PRICING ADMINISTRATION David Cacciottolo Manager, Pricing Administration - LCBO

Agenda • LCBO Pricing • Recent Changes • Future Changes • Online Resources • Pricing Calculators • Quote change schedule • Q&A

What We Do Price all LCBO and private stock products

TBS Pricing

Implement changes to pricing policy

Recent Pricing Changes

• March 1 – MRP and beer fees • April 1 – Excise tax, wine markup

increase, markup harmonization, COSD

Future Pricing Changes Changes Effective Date

MRP Annually on March 1

Beer Cost of Service Annually on March 1

Beer Basic Fee Annually on March 1 November 1, 2018

Wine Markup April 2019 (1% increase)

Excise Annually on April 1

Cost of Service Differential (COSD)

Previously Ad Valorem differential within markup • +6% on imported wines and • +7% on imported spirits.

New fixed per litre rate; regional specific • Domestic and imported markup harmonized • Driven by CETA agreement

COSD Values

ORIGIN WINE SPIRITS COOLERS

DOMESTIC 0.000000 0.000000 0.000000

NAFTA 0.315880 1.239000 0.110530

CETA/ EU 0.601520 0.972990 0.813810

Other 0.649550 1.550290 1.304880

Please note: To have the correct rate applied, suppliers must submit a declaration of origin prior to the beginning of each calendar year. If no documentation is received, the ‘other’ rate will be applied.

Markup Harmonization

Table Wine Prior to April 2018 April 2018

Ontario 69.5% 71.5%

Canada - out of province 75.5% 71.5%

U.S & Imports 75.5% 71.5%

Whisky Prior to April 2018 April 2018

Domestic 139.7% 139.7%

U.S 146.8% 139.7%

Imports 146.7% 139.7%

Wine Examples Before and After COSD

ORIGIN QUOTE PRICE CURRENT PRICE April 30

DOMESTIC $50.32 CAD $9.95 $10.05

NAFTA $36.67 CAD $9.95 $10.00

CETA/ EU $36.67 CAD $9.95 $10.25

OTHER $36.67 CAD $9.95 $10.35

ORIGIN QUOTE PRICE CURRENT PRICE April 30

DOMESTIC $112.98 CAD $19.95 $20.20

NAFTA $97.18 CAD $19.95 $19.80

CETA/ EU $97.18 CAD $19.95 $20.00

OTHER $97.18 CAD $19.95 $20.15

Spirit Examples Before and After COSD

ORIGIN QUOTE PRICE CURRENT PRICE April 30

DOMESTIC $70.92 CAD $26.70 $26.85

NAFTA $67.60 CAD $26.70 $27.15

CETA/ EU $67.20 CAD $26.70 $26.85

OTHER $67.20 CAD $26.70 $27.45

ORIGIN QUOTE PRICE CURRENT PRICE April 30

DOMESTIC $173.95 CAD $49.95 $50.10

NAFTA $167.67 CAD $49.95 $49.75

CETA/ EU $167.31 CAD $49.95 $49.45

OTHER $167.31 CAD $49.95 $50.05

Cooler Examples Before and After COSD

ORIGIN QUOTE PRICE CURRENT PRICE April 30

DOMESTIC $28.48 CAD $2.95 $2.95

NAFTA $27.21 CAD $2.95 $2.95

CETA/ EU $27.16 CAD $2.95 $3.30

OTHER $27.16 CAD $2.95 $3.55

ORIGIN QUOTE PRICE CURRENT PRICE April 30

DOMESTIC $18.40 CAD $12.25 $12.25

NAFTA $17.56 CAD $12.25 $12.15

CETA/ EU $17.52 CAD $12.25 $13.85

OTHER $17.52 CAD $12.25 $15.05 *6 pack can

*473ml can

Overview of online Resources

Step 2

Step 1

Online Resources

Wine Calculator Key Fields: • Excise Rate • Duty Rate • Origin • Type of Wine

Spirit Calculator Key Fields: • Alcohol • Origin • Excise Rate • Duty Rate

Cooler RTD Cider calculator Key Fields: • Alcohol • Excise Rate • Duty Rate • Type • Origin

Beer Import calculator Key Fields: • Excise Rate • Duty Rate • Brewery Type

Beer Ontario Calculator Key Fields: • Store (S), Warehouse (W) • Refillable • Container Type • Brewery Type

Instruction Tab

Reference Tab

Gift calculators Key Fields: • Liquid cost • Package Cost • Origin • Duty • Excise

Quote Increase Schedule 2018 - 2019 Date to Pricing Quote Effective Date Retail Change*

Domestic February 26, 2018 April 2, 2018 April 30, 2018 April 2, 2018 April 30, 2018 May 28, 2018 April 30, 2018 May 28, 2018 June 25, 2018 May 28, 2018 June 25, 2018 July 23, 2018 June 25, 2018 July 23, 2018 August 20, 2018 July 23, 2018 August 20, 2018 September 17, 2018 August 20, 2018 September 17, 2018 October 15, 2018 September 17, 2018 October 15, 2018 November 12, 2018 October 15, 2018 November 12, 2018 December 10, 2018 November 12, 2018 December 10, 2018 January 7, 2019 December 10, 2018 January 7, 2019 February 4, 2019 January 7, 2019 February 4, 2019 March 4, 2019 February 4, 2019 March 4, 2019 April 1, 2019

* The retail price for imported products will change following receipt of goods purchased at the revised quote.

Quote Changes • Increases permitted 13 times per year • Decreases anytime • Domestic price change as per schedule • Imported price change follows receipt of PO

Grocery Products • Pricing is initiated by suppliers • Quote and price change schedule – same as LCBO products • Price decreases are permitted • Minimum prices for wines