NLC today released its financial and operational results for the first quarter of fiscal year 2023, ended July 2, 2022. All information is unaudited.
NLC reported net earnings for the quarter of $47.4 million, a decrease of $4.2 million, or 8.2%, compared with Q1 of fiscal year 2022. The dividend paid by NLC to the Government of Newfoundland and Labrador totaled $53.0 million for the quarter, $8.8 million lower than Q1 of the prior year. The prior year included a one-time dividend payment of $9.3 million related to the previous year’s net earnings.
“As we’ve been emerging from the pandemic, we anticipated sales and alcohol consumption to normalize,” said Bruce Keating, NLC President and CEO. “However it was uncertain the magnitude of the adjustment and the pace at which it would occur. We have also seen an impact on consumer disposable income and softer market conditions, and anticipate continued volatility as the fiscal year unfolds. That said, we are currently seeing a strengthening in the second quarter, which is encouraging.”
Beverage Alcohol sales for Q1 were $72.1 million, down 0.9%, mainly due to lower spirits and ready-to-drink (RTD) sales. Compared with Q1 of 2022, spirits sales were down 2.9% and RTD decreased 7.4%. Sales in the wine category increased by 4.0% and beer sold through NLC corporate stores increased 4.4%.
Sales through NLC’s corporate stores were down 0.8% compared to Q1 of the prior year, while Liquor Express outlets across the Province experienced a decrease of 5.9% compared with Q1 of the prior year. Sales through licensees rebounded strongly as pandemic restrictions eased, increasing to $4.1 million for the quarter, an increase of 45.0% compared to Q1 of 2022.
In addition to direct sales, NLC earns commissions on the sale of beer through Brewers’ Agents. These commissions for the quarter totaled $15.4 million – down 18.3% over the first quarter of fiscal year 2022. This decrease related to lower beer sales, a shift in consumer buying habits as consumers purchased more beer at NLC corporate stores and an adjustment in the current year related to the previous year’s beer commissions as a result of an audit of beer commissions.
During the quarter, NLC renovated three Liquor Store locations, including Howley Estates (St. John’s), Humber Gardens (Corner Brook) and Happy Valley – Goose Bay. Upgrades included new flooring, lighting, expansion of cold space, and enhanced store layout and design.
Cannabis sales through Licensed Cannabis Retailers (LCRs) totaled $15.3 million in Q1, an increase of 0.7% over Q1 of the prior year. Total retail cannabis sales in Q1, including online sales, were $15.4 million.
While whole flower sales decreased compared with the prior year, growth in the category was driven by pre-rolls, concentrates, edibles and ground/milled product. The first cannabis category call was completed in April, which delivered 94 new products from 18 additional suppliers. While most of these new products arrived in June, several will arrive in the second quarter.
Cannabis NL was also pleased to welcome a new LCR in the first quarter – Argentia Gold in Placentia. There are currently 40 Licensed Cannabis Retailers in Newfoundland and Labrador compared to 30 one year earlier.
Rock Spirits produced 81,000 cases of spirits and 10,300 cases of RTD during Q1, a decrease of 8.0% in spirits and an increase of 140.0% in RTD over the same period the previous year. While the decrease in spirits was driven by the timing of production, the increase in RTD was due to continued growth in canning initiatives, including East Coast Lifestyle Ocean Berry Vodka RTD as well as NLC-owned Screech Sangria and Screech & Cola (Come Home Year 2022 edition). During the quarter, NLC reached an agreement and began production of Ignite Vodka, Mike’s Hardest Blue Freeze Vodka and East Coast Lifestyle Ocean Berry Vodka RTD.
Regulatory Compliance and Enforcement
NLC conducted 865 inspections on liquor establishments and cannabis retailers in Q1, as it continues to work closely with the licensee community. This represents a 44.0% decrease compared with the number of inspections conducted during the same period in fiscal year 2022. This decrease is due to an increase in presence required at special events in fiscal year 2023 compared with the prior year, as well as challenges with respect to human resources capacity in the quarter. NLC’s Regulatory Enforcement team also seized over 60 kilograms of illicit cannabis product during this period. NLC is committed to providing systematic and thorough regulatory oversight for beverage alcohol and cannabis that helps ensure public safety and provides a safe and secure supply of cannabis to the Province.
NLC is continuing the development of its new Corporate Responsibility strategy, encompassing social responsibility, community, sustainability, compelling workplace and corporate governance. With the allocation of the appropriate resources in place in the first quarter, NLC will complete its strategy in this fiscal year, which will guide these efforts through its next three-year business plan. NLC will work closely with government and other stakeholders to reduce the negative consequences of alcohol consumption and to promote a culture of moderation, as outlined in the Provincial Alcohol Action Plan.
NLC continued to transform its governance processes and practices by establishing a Regulatory Committee as a new, permanent committee of the Board of Directors. The Regulatory Committee was established as part of NLC’s broader program of governance reform to recognize the critical role of the Board in providing oversight and direction to NLC’s legislated regulatory mandate for beverage alcohol and cannabis. The Regulatory Committee is mandated to provide direction and advice to guide Regulatory Services’ strategy and objectives; and ensure that Regulatory Services operates with an appropriate level of independence from NLC’s commercial activities, and prevents any real or perceived conflicts of interest. It also oversees a process to periodically review, and where appropriate, make recommendations to Government with respect to changes to legislation and regulations.
To further its commitment to Diversity, Inclusion and Belonging, NLC participated in Celebrate Diversity Month in April, which included training delivered by the Association for New Canadians. Managers, Directors and Executive received training on cultural intelligence to support anti-racist workplaces. We also participated in Pride Month, including the raising of the Progress Pride flag at head office and various demonstrations of our support in-store, online and across NLC’s social media channels.
In addition, NLC celebrated Public Service Week in June, holding various activities to recognize our staff for their tremendous contributions in all areas of our business this past year. To further protect the well-being of staff and customers, NLC has purchased Automated External Defibrillators for designated locations, and staff currently certified in First Aid are trained on how to use them in an emergency.
As President and CEO Bruce Keating said, “Our entire NLC team continues to focus on delivering on our financial objectives in more volatile times. As importantly, we have continued to take important steps with respect to our regulatory mandate; corporate governance; corporate responsibility; diversity, inclusion and belonging; and as an employer to more than 600 NLC team members. Each member of the NLC team will continue to work to earn trust in everything we do and strive to make NLC the kind of organization we believe it can be.”
Newfoundland and Labrador Liquor Corporation (NLC) Quarterly and Year-to-Date (YTD) Results
*Note – Total Retail Cannabis Sales includes all sales of cannabis in Newfoundland and Labrador. In October 2021, NLC began warehousing and selling cannabis to LCRs. Prior to October 2021, licensed cannabis producers sold cannabis directly to LCRs and remitted a commission to NLC that was included in other income.
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 management of beverage alcohol and cannabis, and for the delivery of programs that promote safe, responsible consumption of alcohol and cannabis.
NLC is one of the largest retailers in the Province. Through 29 corporate retail locations, catalogues, private order services, more than 140 agency stores, over 600 Brewers’ Agents outlets, and more than 1,400 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. It also regulates and distributes to 40 Licensed Cannabis Retailers across the Province, and offers customers a secure, legal online environment for cannabis purchases via ShopCannabisNL.com. NLC 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.