The first key to unlocking the mysteries of doing business in Canada is understanding that its ten provinces and three territories are separate markets. Each has its own distinct liquor control board or commission that operates according to a unique protocol. What holds true for one province doesn’t necessarily apply to the next.
With more than 14m people, Ontario is the most populated province in Canada and its beverage alcohol market has an estimated retail value of C$12bn ($9.2bn). This makes the Liquor Control Board of Ontario (LCBO) one of the largest purchasers in the world. Like most provinces, Ontario also has a government owned and operated retail channel, with a total of 663 LCBO stores. Through these and its appointed agency stores, the LCBO accounts for 81.6% of all wine sales in Ontario. Wine is divided into two main categories. LCBO Wines can be described as handling general listings while Vintages is the premium wine boutique, launching new releases every two weeks. In the past fiscal year (April 1st 2017 to March 31st 2018) the former reached C$1.6bn in sales and the latter approximately C$500m.
Who is in charge of purchasing wines for this behemoth? Fortunately, the responsibility doesn’t fall on one single person. “All the decisions are the result of a committee process,” explains Howard Kaman, Ontario specialty brands manager for the Charton Hobbs agency. Buying is largely based on tenders calling for specific products. “Once a product has passed the pre-submission stage, samples will be submitted for tasting,” Kaman says. The panel is formed by a group of buyers who score the wines according to a variety of criteria and make the selection based on results.
The team consists of a hierarchy, with directors overseeing category managers, who work with product managers. Leading the whole is the vice president of merchandising. Carolyn O’Grady-Gold has filled this position since May 2017. O’Grady-Gold joined the LCBO in 2004 as a category manager for brown spirits, moving up the ladder to her current role in which she manages more than 100 people.
Until September 2018, buying teams for LCBO Wines and Vintages were separate. “We need to make changes in our organisational structure to enable us to be an agile, collaborative and effective team that puts a greater focus on the customer,” said O’Grady-Gold in a press release announcing the merger of the two. While LCBO Wines and Vintages are still two distinct businesses, Craig de Blois, president of Noble Estates wine agency, supports the new configuration, explaining “a supplier no longer has to meet with two different buyers if they have a $15 wine and a $50 wine.”
With the merger came a shuffle of directors and category and product managers. “It’s constantly shifting and you never have just one person that can make or break the Australian wine category for example,” says Nicholas Pearce, managing director of NP Wines. “There are new people coming in and people moving up.” As such, today’s snapshot might look different in a few months’ time.
< With a tenure at the LCBO spanning 20 years, Kathy Cannon has been a director (first of LCBO Wines, then Vintages) for a decade. Her new title is director of European wines and destination collection. From August 2017 to September 2018, European wines accounted for a total of C$756m in retail sales. This portfolio is divided between three category managers with Igor Ryjenkov MW and Paul Farrell responsible for the lion’s share.
Ryjenkov is the category manager for Italy, Spain, Portugal, fortified and holiday gifting. He emigrated from Russia in the early ’90s and was the first person in Canada to earn the Master of Wine title in 2003. After seven years as a buyer for Vintages, Ryjenkov was promoted to category manager of the Wines division’s C$440m European portfolio in 2014. With the recent rearrangement, Ryjenkov oversees the Italian selection (excluding rosé and sparkling), which is the second largest import category in Ontario. Within the first nine months of the current fiscal year, it achieved approximately C$250m in retail sales.
Farrell is responsible for France, Greece and Germany, as well as sparkling, emerging Europe and rosé. Prior to joining the buying team in 2008, Farrell was a highly respected product consultant in LCBO stores. Leaders within his portfolio include French red (the fourth most significant category in Vintages), old world rosé – which is growing at more than 50% – and European sparkling, which contributed almost C$40m in retail sales in the first five and a half months of the current fiscal year.
Cannon’s counterpart is currently Greg Tranah. Recruited in 2009, Tranah was named acting director of Wines in March 2018. The scope of the role has now morphed into Ontario and New World wines, which represented a retail value of C$1.42bn from August 2017 to September 2018. Tranah also has three category managers under his direction.
