The High-Volume Consignment Program Guidelines
Purpose
The High-Volume Consignment Program (HVC) is designed for suppliers that fill orders from the
LCBO Specialty Services Department in higher volumes than can be accommodated via the regular
Consignment program operated out of the LCBO Toronto warehouse.
Below is a brief overview of key characteristics of the HVC program. The intention is to provide a
program for agents to meet sales targets with a focus on optimizing the use of available warehouse
space at the LCBO.
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Full container loads consisting of no more than eight separate SKUs;
Each SKU consisting of no less than one full pallet1;
Each SKU ordered from a single supplier and held by the LCBO, as necessary in a third
party warehouse, pending receipt of customer orders;
The supplier’s agent arranges customer orders in the same manner as other Specialty
Services orders;
Inventory is drawn from the third-party warehouse as required and released at the LCBO
Specialty Service Department;
Sufficient inventory should be on hand in Toronto to fill most orders on the same day;
Orders outside of the norm may have to be transferred from an outside warehouse, in which
case the LCBO Specialty Services Department may require notice of up to two business
days before pickup.
Ordering
New containers are ordered from approved suppliers, at the agent’s request, to ensure a continuous
supply to meet demand, provided that inventory levels are acceptable. Participating agents are
responsible for determining order quantities and frequency, and are held accountable for ensuring
no excessive build up of inventory. Order requests for products participating in the HVC program
must meet the following criteria by SKU:
1. Minimum SKU sales2 of at least 200 cases over the last 12 months at the time the order is
submitted.
2. Order maximum per SKU = (average weekly sales over last 8 weeks) X maximum order
weeks by country – (On Hand inventory and In Transit inventory).
The maximum order quantity per brand in HVC will be either 38 or 42 weeks depending on
country of origin. All countries will use 38 weeks with the exception of the following countries
with longer lead times which will use 42 weeks: Australia, New Zealand, South Africa, Chile,
Argentina and South Korea.
1
A full pallet will have no fewer than 50 cases. Sales for each SKU must have exceeded 200 cases in the last 12
months.
Throughout this document, the use of the term “sales” refers to transactions between the LCBO and its customers
that are “processed” by an agent and payment is received by the LCBO.
2
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Fees
Participating suppliers pay fees for storage and handling, which are based on expected LCBO
costs3, consisting of:
1. Storage charges of $0.30 per case per month, beginning immediately upon arrival in the
warehouse
2. Handling fee of $0.35 per case (one time charge).
3. Removal charges to Toronto pick up warehouse of $0.70 per case (one time charge)
Disclosure
Participating agents must disclose the nature of the transaction between LCBO and the customer,
and the LCBO price for each product, in a form acceptable to the LCBO, including:
1. Providing all customers with a written invoice upon payment that clearly identifies the LCBO
price for the product sold.
2. Clearly indicating on the Agent’s price list4 that it does not sell beverage alcohol but rather
may arrange for the customer to purchase it from the LCBO, that prices included on its price
lists include the LCBO sale price, and that LCBO sale prices are available on request.
Participating suppliers and their agents must enter into separate contracts with the LCBO.
Program Eligibility
A separate application must be made for each supplier that the agent wishes to participate in the
program. Only one application for one supplier may be made at any one time. New applications are
reviewed quarterly in January, April, July, and October of each year.
Application Requirements
At the time of application, agents must supply;
a.
b.
c.
d.
A valid AGCO manufacturer's representative licence;
A completed application form;
A copy of the agent’s appointment to act as agent for the supplier on supplier letterhead;
Where the applicant is a corporation, a certificate of status or similar good standing
certificate dated not more than 30 days prior to the application;
e. A business case that includes the following:5
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f.
3
Resources necessary to fulfill targets set out in the plan;
Overview of Ontario sales of all products from all suppliers processed through the
LCBO Specialty Services Department by the applicant agent;
o Detailed historical Ontario sales on each SKU the Agent proposes to include in the
program, including price-points, annual sales, monthly sales (i.e.: identifying peak
periods), etc;
o Ontario sales targets for each of the proposed SKUs;
o Key strategies the Agent will employ to achieve the sales targets, including a
description of target customers (e.g. banquet halls, chain restaurants, fine
restaurants, etc.);
A current price list and sample invoice.
LCBO costs/revenues will be reviewed from time to time to ensure that charges are sufficient to cover LCBO costs.
4 The “price list” is the item (document, brochure, website, etc.) used by the agent to advise customers of product
selections, availability and pricing.
5 Submissions will be held in confidence by the LCBO as required by the Freedom of Information & Protection of
Privacy Act.
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Approval Criteria
An agent/supplier will be approved for the program if an application is received that contains the
information listed under “Application Requirements” above, and if in the opinion of the LCBO, the
business case demonstrates the following:
1.
The agent has demonstrated the capacity to process orders in sufficient volumes to
participate in the program, specifically:
o
The agent has processed6 at least 1,200 cases of no more than eight of the applicant
suppliers SKUs through the LCBO Specialty Services Department in the past year.
2.
Sales of the agent’s other supplier’s products participating in the program, if any, are
meeting performance requirements necessary for these suppliers to continue (i.e., no
outstanding warning/remediation letters issued by the LCBO); and
3.
The LCBO is satisfied that the applicant will comply with the terms and conditions set out
in the Agent contract.
Performance Requirements
The Agent’s business plan will be expected to include targets that exceed the sales targets and
inventory targets set out below. In addition, agents must meet the annual sales and inventory
targets set out below. The LCBO will take remedial action as specified below, should sales patterns
suggest that the minimum requirements might not be met, or if excessive inventories have been
accumulated.
