NLC today released its financial and operational results for the second quarter of fiscal year 2023, ended October 1, 2022. All information is unaudited.
NLC reported net earnings for the quarter of $58.3 million, an increase of $1.1 million, or 1.9%, compared with Q2 of fiscal year 2022. The dividend paid by NLC to the Government of Newfoundland and Labrador totaled $60.5 million for the quarter, $5.5 million higher than Q2 of the prior year.
“We anticipated that sales and alcohol consumption would normalize as we emerged from the pandemic,” said Bruce Keating, NLC President and CEO. “However it was uncertain how much of an adjustment would occur and when the adjustment would happen. This has been complicated by the impact of higher inflation rates, interest rates and cost of living on consumer disposable income. This has led to softer market conditions, and continued volatility as the fiscal year unfolds. That being said, we have seen a strengthening in the second quarter, which is encouraging, and we are cautiously optimistic about the remainder of the fiscal year.”
Beverage Alcohol sales for Q2 were $82.4 million, up 3.3%, mainly due to higher beer and ready-to-drink (RTD) sales. Compared with Q2 of 2022, beer sales increased 10.7%, RTD sales increased 9.4% and wine sales increased 1.7%. Spirits sales were down 0.2% compared to Q2 of 2022.
Sales through NLC’s corporate stores were up 2.3% compared to Q2 of the prior year, while Liquor Express outlets across the Province experienced an increase of 2.7% compared with Q2 of the prior year. Sales through licensees rebounded strongly as pandemic restrictions eased, increasing to $5.3 million for the quarter, an increase of 25.0% compared to Q2 of 2022.
In addition to direct sales, NLC earns commissions on the sale of beer through Brewers’ Agents. These commissions for the quarter totaled $20.8 million, up 2.8% over the second quarter of fiscal year 2022.
During the quarter, NLC renovated two Liquor Store locations, including Merrymeeting Road (St. John’s) and Gander. This is in addition to three Liquor Store locations renovated in the first quarter (Howley Estates (St. John’s), Humber Gardens (Corner Brook) and Happy Valley – Goose Bay), and brings to 10 the total number of locations renovated in the past two years. Upgrades included new flooring, lighting, expansion of cooler space, and enhanced store layout and design.
Cannabis sales through licensed cannabis retailers (LCRs) totaled $17.7 million in Q2, an increase of 10.2% over Q2 of the prior year. Total retail cannabis sales in Q2, including online sales, were $17.8 million.
The decision was taken in September to approve vapourizers (commonly referred to as “vapes”) and associated products as a result of a three-year review of the cannabis industry in the Province, recently completed by the Government of Newfoundland and Labrador, in partnership with NLC. This is now an established segment of the legal cannabis market throughout most of the country, with the category, nation-wide, representing approximately 20% of legal sales. Given the significant portion of the illicit market that vape represents this is a positive step in continuing to capture market share from illegal cannabis operators.
Effective October 1st, 2022 the NLC increased commission rates paid to Tier 1 and Tier 2 LCRs from 15% to 20%. This new commission rate will help them to mitigate the specific challenges of this store format compared with other tiers, and improve the viability of these specialized stores in our local cannabis industry.
Cannabis NL is seeking to expand the retail store network to provide a safe, secure and convenient access to legal cannabis throughout the province. Cannabis NL issued a request for proposals for the following communities; Clarenville, St. Anthony, Pasadena, Rocky Harbour, Springdale and Twillingate. Cannabis NL will also be reviewing other opportunities throughout the province in Q4 of this fiscal year.
Rock Spirits produced 82,400 cases of spirits and 10,400 cases of beer and RTD during Q2, a decrease of 1% in spirits and an increase of 278% in beer and RTD over the same period the previous year. While the decrease in spirits was driven by the timing of production, the increase in beer and RTD was due to continued growth in canning initiatives, including a new flavour of Lambs’ Sociables - Spiced Rum Punch. NLC also reached an agreement with Yellowbelly Brewery and canned the first beer at its Rock Spirits production facility.
NLC conducted 1,049 inspections on liquor establishments and cannabis retailers in Q2, as it continues to work closely with the licensee community. This represents a 10.0% 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. NLC’s Regulatory Enforcement team also seized over 313 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 to build on its Corporate Responsibility strategy, encompassing social responsibility, community, sustainability, compelling work place and corporate governance.
In response to the devastating effects of Hurricane Fiona on the West Coast of the province, NLC donated $5,000 to Canadian Red Cross, which was matched by Government of Canada, and donated $1,000 to the Port aux Basques Lions Club to assist with immediate needs of food, water and other essential items. The NLC also supported the efforts of Freightway International Limited, a division of Blue Water Shipping, by supplying boxes requested to help package donations heading to Port aux Basques.
NLC once again partnered with MADD Canada’s School Program that reaches thousands of youth each year to provide effective anti-impairment messages. Through NLC’s contribution, MADD Canada will conduct 15 presentations to schools throughout Newfoundland and Labrador. The NLC will also once again take part in MADD Canada’s Red Ribbon Campaign in its corporate Liquor Stores to bring awareness to the harmful effects of impaired driving.
To further its commitment to Diversity, Inclusion and Belonging, NLC recognized the National Day for Truth and Reconciliation, by closing stores, head office and the distribution centre to acknowledge and remember residential school survivors and victims. NLC was also pleased to provide Quadrangle NL with a donation to support their mission to establish a community centre for 2SLGBTQIA+ individuals and organizations in the Province.
As President and CEO Bruce Keating said, “I am so proud of the great work done by all of NLC’s team members across the Province. We have continued to focus on our customers and delivering on our financial goals. As importantly, we have made important progress in earning the public’s trust in everything we do, and that work will continue with respect to our regulatory mandate; corporate governance; social responsibility; diversity, inclusion and belonging; and as an employer to more than 600 NLC team members.”
Newfoundland and Labrador Liquor Corporation (NLC) Quarterly and Year-to-Date (YTD) Results
NLC is a Crown Corporation of the Government of Newfoundland and Labrador with responsibility through the Liquor Corporation Act, the Liquor Control Act and the Cannabis 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 over 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.