As the first quarter of this calendar year comes to an end, the LCBO would like to share an update on the global supply chain issues facing the international beverage alcohol industry, and any impacts to our supply chain and service levels and fill rates.
Following the busy holiday period, there was a slight recovery in global fill rates, but the market consensus is that the global supply chain issues experienced throughout 2020 and 2021 are expected to continue in 2022, although the drivers vary by geography.
At this time, the most significant issues continue to be:
1. Transportation Issues: many countries are experiencing late shipments of products resulting from port congestion, equipment shortages and increased lead times. The Russian invasion of Ukraine is limiting the movement of goods in the region, adding further stress to networks. In support of government directives, several jurisdictions (including Ontario) have also halted the importation of beverage alcohol products produced in Russia.
Transportation issues account for 40% of LCBO’s stock shortages.
2. Production Issues: several vendors’ production schedules continue to be affected by the ongoing impacts of COVID-19, including the availability of raw/packaging materials (glass and aluminium). Meanwhile, increased consumer demand continues to challenge production capacities; this is particularly prevalent in categories which require aging such as scotches, champagne, cognac and tequila.
Production issues account for approximately 49% of LCBO’s stock shortages.
As global supply chain challenges increase production costs, many businesses are passing these costs on to the consumer. This is a trend across consumer goods and contributes to Canada’s current inflation rate. Beverage alcohol producers, who set their own prices, are subject to the same influences and upward pressure on prices.
I can assure you that we continue to have an extensive selection of both local and international products available at the LCBO, and we will continue to monitor the global landscape and take proactive steps to maintain the proper flow of imported goods.
We will continue to work with our supply chain partners and suppliers to adjust our plans according to changes in market conditions. Thank you for your ongoing partnership and support as we work together to ensure that Ontarians find the perfect product to celebrate their special occasions.
Thank you and stay safe,
- Nick Nanos
- Chief Supply Chain Officer, LCBO