The following describes the evolution of the LCBO from a staid distributor of beverage alcohol products to an innovative, customer-focused and award-winning retailer.

We’ve been asked: Why change? You are a monopoly.

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The LCBO in fact has several competitors in the Ontario beverage alcohol marketplace. These include the privately-run Beer Store network, Ontario retail winery stores, U-Brews and U-Vints and cross-border shopping. LCBO sales represent half the $8 billion Ontario beverage alcohol market.

The LCBO also competes for “wallet-share” – money that consumers may decide to spend with other retailers for things like Christmas gifts or pizza and a movie instead of a bottle of wine with dinner.

So it’s important that customers visit our stores because they want to, not because they have to. Unlike other retailers, however, we can’t offer deep price discounts. That would not be socially responsible.

We’ve had to look for other ways to increase customer satisfaction, mainly by upgrading our stores, improving product selection and training staff to offer friendly, knowledgeable customer service.

Succeeding in a shared marketplace and providing the best possible customer service have been integral to our vision and strategic plans.

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Key objectives of our strategic plan for 2003-2008 are:

• Increasing customer satisfaction.

This is being achieved by continuing to educate staff to better serve customers knowledgeably and responsibly, by creating interesting and dynamic store environments that help engage customers in a discovery of the world of beverage alcohol, and by ensuring stores have popular, fast-moving brands when customers want them, in the quantities required, as well as a good assortment of products tailored to local needs.

• Promoting responsible drinking.

This means keeping alcohol out of the hands of minors and intoxicated people, promoting the responsible use of beverage alcohol and hosting and working with groups such as MADD Canada on campaigns against drinking and driving.

• Maximizing returns to the people of Ontario by generating at least $5.5 billion in dividends over five years.

This will be achieved by growing annual sales from $3.6 billion in 2005-2006 to $4 billion in 2007-2008, by reducing expenses as a percentage of net sales and by improving our supply chain – the flow of products from suppliers to store shelves – to drive excess costs out of the system. It also means ensuring we get the best possible return on capital investment in our store network, logistics operations and such areas as information technology.

• Developing and improving collaborative relationships with our suppliers.

By partnering with suppliers we can respond more efficiently and effectively to trends in customer preferences and reach more customers with informative, engaging programs. We can plan more effective in-store events based on an 18-month promotional calendar and more accurately forecast when products are needed.

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• Promoting the growth of Ontario winery sales.

Our goal, working with winery retail stores, is to build Ontario wines’ share of the market, to use our sales and marketing expertise to help Ontario winemakers build a world class brand, help expand Ontario wines’ customer base, and ensure LCBO strategies take into account the goals and objectives of the Ontario wine industry.

• Increasing employee satisfaction.

Having the right people – knowledgeable, engaging and responsible – in the right place at the right time is vital because we know that the more employees are satisfied, the more customers are satisfied. We are upgrading leadership and succession planning programs and improving our performance management system, heightening awareness of the organization’s commitment to wellness and ensuring we live up to the LCBO’s corporate values and personality as a caring retailer.

Our mission is to be a socially responsible, performance-driven, innovative and profitable retailer, engaging our customers in a discovery of the world of beverage alcohol through enthusiastic, courteous and knowledgeable service.

In short, to continue to evolve and constantly seek ways to enhance the shopping experience, increase productivity and profitability, maximize our dividend transfers to the provincial government and fulfill our mandate to be a socially responsible retailer.

• Protecting the environment.

Our environmental strategy has five specific goals:

• Reducing package waste generated by LCBO sales
• Increasing the rate of material diverted from landfill to recycling and re-use
• Improving all aspects of environmental management
• Reducing consumption of energy and utilities at LCBO facilities
• Promoting re-use and conservation.

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If you examine our customer research and look at our financial performance you’ll see the LCBO is doing very well on all counts.

Customer feedback continues to be positive. Customers like the changes we have made. Our large-scale customer satisfaction surveys show that 79 per cent of our customers rate their overall shopping experience as an eight or higher on a 10-point scale while dissatisfaction barely registers only one per cent.

A Customer Tracking Study, conducted annually and based on in-depth interviews with 2,500 people across Ontario who say they are the primary LCBO customer in their household, consistently reports satisfaction levels in the mid 70s to high 70s. This compares with 74 per cent when the study began in 1999.

The survey also tells us that for four out of every 10 customers the LCBO is one of their favourite places to shop.

Some of the highest rankings are for the friendliness and professionalism of staff. 

Similar findings are reported by a more frequent survey known as Project SCORE. This is a monthly survey that asks 400 randomly selected LCBO customers across the province to rate their satisfaction with their most recent shopping trip to our stores and their reason for their rating.

