Dealing with the people’s booze monopoly is certainly no bed of roses.
If you haven’t done so already, I recommend that you read ‘I Never Promised You a Rosé Garden (Part 1) before wading into this sad tale.
We found the process of communicating with the folks at Vintages to be a real bear right from the outset. Here’s a typical note sent from Fred Firestone, Vintages Category Manager, European Wines shortly after we began (the names of the LCBO employees have been changed to protect the innocent … me), “Dear Mr. Walker: I understand you are a new agent. However, my Product Manager does not have time to council (sic) you on a continual basis. Please refer to trade website and the “How to Grow Your Business With Vintages” document. If you still have process based questions please forward to me in one e-mail.” Ouch!
I subsequently suggested to Mr. Firestone that he might want to consider appointing a full-time employee to assist new (if not all) agents in their endeavours to work their way through the briar patch of LCBO rules, regulations and administrivia. After all, it is the agents who source all the products that enable the LCBO to report huge profits year in and year out. I did not receive a reply.
I return now to my tale of the Rosé Brut 1er Cru from Champagne Forget-Brimont that had been accepted for sale by LCBO Vintages. The value of the Canadian dollar to the Euro fell from 1.42 dollars to the Euro when we made our original submission in February 2008 to 1.58 on December 16, 2008, a negative change of eleven percent. Why did I pick December 16, 2008? That’s the day we received a letter from Victoria Beetle, Assistant Product Manager, European Wines, Vintages saying, “We are currently pricing the February 14th, 2009, catalogue and came across a discrepancy on the following item:
- LCBO# 95059 Premier Cru Rose Champagne (Forget-Brimont)
- NISS Est. Retail: $48.75 (our original quotation in February 2008)
- Calculated Retail: $54.95 (updated LCBO price, December 2008)
“This is a courtesy notice as the retail is working out to a higher price band then estimated. We will proceed at the higher retail price however it should be noted that the agreed upon rebate terms will still apply to this item’s sell-through. Should you choose to re-quote to achieve the desired retail, please ensure currency and freight rates used in calculations are correct. You may verify these figures with our Pricing Department.”
We received a similar note from her boss, Ivan Sikorsky, Product Manager, European Wines, Vintages, “In respect of the price and discrepancy between your price and the estimated retail calculation, it is always best to contact Bill Ramming and his team in Pricing to ensure the correct variables are used. We are aware of the main reason for the price increase and thus this is a courtesy note to give you an opportunity to bring the wine back into the price band it was submitted and committed to ($48.75) which had an impact on the decision process and the quantity ordered. Where feasible, we share this information upfront with the agent and the supplier when the option to address the price is still available, to minimize the potential rebates, should the wine’s performance fall short of the expectation and eliminate the surprise factor.”
Note the subtle references to the dreaded claw back provision in both notes. Under this clause, the LCBO would charge the winery a penalty if less than seventy-five percent of the order was sold in the first ninety days after being available in the LCBO stores. Basically, what had happened was that the negative change in the currency exchange rate had caused the price of the Rosé Brut to rise and Vintages was kindly providing us the opportunity to make up the difference by dropping our quoted price. We had seen the effect of similar generosity from Vintages on our previous listing when they encouraged us to eliminate virtually all of our commission to bring our Barbera d’Asti under $18 only to have them list it at $19.95. Essentially, our sacrificed commission became even more profit for the LCBO.
So, as suggested by Victoria and Ivan, we got in touch with Bill Ramming, Manager, Pricing Administration for the LCBO who had been extremely helpful to us during our early stages in the wine business. Here’s Bill’s response, “Glad I could help out before. The exchange rate we are applying is $1.58 and the freight is $9.16. This actually gives you a retail of $54.30. To get to $54.95, you can quote 96.18 Euro.”
This was good news in that it would give us a little wiggle room in case the claw back provision was invoked. I wrote to Victoria, “As per our exchange with Mr. Bill Ramming, we wish to requote the price for the subject wine from 94.86 Euros to 96.18 Euros per six-bottle case. Is this note sufficient to effect the change or would you like a formal quote from the winery? Please let us know.”
