NLC today released its financial and operational results for the first quarter of fiscal year 2022, ended July 3rd, 2021. All financial information is unaudited.
NLC reported a 13.2% increase in net earnings during the quarter compared with Q1 of fiscal year 2021, for a total of $51.6 million. NLC paid a dividend to Government of $61.8 million in Q1, compared to $51.0 million in the same period a year ago.
Beverage Alcohol sales for Q1 were $71.8 million, up 9.1%, with increases in all categories. Compared with Q1 of 2021 spirits sales were up 2.1%, wine increased by 5.3%, ready-to-drink (RTD) increased by 19.3% and beer sold through NLC corporate stores increased by 39%.
One year ago, the first quarter of fiscal year 2021 saw the initial restrictions and effects associated with the COVID-19 pandemic. During this time, NLC Liquor Stores closed to in-store traffic, with sales shifting to the Liquor Express channel. With the easing of restrictions during the same period of fiscal year 2022, sales through NLC’s corporate stores were up 33.1% over the prior year. Likewise, Liquor Express locations experienced a decrease of 26.2% in sales over Q1 of the prior year, as customers largely returned to pre-pandemic shopping patterns.
In addition to direct sales, NLC earns commissions on the sale of beer through Brewers’ Agents. These commissions for the quarter totaled $18.9 million – up 8.5% over the first quarter of fiscal year 2021.
Commissions earned on the sale of cannabis through licensed cannabis retailers totaled $4.6 million in Q1, an increase of 98.6% over Q1 of the prior year. In Q1 of fiscal year 2022, retail cannabis sales were $15.3 million for an increase of 73%. While dried flower represents 85% of all sales, new products continue to bring innovation and excitement to the category. On June 1st, as part of its annual price adjustment, cannabis prices actually decreased overall by 7% – an important step in helping NLC gain more market share from operators in the illicit cannabis trade.
In Q4 of the previous fiscal year, NLC launched a new Request for Proposals (RFP) in an effort to increase access points in specific geographical areas. On May 28th, it identified eight qualified applicants, who will continue through the next phase of the application process to become licensed cannabis retailers. As a result, new locations will open later in the year in a number of areas throughout the province, including Channel Port-aux-Basques, Bonavista, Clarenville and St. John’s. On June 1st, NLC posted another RFP, with results expected early in Q2. For a full list of licensed cannabis retailers, visit ShopCannabisNL.com.
NLC continues its efforts to bring new offerings to the market including the introduction of eight new licensed cannabis producers, which arrived in market in June. This brings the number of approved licensed producers to 30.
Rock Spirits continues to build upon the success of its new canning line, producing 4,300 cases of RTD in Q1 in addition to the 88,000 cases of spirits produced. As the canning line was not operational in the first quarter of fiscal year 2021, all 4,300 cases represent new growth for the Corporation. Compared with Q1 of the prior year, the production of spirits experienced an increase of 115%. This is primarily due to the effects of COVID-19 on NLC operations in the first quarter of fiscal year 2021, at which time NLC converted one of its lines exclusively for the production of hand sanitizer to support government’s province-wide efforts to curb the spread of the virus.
In addition to Rock Spirits’ success with increased production, it recently partnered with Dildo Brewing Company Ltd. to bottle a new line of vodka, which was launched in August and available in Liquor Stores and Liquor Express locations throughout Newfoundland and Labrador. Rock Spirits seeks out new opportunities in both canning and bottling, and continues to invest it its own brands, as illustrated by the recent rebranding of Old Sam rum.
Regulatory and Compliance conducted 1,191 inspections on liquor establishments and 53 inspections on cannabis retailers in Q1, as it continues to work closely with the licensee community. This represents a 33% increase over the number of inspections conducted during the same time period in fiscal 2021.
NLC’s Regulatory Compliance and Enforcement department continues to disrupt groups controlling the illicit cannabis market by conducting comprehensive investigations and executing warrants resulting in significant seizures of contraband product. In Q1, it completed 12 such seizures of product, worth an estimated $636,800.
