2015/16 to 2017/18 - LCBO

1 1 2015 /16 to 2017 /18 LCBO MARCH 26, 2015 LCBO Three-Year strategic Plan 2 3 Table of Contents I. Introduction & Approach to Planning .. 5 II. Assessment of LCBO performance .. 7 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 11 13 How We ll Measure It Our Goals .. 17 IV. LCBO Enterprise Risk Management .. 30 Appendix Three-Year Financial 97 4 5 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.

2 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.

3 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. 6 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.

4 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.

5 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 ( , 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.

6 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 7 II.

7 Assessment of LCBO performance 2014/15 8 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. 9 LCBO performance - Fiscal 2014/15 (f)* - At a Glance LCBO Achieved Record Breaking Financial performance in an Improving Economic Climate Sales Growth: LCBO achieved $ billion in sales, representing growth over last year, while the Ontario retail market grew by LCBO surpassed its sales plan by The LCBO operated in an environment where economic conditions were more positive than last fiscal year.

8 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 below plan and of net sales. Net Income: The LCBO achieved another record breaking year, realizing $ billion in net income. We were over last year by and over plan by 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.

9 LCBO s Customer Engagement Score for fiscal 2014/15 is 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 million people and refused service to 409,413 YTD Period 12 2014/15.

10 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 $ 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.