We were more than a little started to then receive this note from Ivan Sikorsky, “This is not to be mistaken as an opportunity to take an extra margin, we reached out to you as a courtesy to see if you would like to re-quote to meet $48.75 retail … under which the wine was considered and accepted, and as I mentioned that had an impact on the selection and the quantity. We will not accept a higher requote. Please advise by tomorrow morning of your intention to quote down to meet the under $50 retail and as per Victoria’s original message we will have to proceed with higher retail after that, with potential implications on the Sell-through and rebate.”
Being more than a tad frustrated, I sent Mr. Sikorsky this incautious reply, “We were startled by your reply! But I guess we shouldn’t have been. It is representative of all our dealings with the staff at Vintages. You referred us to Mr. Ramming. He said we could adjust the ex-cellar quote and confirmed the fact. You reneged. What gives?? If the winery isn’t entitled to the small extra amount (to help mitigate your looming claw back provision) then why should Vintages and the LCBO get it? As Mr. Ramming calculated, the retail price should be $54.35, not $54.95. We clearly told you in previous correspondence that we do not intend to adjust the ex-cellar price downwards to absorb the effect of our currency’s devaluation and the missed opportunity for savings that could have been realized had you not ignored our offer to ship in twelve-bottle cases (about $1.50 per bottle). Why is it that every time you ‘reach out to us’ there seems to be a garrotte in your hands? This is a rhetorical question; there is no need to reply.”
We immediately received this reply, not from Mr. Sikorsky, but from his boss, Mr. Firestone, “My staff has spent a great deal of time working with you on this issue. Your email of December 20, 2008, is sarcastic, insulting, and unprofessional. Moving forward, we will not be responding to unprofessional communications from you.”
So, you ask, how did this all work out? Well, our Rosé Brut was released at $53.95 the bottle, down a buck from what Vintages said it would be – a Pyrrhic victory if ever there was one.
The prices of the other two Rosé Brut featured by Vintages alongside our champagne were priced at $63.95 and $79.95 … not a premier cru, let alone a grand cru grape between them.
The LCBO pounced with their dreaded claw back provision. During the first ninety days after our wine was released, Vintages only sold 148 of the 300 cases they had originally ordered, less than half. We were billed $4,556.96 for the shortfall. I noted to the LCBO Accounts Receivable department that the original quote was in Euros and thus the claw back should be calculated in that currency. We thereby saved about $100. A second Pyrrhic victory! The claw back of course negated any profit we might have made from the order.
We made more than 300 submissions to Vintages since the Rosé Brut fiasco. Not a single one has been accepted, not even the Châteauneuf du Pape that Decanter magazine rated in the top three from the terrific 2005 vintage … offered at under thirty dollars the bottle. They didn’t even ask to taste it! On the other hand, over the years other agents have taken on some of our wineries. In almost every case they have quickly gained Vintages listings. The moral of the story? The senior folks at the people’s booze monopoly don’t take kindly to unbridled sarcasm.
A few months later we attended a Vintages conflab along with hundreds of other agents, Fred Firestone presiding. One of our fellow minions summoned up the courage to ask him if he thought it was fair to levy the claw back penalty when the LCBO couldn’t get the product onto its shelves because of their over-stocked inventory position. “Ah,” Fred intoned, “Remember, we are partners in bad times as well as in good.”
Thus endeth my sad tale of our Rosé Brut Champagne versus the LCBO Vintages.
Hélène and I will soon be off to southern France for a while to remind ourselves of the pleasant parts of being in the wine business. We are looking forward to visiting our true vinous partners once again and catching up on all of their adventures. We can hardly wait to try the wines of the vaunted 2016 vintage and taste again the wonderful 2015s. We’ll also be there for both phases of the French Presidential elections, so will have gobs of material for future Gentleman’s Portion contributions.