Another way of assessing the shopping experience is our Mystery Shopper program, which involves visits to our stores by unidentified shoppers reporting on customer service and the appeal of stores. This program gave stores an average overall score of 88 per cent in 2007-2008.

Mystery Shoppers visit larger LCBO stores at least once a month, smaller ones at least seven times a year.

In terms of dividend transfers to the provincial government, in fiscal 2007-08 we delivered our 14th record dividend – $1.345 billion. This figure, which does not include taxes, was $65 million more than the previous year and 5.1 per cent higher than the previous year. Our net sales were also a record at $4.1 billion, 5.5 per cent higher than the year before.

In addition to the dividend, the provincial, federal and municipal governments received $857 million in taxes, import duties and payments to municipalities.

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How did we know what changes would work? Customer research. We learned and we continue to learn more about our customers – who they are and what they want. 

We went beyond standard demographic research into segmentation studies. These studies separated our customers into distinct groups based on shopping behaviour and lifestyle, as opposed to age categories. This has helped us better understand customer interests and shopping habits and tailor our retail and marketing strategies accordingly.

We've also done telephone surveys and in-store surveys large and small. We have done everything we can to learn more about the products and services the buying public wants. Research also guides the LCBO’s major social responsibility campaigns.

In other words, we measured what was important and we behaved very much like a private sector company, observing other retailers and adapting successful ideas without compromising good public policy or social responsibility.

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In 1998 the LCBO – with the support of its Board and government – embarked on a bold modernization plan – to be Ontario's Source for Entertaining Ideas. We had listened to our customers and now we were about to take action.

To accomplish this we made major changes to the store network:

We also looked at value-adds for our customers. In larger, destination stores we now offer a full range of products and services including tutored tastings and advice on food matching.

In smaller communities that can’t support a regular LCBO store, we partnered with existing private sector retailers to open agency stores to fill in service gaps.

Since 1962, privately owned agency stores have provided beverage alcohol service to smaller Ontario communities, mostly in Northern Ontario. There was an expansion in the 1990s, making beverage alcohol shopping more convenient for more people, bringing additional revenue to communities and increasing their overall business base by giving rural consumers another reason to shop with local retailers. A further expansion was undertaken in 2002.

The number of agency stores at the end of fiscal 2007-08 was 217 and represented 2.1 per cent of total LCBO sales.

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How do we continue to leverage our vision to help grow the business and increase our revenues? Customer research, of course.

For example, LCBO sales trends have shown that the interest in mixed drinks and cocktails is growing but our research also shows many consumers mistakenly think making mixed drinks is difficult and time-consuming.

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So the LCBO, together with our suppliers, launched annual promotions in our more than 600 stores across Ontario that include demonstrations and shaker cocktail recipes for hosts.

These promotions show that spirits are fun and ideal for entertaining because of their mixability, diversity and ease of preparation.

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Most important of all, we invested in our people. Great stores and selection alone don't win over customers. You need great service too.

We made product knowledge courses mandatory for all retail employees. A program called Service Knowledge better prepares them to answer questions from customers with confidence.

We partnered with the Wine Council of Ontario to educate our employees more about products and developed a program called World of Ontario Wines, in which more than 300 employees in our biggest stores are designated WOW Leaders to promote the sale of Ontario wine.

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Other employees have become “Beer Guys” and “Beer Gals” to promote consumer beer knowledge and interest and a Spirit Advocate program does the same for spirits.

We also undertook large-scale employee attitude/engagement surveys and learned that our employees must contribute to and understand our vision in order to embrace it. They must understand the goals and what they can do to help achieve them. They must know the core values – in our case, customer service, social responsibility, excellence and integrity – and how they can bring them to life.

The approach is to define what customer service means to an organization and then train and motivate staff to provide that service. There is a one-to-one correlation between employee trust and profitability: The more employees believe management support quality service, the more profitable that organization will be.

Employees must be engaged, which at the LCBO means being part of a world-class organization in which they can learn, grow and maximize their potential.

This includes leadership development programs and a coaching culture to identify the leaders of tomorrow and ensure they have the skills and knowledge required to take the LCBO into the future.

It means transferring corporate experience and knowledge to the next generation through mentoring and job-shadowing and making succession planning a top priority throughout the organization.

It also means promoting a harmonious and inclusive work environment and enhancing health and safety to achieve an accident-free workplace.

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A study by consultants Watson Wyatt Worldwide of more than 250 large companies in the United States reported that employees who understand the goals and objectives also know how their actions can help the organization achieve them.

The study said effective communications connects employees to changing business challenges and helps organizations respond quickly to changing conditions. It also said that organizations making a significant improvement in communications see an increase in market value of nearly 30 per cent.