The category manager for Ontario and flavoured wines, Astrid Brummer, has been on the domestic buying team since 2009. As Ontario wine accounts for 42% of provincial sales by volume, this is a significant portfolio. It includes Ontario VQA, non-VQA and international Canadian blends (ICB) and was worth a total of C$514m from August 2017 to September 2018.
Greg MacDonald has 20 years’ experience at the LCBO. He earned the Wine & Spirits Education Trust (WSET) Diploma in 2010 and has worked principally on the Vintages side of the business. In a temporary role as acting category manager for USA, South Africa and British Columbia, he is currently in charge of California reds – the top-selling import category among LCBO Wines and Vintages.
While category managers are regarded as the key buyers, their product managers play an integral role. “They are often the point person for suppliers,” say de Blois. And at the top of the pyramid, “Kathy, Greg (Tranah) and Carolyn all support decisions and make recommendations and can push things along,” claims Alex Bakker, former national director of Andrew Peller Import Agency.
Beyond government stores, wine sales in grocery stores have been authorised in Ontario since 2015. However, licensing, regulations and slim margins have curbed rapid growth. Under the current system, grocery buyers are unlikely to wield power as in privatised markets. “Grocery in Ontario is still very new and there are only 70 locations currently selling wine; buyers and other people involved in the business change frequently,” says Grace Costa, senior account manager for grocery at Arterra Wines Canada. Furthermore, grocery stores are only permitted to purchase products listed by the LCBO. Nevertheless, evolution in Ontario is not beyond the realm of possibility. The provincial government is currently conducting a public poll about allowing private companies and corner stores to sell alcohol. Watch this space.
As for restaurants, they too must buy from the LCBO. However, its consignment program allows agents to offer wines not sold on government store shelves. This is where serious restaurant buyers play, and consignment sales contribute more than C$110m to the LCBO’s wine sales. Buying power, however, is scattered. While large restaurant groups exist, few appoint a central buyer and purchasing tends to be managed by sommeliers at their individual restaurants.
One of the exceptions is Cactus Club. A Western Canadian chain with 30 locations, Cactus Club now has two outposts in Toronto and a spin-off restaurant call King Taps. Vice-president of service and head sommelier Sebastien Le Goff purchases wine for the entire chain. Speaking about volume across the three Toronto restaurants, Le Goff says, “from May to October, the rosé will sell 500 cases and we’ll move 225 cases of our BTG Chianti by the end of the year”.
Similarly, Jordan Alessi is director of guest experience for the Chase Hospitality Group. He oversees the wine selection for seven restaurants in Toronto as well as properties in British Columbia and Miami. While he has a sommelier in each, Alessi creates the base list, choosing certain wines for all locations. The group’s two flagship restaurants – The Chase and The Chase Fish & Oyster – serve a combined total of up to 750 covers between lunch and dinner. “This translates into a lot of wine sales, between C$9,000 and C$20,000 in a single day,” estimates Alessi.
Anne Martin is head sommelier and senior manager of beverage for Maple Leaf Sports and Entertainment (MLSE). Her purview includes the Coca-Cola Coliseum, BMO Field, the Scotiabank Arena and its 500-plus seat Real Sports Bar and Grill as well as the MLSE’s e11even restaurant. She is buying for a clientele out to have a good time and impress. “I’ve never sold the volume, quality or price point in any other restaurant,” says Martin, who has previously worked in several of Toronto’s busiest fine dining establishments. MLSE’s global wine partner, Treasury Wine Estates, and its Canadian importer, Mark Anthony Wine & Spirits, are guaranteed a percentage of spots throughout all venues. However, Martin still has plenty of space to work with a wide variety of agents and suppliers.
Manoeuvering though the LCBO’s convoluted system and getting to the heart of Ontario’s influential buyers may seem onerous. Having a savvy agent and investing in market visits to get to know the players and form relationships go a long way to untangling this web. Once it has been penetrated, the potential to do business is vast.