NLC is committed to being a leader in corporate responsibility, promoting a positive impact on consumers, employees and other stakeholders in the Province through its actions in social responsibility, sustainability, community and corporate governance.
NLC continues to follow through on its social responsibility commitment through various marketing campaigns, in partnership with the Royal Newfoundland Constabulary and the Royal Canadian Mounted Police (RCMP). NLC and the RCMP continued its public education campaign aimed at drinking and driving, with “Don’t Drink and Drive and Never Drive High. It’s That Simple!” campaign and a related campaign targeting responsible ATV and recreational vehicle usage, with, “Don’t Drink and Ride and Never Ride High”. Sadly, recent fatal incidents in our province illustrate the need for continued educational efforts in this area.
NLC strives to be a leader in corporate governance practices to ensure the organization is effective, open, accountable and transparent. During Q1, NLC’s Board of Directors have continued a review of various corporate governance policies and procedures and is making changes to ensure it is a leader in Board oversight to further build and strengthen public trust.
NLC has made it a priority to promote an environment within NLC and in the communities in which we operate where diversity and inclusion is fostered and promoted, and where all our NLC team members are safe, valued, respected and provided the opportunity to succeed. NLC’s Diversity, Inclusion and Belonging Committee continues to help drive NLC’s diversity agenda and plans. NLC began the quarter as a proud supporter of Diversity Month in April. The organization followed this by celebrating Pride month in June, with activities in its office locations and its corporate retail stores across the Province to show its support for the LGBTQ2S+ community and for people everywhere having the freedom to be themselves and be accepted for who they are.
NLC acknowledged National Indigenous Peoples Day and will continue to work within our communities to support understanding, empathy and reconciliation. NLC also places a high priority on both physical and mental well-being and the important linkage between the two. NLC undertook a number of actions during the quarter to promote and encourage healthy bodies and minds.
As Bruce Keating, NLC’s President and CEO said, “I’m very proud of the efforts of every NLC team member, and of the impact NLC is having in so many areas in our Province. And yet, I believe we’ve only scratched the surface when I think about the impact this organization can have as we look ahead.”
NLC is a Crown Corporation of the Government of Newfoundland and Labrador with responsibility through the Liquor Corporation Act and the Liquor Control Act for importation, sale, distribution and regulation of beverage alcohol, and for the delivery of programs that promote safe, responsible consumption of alcohol.
On October 17th, 2018, the Cannabis Act came into effect federally, regulating recreational cannabis markets in Canada and providing the Government of Newfoundland and Labrador with the authority to prescribe regulations regarding the distribution and sale of non-medical cannabis. Under Newfoundland and Labrador’s regulatory model, NLC, through the Cannabis Control Act, has been given responsibility for regulating the sale and distribution of non-medical cannabis, and for social responsibility initiatives that promote safe and responsible use of non-medical cannabis. NLC is committed to providing a safe and secure supply of legal cannabis for residents of the Province, while disrupting the illicit market. In doing so, it recognizes the importance of province-wide accessibility both online and through retail locations.
NLC is one of the largest retailers in the Province. Through 29 corporate retail locations, eCommerce, catalogues, private order services, more than 140 agency stores, almost 700 Brewers’ Agents outlets, and more than 1,500 restaurants, lounges and other licensees, NLC offers 4,000 to 5,000 products per year to consumers and its retail partners from more than 20 countries, and handles six to seven million transactions annually in corporate stores and agency locations. It also regulates 30 licensed cannabis retailers across the Province; and operates a 77,000 square foot Distribution Centre, employing 600 people in all parts of the business.
NLC operates with the expectation that it will generate revenue for the Government of Newfoundland and Labrador that will be reinvested for the benefit of people of the Province, and returns 100% of its profits to Government to help fund key public services. NLC aspires to earn trust in everything it does – with customers, employees, retailers, commercial partners and communities in which it operates and with Government as it works together to build a stronger Newfoundland and Labrador.