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Selling beverage alcohol responsibly is a public trust the LCBO has taken very seriously since its creation in 1927. Over the years, the LCBO has had a strong and consistent commitment to socially-responsible programs, practices and actions:

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• responsible retailing

• promoting responsible consumption through education and advertising

• reducing our ecological footprint by eliminating plastic bags, increasing the number of alternative containers available and encouraging customers to return containers for a refund

• ensuring products sold by the LCBO meet the highest quality and safety standards

• fundraising to support charities and community organizations in Ontario.

Today, consumers expect a higher standard of social responsibility and a greater commitment to the environment from the companies they do business with and the LCBO is evolving and working to integrate social responsibility into all points of contact with our customers beyond what has been achieved in the past.

Social responsibility practices are as important as our mandate to provide a high level of customer service and maximize dividends for the provincial government.

Corporate social responsibility at the LCBO includes:

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• All LCBO retail employees go through an award-winning training program, produced by the LCBO, called Strategies for Managing Age and Alcohol-Related Troubles (SMAART) to enable them to challenge and refuse service to anyone who appears underage and cannot provide valid proof of age or appears intoxicated. They challenged more than two million would-be customers in 2007-08 and refused service to more than 134,000. Most refusals are for age-related reasons.

• To help prevent underage drinking, the LCBO and MADD Canada has a website for parents of pre-teens with tools and tips to talk to their children about alcohol to help them be informed and make smart choices.

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• To take the social responsibility message into high schools, the LCBO develops safe prom and graduation campaigns that include posters, prom tips for students and parents, information resource packages and web-based resources for teens, parents, teachers and counsellors.

• Every year since 1995, the LCBO has conducted major advertising campaigns in partnership with MADD Canada to raise awareness about the responsible use of alcohol and the dangers of impaired driving and to encourage people to take action to prevent drinking and driving. These innovative, award-winning advertising campaigns have included TV, radio, print, cinema, bar washroom and outdoor advertising across Ontario.

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• Helping to protect the environment through a deposit return program and support of the Blue Box program, working with suppliers to offer more products in alternative containers and reduce packaging, and encouraging the use of reusable bags. The LCBO also recycles corrugated cardboard, fine paper, polystyrene, newspaper, batteries, printer cartridges, data tapes and other materials, as well as working to reduce the use of energy in stores, warehouses and offices.

• Raising more than $1.5 million every year for charities and other worthy causes through donation boxes in stores, the Spirit of Giving program at the checkout, the United Way and a variety of activities such as barbecues and raffles at stores in aid of local organizations.

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We raise more than $1.5 million for charities and other worthy causes every year.

Donation boxes are placed at checkouts each month to collect funds for two designated charities and customers are sometimes invited to make a donation at the checkout. 

These charities include organizations fighting impaired driving – like MADD Canada and Ontario Students Against Impaired Driving – as well as the four hospitals for sick children across Ontario, the United Way, the Canadian Cancer Society and many others.

Local charities also benefit twice a year from the donation box program.

The proceeds of golf and softball tournaments, ski days, in-store product tastings, sales of CDs and gift-wrap programs and other events throughout the year also contribute to charities such as camps for children with physical disabilities or cancer.

The LCBO United Way employee campaign also raises a considerable amount of money through employee donations, payroll deductions and special events. The total raised in 2007 was $950,000, including the Spirit of Giving program at the checkout.

LCBO employees are also actively involved in many individual fundraising efforts in their communities.

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The LCBO is helping to protect the environment in several ways:

• A deposit return program in which consumers pay a deposit on purchases at the LCBO, agency stores and winery and distillery retail stores, and receive a refund when returning containers to The Beer Store.

The Bag it Back program is helping to divert significantly more glass and other beverage alcohol containers from landfill sites and results in more glass being recycled into higher-end uses, including new glass bottles, fibreglass and polar fleece.

It is also freeing up space in the Blue Box program, giving municipal governments an opportunity to expand recycling programs.

The deposit is 10 cents and 20 cents depending on the size of the container.

• The LCBO has also been a leader in supporting Ontario’s Blue Box program and has contributed $40 million to date to Ontario’s cities and towns as well as helping develop new markets for coloured glass.

• LCBO Sales and Marketing is working with suppliers to offer more products in alternative packaging, such as Tetra Pak containers, PET (polyethylene terephthalate) plastic bottles and aluminum cans, which use less packaging than glass.

• Cloth Envirobags are available in LCBO stores in place of disposable shopping bags and 50 cents from the sale of each bag, together with proceeds from other fund-raising efforts, goes to the LCBO National Heritage Fund, which supports community-based projects to preserve or restore wildlife habitat.

• Suppliers are encouraged to minimize packaging and the LCBO recycles corrugated cardboard, fine paper, polystyrene, newspapers, batteries, printer cartridges, data tapes and other materials, as well as working to reduce the use of energy in LCBO facilities to reduce greenhouse gas emissions.

