STANDARD MICRO

783 126003 ANCHOR STEAM BEER - 50L KEG 50000 279.95 United States STANDARD MICRO

Top 1000 Beers (2014)

(ranked by case sales)

Rank SKU Product Unit Size ML Unit Price Country Type Segment

792 750514 MAGIC HAT #9 2130 4.99 United States STANDARD MICRO

800 762868 NEW BELGIUM BREWING RANGER IPA 58674 312.56 United States STANDARD MICRO

804 721875 ROGUE JUNIPER PALE ALE 650 6.76 United States STANDARD MICRO

815 751718 DESCHUTES CHAINBREAKER 50000 298.08 United States UNPASTEURIZED MICRO

824 744700 PYRAMID APRICOT ALE 650 4.77 United States UNPASTEURIZED MICRO

826 128041 ANCHOR SEASONAL BEER 2130 12.75 United States STANDARD MICRO

833 768089 STONE IPA 2130 13.99 United States STANDARD MICRO

837 735691 LAGUNITAS HOP STOOPID ALE 650 5.51 United States STANDARD MICRO

869 760144 OMMEGANG GAME OF THRONES 750 9.93 United States STANDARD MICRO

872 762341 ROGUE FARMS 7 HOP IPA 650 7.00 United States STANDARD MICRO

875 757279 LAGUNITAS LITTLE SUMPIN' SUMPIN' ALE 2130 16.35 United States STANDARD MICRO

884 736216 LAGUNITAS IPA MAXIMUS 2130 16.35 United States STANDARD MICRO

890 734389 ROGUE YELLOW SNOW IPA 650 7.00 United States STANDARD MICRO

897 755078 DESCHUTES TWILIGHT 2130 15.11 United States UNPASTEURIZED MICRO

906 728504 BROOKLYN PUMPKIN ALE 2130 14.59 United States STANDARD MICRO

916 716185 LAGUNITAS THE CENSORED RICH COPPER ALE 2130 15.75 United States STANDARD MICRO

921 768092 STONE ARROGANT BASTARD ALE 650 6.25 United States STANDARD MICRO

922 743845 BROOKLYN BLACK CHOCOLATE STOUT 1420 9.85 United States STANDARD MICRO

923 753123 SAMUEL ADAMS OCTOBERFEST 30000 140.75 United States STANDARD MICRO

927 761924 DEATH OF A CONTRACT BREWER BLACK IPA 650 5.29 United States STANDARD MICRO

928 764273 MAINE BEER MO 500 6.93 United States UNPASTEURIZED MICRO

930 766808 ANCHOR IPA 2130 12.75 United States STANDARD MICRO

933 757575 DESCHUTES MIRROR POND 50000 298.08 United States UNPASTEURIZED MICRO

942 637611 LOST COAST TANGERINE WHEAT ALE 650 4.89 United States STANDARD MICRO

949 755001 DESCHUTES BLACK BUTTE 650 5.11 United States UNPASTEURIZED MICRO

Top 1000 Beers (2014)(ranked by case sales)

Rank SKU Product Unit Size ML Unit Price Country Type Segment956 721870 ROGUE CHIPOTLE ALE 650 7.00 United States STANDARD MICRO957 763935 RUCKUS HOPTIMUS PRIME 650 6.46 United States STANDARD MICRO963 768090 STONE GO TO IPA 2130 15.99 United States STANDARD MICRO965 764795 GIGANTIC IPA 650 6.03 United States UNPASTEURIZED MICRO977 532986 TENAYA CREEK HOP RIDE IPA 650 5.82 United States STANDARD MICRO985 716118 LAGUNITAS CZECH STYLE PILSNER 2130 15.75 United States STANDARD MICRO

Case Sale Total for Top 1000 Beer SKUs: 6,490,560

Case Sale Total for All Beers (4431 SKUs): 6,592,396

Links

http://www.liquorstoresna.ca/http://www.liquordirect.ca/http://www.wineandbeyond.ca/ http://www.brownjugalaska.net/ http://www.liquorbarn.com/ http://www.connect-logistics.com/homehttp://www.liquorconnect.com/Pages/default.aspxhttp://aglc.ca/liquor/default.asp