While the LCBO says shortages caused by the sluggish transition to a new warehouse management system will be solved by the August long weekend, industry insiders say that’s not what they are being told.
Two suppliers who sell wine to the LCBO say that senior LCBO staff members have told them things won’t be back to normal in stores until September. And frontline LCBO workers are telling union leaders September is also a more realistic timeframe.
The two suppliers provided the Star with what they say is internal LCBO data that shows a drop in the number of cases sold of many popular products after the new system was implemented at the Durham Retail Service Centre in mid-June.
Rolf Lutz, president of Vinexx, an Ontario agency representing wineries, said there’s no doubt in his mind that the warehouse problem is resulting in a decline in sales of at least some wines. He said other factors can influence how much is sold, such as promotions and competition.
“At the end of the day, if products aren’t on the shelf, they can’t be sold,” he said, stressing that the financial impacts of the delays on his business are real.
“We can’t cash a cheque for goods that weren’t sold. If it’s not sold, we don’t get paid,” he said, adding that he predicts the impacts of the problem will be felt on his business six to nine months from now.
According to the data, popular products such as Heineken lager, Red Stripe Lager, Strongbow Cider, Mike’s Hard Lemonade, Yellow Tail Cabernet Sauvignon, Pelee Island Lola Blush VQA, Palm Bay Ruby Grapefruit cooler, and Black Fly Grapefruit Gin Fizz saw decreases in the sale of cases ranging anywhere from 12 per cent to nearly 60 per cent between June 23 through July 13 compared to the same three-week period last year.
When the Star presented the LCBO with the data from the suppliers, the Crown agency said “any impact to individual products needs to be evaluated on a case-by-case basis which we are committed to doing.”
“It is important to note that year-over-year sales comparisons can be attributed to other factors including product participation in promotional opportunities, a lower growth in wine sales overall and innovation and increased competition in the coolers and ciders category,” said an email from an LCBO spokesperson.
In the snapshot of data provided by the suppliers, which does not show sales of all brands sold in the province, some beers, wines and liquors saw increases in cases sold.
In early July, customers began to notice empty shelves, some with signs telling patrons to ask staff for alternative product recommendations. On July 13, CP24 reported that LCBO president and CEO George Soleas said that systems should be back to normal in “two to three weeks.”
Then, in a message to Drinks Ontario, a trade organization, LCBO senior vice president of supply chain and wholesale Nick Nanos said the agency anticipated being back to more regular operations in “2 to 4 weeks’ time,” according to the organization.
The LCBO told the Star that “all areas of our business are focused on resuming regular operations. Significant progress is being made daily and we are confident that delivery schedules will be back on track by the Civic long weekend.”
Warren “Smokey” Thomas, president of OPSEU, the union that represents LCBO employees, says such a timeline is unrealistic given the existing backlog of deliveries.
“There’s still more of a backlog than (workers) think can be handled in the timeframe (Soleas) is talking about, unless he has some kind of rabbit to pull out of the hat,” said Thomas. He says his members say it’s more likely the problem won’t be resolved until September.
In a letter to the agency Thursday, Thomas demanded an “immediate” meeting with LCBO chair Carmine Nigro and Soleas to discuss the problem.
“Frankly, I am skeptical and so are the experts: your frontline employees are trying to sort out the mess you created,” he wrote. “We don’t believe your two-week timeline is a realistic goal, and we want to know how you intend to achieve it.”
Soleas responded bluntly on Friday in his own letter, telling Thomas the LCBO “has heard with disappointment the irresponsible, inaccurate and inflammatory comments you have made in recent weeks concerning the implementation, and your attempts to politicize the issue.”
“I have publicly provided our customers and partners with updates on our efforts to resume regular delivery schedule by this coming Civic long weekend. It is largely because of the dedication of our hard-working frontline employees that I am confident,” Soleas wrote.
Thomas told the Star that in addition to the delivery backlog, workers in receiving have told him there are also around 300,000 cases of alcohol waiting for processing at the Durham service centre.
The LCBO said that as part of its contingency plan, it has signed a short-term contract with a freight management company “to support with transportation and logistics services.” It said that “the amount of inbound product in our Durham facility is normal for this time of year.”
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The Durham Retail Service Centre, which began shipping in 1985, processes more than 50 million cases of alcohol annually and is at the “forefront of retail distribution today,” according to the LCBO’s website. The agency says the introduction of the new warehouse management system “is a critical modernization effort to help us serve customers better and more efficiently.”
Cathy Siskind-Kelly, co-founder of Canadian mixed drinks manufacturer Black Fly Beverages, said her company was one of a small number of domestic suppliers recently allowed to go into LCBO stores to replenish stocks themselves. Black Fly blends, bottles, cans and ships drinks out of its plant in London, Ont.
After the delivery delays began but before Black Fly could deliver stock themselves, sales of six-packs of Black Fly’s Grapefruit Gin Fizz cooler declined 43.3 per cent between June 23 and July 13 compared to the same three-week period last year, according to the LCBO data shown to the Star.
Black Fly is running an in-store promotion offering $1 off six-packs of the Grapefruit Gin Fizz, “so anything that impacts our ability to increase inventory to support a program like that is an issue for us,” Siskind-Kelly said.
“It’s not having a positive impact on our sales when you have lower inventory than you want or need in the store system,” she said, but stressed that her company’s ability to deliver stock directly to stores is a “silver lining” in the situation.
Mike Pearce, Black Fly’s vice president of sales and marketing, said the decrease in sales could be attributable to a number of factors, including the current problem, as well as the wet and cool spring Ontario experienced this year, which results in store managers not wanting to overstock products.
“We all know that in the industry, you need the weather, you need the in-store promotions, you need a great product and you need supply chain to work. You have to have all those things in place and if you don’t have one or two of those, it’s going to impact,” he said.
The data show that cases of six-packs of Red Stripe Lager and cases of 500-millilitre cans of Heineken lager declined in sales by 59.5 per cent and 25.1 per cent, respectively, between June 23 and July 13 compared to the same three-week period last year.
François Lefebvre, director of corporate affairs for Molson Coors Canada, which distributes both beers, as well as Strongbow, said he couldn’t comment on sales numbers for competitive reasons, but said “we are working diligently with the LCBO to explore all options to ensure we are getting our products into the hands of consumers.”
The data also show that sales of several wines produced by Pelee Island Winery in Southern Ontario decreased between June 23 and July 20, including cases of the well-known Pelee Island Monarch Vidal VQA and the Pelee Island Lola Blush VQA, which both showed declines of more than 25 per cent over the same four-week period last year.
Pelee Island Winery declined to comment when contacted by the Star.
One supplier said their products have also been delayed and that sales of some products are down as much as 50 per cent in recent weeks during the delivery delays. The supplier said a wine that was supposed to be on promotion starting July 22 has still not been received in any LCBO warehouse or store.
“It’s disappointing that consumers are missing out on this promotion. It’s unfortunate that the brand is missing out on the exposure and awareness,” said the supplier.
Labatt, which distributes Mike’s Hard Lemonade and Palm Bay products, declined to comment. Wine agency Philippe Dandurand Wines, which represents Yellow Tail, also declined to comment.