• The LCBO participates in a variety of environmental initiatives such as Earth Day, the Clean Air Commute (with Pollution Probe), Earth Hour (World Wildlife Fund) and Greening Greater Toronto (Toronto City Summit Alliance).

• The LCBO announced in May, 2008, it would phase out plastic bags and encourage customers to use their own reusable bags. They can also choose from a range of inexpensive reusable LCBO bags or take a free paper bag or cardboard box.

LCBO environmental strategy has five specific goals:

• Reducing package waste generated by LCBO sales

• Increasing the rate of material diverted from landfill to recycling and re-use

• Improving all aspects of environmental management

• Reducing consumption of energy and utilities at LCBO facilities

• Promoting re-use and conservation.

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Products sold in LCBO stores must first be tasted, tested and certified by the LCBO’s Quality Assurance laboratory.

This means they are safe to consume, authentic and meet standards set out in Canada’s Food and Drugs Act and Consumer Packaging and Labelling Act and their related regulations.

Every year, more than 475,000 tests are performed on more than 22,000 products.

The lab is world-renowned and meets the high standards set by the Geneva-based International Organization for Standardization. It is registered under ISO 9001:2000 as well as under ISO/IEC 17025, a designation specific to chemistry laboratories.

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As a government agency, the LCBO has worked very hard to support our domestic wine industry and craft brewers. We have:

•	Partnered with the Wine Council of Ontario and the provincial government to develop an overall wine strategy.	Click to Enlarge Click to Enlarge
•	Developed a craft winery program to help smaller wineries establish their brands so they can better compete.
•	Increased shelf space in our stores for Ontario wines.
•	Launched an in-store program that highlights two “Ontario Superstar” wines each month.
•	Trained some 300 employees in our stores to act as specialists in Ontario wine – WOW Leaders – who can help customers and colleagues alike learn more about the value and versatility these wines offer.
•	Worked with the Ontario Craft Brewers to make these beers more visible in LCBO stores through new signage and displays designed to showcase them.
•	Developed promotional material highlighting some of the many craft beers available at the LCBO and how Ontario’s craft brewers pride themselves on their traditional brewing practices.
•	Introduced "Beer Guys" and "Beer Gals" to promote consumer knowledge and interest.
•	Developed thematic promotions and special displays to help small brewers grow and, with the goal of doubling sales volume, create more jobs and stimulate economic growth in their communities.

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The transformation of the LCBO has been a success by any measure.

In 1991-92, the LCBO’s annual revenue was $1.8 billion and the dividend was $675 million.

In 2007-08, annual revenue was $4.1 billion and the dividend was $1.345 billion.

This did not include $382 million in PST, $119 million in GST and $339 million in excise taxes and import duties. When payments to municipalities were included, the total was $2.2 billion. (As of May 21, 2008, these figures were unaudited.)

Our strategic plan for 2008-13 projects at least $7.6 billion in dividends by the fifth year.

Dividends help pay for health care, education and other important social programs and major capital projects.

The LCBO has also been successful in containing costs, as reflected in expenses as a percentage of net sales.

This figure was reduced to 16 per cent in fiscal 2007-08, down from 16.3 per cent a year earlier. Each one per cent reduction in operating expenses translates into $40 million in savings.

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New and renovated LCBO stores are designed to be bigger, brighter and better located than the stores they replace. This not only increases customer satisfaction in measurable ways but increases sales that ensure a solid return on LCBO’s capital investment.

All real estate decisions are guided by extensive customer research and market analysis to ensure they meet the needs of urban and rural communities of all sizes, and by rigorous financial analysis. 

The business case developed for each capital project includes a forecast of incremental expenses and sales – netting out both current sales growth trends and negative impact on sales at nearby stores in the trade area – to ensure an accurate forecast of the project’s return on investment. All major capital projects must show a projected return on investment of at least 12 per cent to proceed.

Following completion, financial performance is reviewed annually and compared to the forecast. Eighty-one of 93 stores tracked during an eight-year period were performing on forecast or better than forecast.

Our integrated marketing initiatives, which include in-store displays, newspaper inserts, broadcast advertising and web-based promotions, have played an important role in building customer traffic, increasing sales of featured products and enhancing the LCBO brand.

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As a socially-responsible retailer, LCBO can benchmark its success, not only through customer satisfaction surveys and financial results, but also through the recognition it has achieved, often in open, juried competitions. To date, LCBO has won well over 200 awards for store design, staff training and development, innovative retail practices, marketing and communications.

A survey of nearly 1,000 readers of Canadian Business magazine named the LCBO one of the top 10 best-managed brands in Canada and a Corporate Reputation Study conducted by an independent survey company placed the LCBO 15 out of the top 100 companies in Ontario.

Below is a list of some of LCBO’s more prestigious awards.

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