Minimum Total Annual Sales Targets
At least 1,200 cases for all SKUs within HVC from the approved supplier processed over the
previous 12-month period. Sales will be reviewed on a quarterly basis during the months of January,
April, July, and October of each year7, and:
1. If sales patterns for any one supplier suggest that fewer than 1,200 cases will be sold on a
rolling 12-month basis, the LCBO will first advise the agent that remedial action is required.
(Step 1)
2. If such remedial action is not successful in improving sales performance in the following
quarter, the LCBO will advise the supplier that the supplier's ongoing participation in the
program will be discontinued if insufficient sales are not properly addressed by the next
quarterly review. (Step 2)
3. If required sales performance is not achieved within 6 months8 of agent notification as
outlined in step 1 above (i.e., the next quarterly review after Step 2), the supplier’s
participation in the program will be terminated. (Step 3)
“Processed” means accepting and submitting orders for product from customers, delivering (or confirming receipt
of ) orders to customers form the LCBO’s Toronto pick up warehouse, and typically collecting and remitting payment
to the LCBO on behalf of customers.
7 Calculated as of the last day of the preceding month.
6
8
New suppliers will be provided with a full 12-month period to achieve 1200 case requirement. In other words, new
suppliers will be given additional time so that the six-month period will be extended to the first quarterly review
which follows the expiry of 12 full months after the date of the Supplier Agreement.
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Excessive Inventory Accumulation
Agents must ensure that inventory9 in the warehouse does not accumulate in excess of twelve (12)
months sales10 for any one SKU. Inventory performance will be reviewed on a quarterly basis at the
end of January, April, July, and October of each year.
1. If inventory for any one SKU exceeds projected twelve (12) month sales as defined above,
the LCBO will first advise the agent that remedial action is required. (Step 1)
2. If inventory of the same SKU identified above continues to have more than twelve (12)
months inventory at the next quarterly review, the LCBO will advise the supplier that
inventory levels for the SKU in question must be rectified by the next quarterly review in
order for the LCBO to place new orders of any SKU with the supplier. (Step 2)
3. If inventory of the same SKU identified above continues to have more than twelve (12)
months inventory at the following quarterly review, the LCBO will issue no new orders (of any
SKU) from the supplier until inventory levels for these SKUs meet the minimum criteria, and
both the agent and the supplier will be advised that the supplier’s ongoing participation in the
program will be discontinued if the excessive inventory is not properly addressed by the next
quarterly review. (Step 3)
4. If inventory of the affected SKUs is not properly addressed by the next quarterly review, the
suppliers’ participation in the program (for all SKUs) will be discontinued. (Step 4)
Note: The LCBO will not place orders from a participating supplier if, at the time of order, total
inventory of all SKUs for the supplier exceeds projected 12-month sales for all of the supplier’s
SKUs11
9
Inventory equals the total quantity on hand in Ontario, plus all quantities ordered from the supplier but not yet
received into the warehouse.
10
Projected twelve (12) months sales are calculated based on sales for the most recent eight weeks.
For example, if 100 cases of “Generic White” were sold over the past eight weeks, the projected 12-month sales for
Generic White would be 100 X 6.5 = 650 cases. Inventory in excess of 650 cases of Generic White following a
quarterly review would precipitate warning letters, ordering restrictions and ultimately discontinuation as set out
above.
11
An agent/supplier with a portfolio of 8 brands each selling 100 cases over the past eight weeks would have a
maximum total inventory of 100 x 6.5 x 8 = 5,200 cases. Inventory in excess of 5,200 cases would precipitate an
immediate suspension of ordering privileges for all SKUs for this supplier until inventory levels were drawn down.
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Inventory Management
Order quantities and frequency are the sole responsibility of the agent, who must comply with the
requirements set out under “Excessive Inventory Accumulation” above. Agents are expected to
manage inventory of their suppliers’ products very carefully. Agents will be accountable for the
product that they order and should consider potential sales very carefully before ordering significant
quantities, particularly for new brands.
If actual sales of a particular product are not meeting sales targets, agents will be expected to take
action to generate sales and sell through existing inventory. Should an agent determine that
demand for a particular product is not sufficient to clear on hand inventory, the LCBO will not acquire
the inventory for sale through the LCBO retail system. However, the agent may request that
remaining inventory be destroyed, returned to the supplier or transferred to another jurisdiction, on
condition that:
1. In the case of product to be destroyed or returned to the supplier, the agent provides the
LCBO with written authorization for same from the supplier, or
2. In the case of product to be transferred to another jurisdiction, the agent arranges for the
receiving jurisdiction to issue a Purchase Order for the product to the LCBO, and
3. The agent pays a fee of $5 per case, plus expenses, and
4. No new orders are placed for the SKU in question for at least 12 months.
Should performance necessitate termination of a supplier, any remaining inventory will not be
acquired for sale through the LCBO retail system. Agents/suppliers may choose to have remaining
inventory:
1. Returned to the supplier or forwarded to another liquor jurisdiction at the expense of the
supplier, or
2. Destroyed at the expense of the agent/supplier.
Participating agents will be required to provide performance security in the form of funds paid or
payable to the LCBO (certified cheque, bank draft, credit card, or letter of credit) equal to $2,500 per
approved supplier, to be held by the LCBO until termination of the Supplier Agreement or Agent
Agreement. Upon termination of the Supplier Agreement or Agent Agreement, the LCBO may apply
all or any part of the performance security to amounts owed by the Agent and the Supplier to the
LCBO including costs the LCBO may incur in disposing of outstanding inventory. Any performance
security that remains will be repaid to the Agent without interest.
An agent may not apply for re-instatement for a terminated supplier until at least 12 months after the
last remaining inventory of the terminated supplier has been removed from the warehouse.
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