1. PLCB Category Management Review
October, 2007
James Short
Director of Marketing
Pennsylvania Liquor Control Board
NABCA Best Practices Summit

2. Agenda Evolution of PLCB Category Management Listing Calendar
De List / Store Freeze Methodology
Clustering Solution
Future Goals

3. Timeline PLCB Fields Category Management Proposals (02/07)
PLCB Partners with Future Brands / Gallo (03/07)
Analysis of Current Solutions / Systems (04/07)
Two year Project Goals Established (04/07)
Vendor Partners Re-Locate to PA Market (08/07)

4. SIX MONTH REPEATING CALENDAR
LISTING CALENDAR
SIX MONTH REPEATING CALENDAR
Two Listing Periods
- Similar to National Accounts
- Conducive to Supplier Planning
Reduction From Seven Listing Periods
Shelf Sets Produced Concurrently

5. De List / Freeze Methodology

6. De-List Filter Methodology
Assortment Criteria
Purpose
Retain
If Segment Share for
$ Sales > or = 5%
Retain top 95%
of Segment
Yes No
Retain
If Periods Active < or = 14
Retain New Items
Yes No
If Segment Growth > or = 5%
and Item Growth > or =
75% Segment Growth
Retain Growing Items
in Growing Segments
Retain
Yes No
Retain
If Item Growth > or = 20%
Retain Large Growth
Items
Yes No
Retain
If Profit / Store > or = $250
Retain Profitable Items
Regardless of Growth
Yes No
Freeze Analysis
Examine Code for Possible Freeze
Next Page

7. Spirits Freeze Methodology $ Profit Needed to be Retained as Optional
Codes analyzed at store level to determine $ Profit Delivered
Code is retained if it meets a $ Profit threshold
$ Profit Threshold for an Account is Determined by the TTL $ Sales of the Store
1. Large Stores – Avg. Retail $16.15 Avg. Profit $ Bottles per wk = $7.26 x 52 wks =$375
2. Med. Stores – Avg. Retail $14.98 Avg. Profit $ Bottle per week $4.49 x 52 wks = $230
3. Small Stores – Avg. Retail $14.67 Avg. Profit $4.40 ½ Bottle per week $2.20 x 52 wks =$115
$ Profit Needed to be Retained as Optional
< $1 Million
$1 Million –
$3 Million
> $3 Million
$115
$230
$375
TTL Store Sales
TTL Store Sales
TTL Store Sales
Next Page

8. Freeze Methodology Final Assortment Decision to Delete Retain
Code Meets Established Minimum $ Profit / Store
Retain Profitable Codes in Correct Stores
Yes No
Freeze Code at Store Level
Retain
Listing
TTL $ Profit Where Codes are Retained > $15,000
Retain Profitable Codes for PLCB as Whole
Yes No
Final Assortment Decision to Delete

9. Clustering

10. Former Clusters Cluster 1 – Wine Enthusiasts
- 62 stores
- Warehouses 1 & 2 only
Cluster 2 – Premium Wine Development
- 72 stores
- All Warehouses
Cluster 3 – Popular Wine Development
- 105 stores
- All Warehouses
Cluster 4 – Mainstream Spirits & Low Tier Wine
- 38 stores
- Warehouse 1 only
Cluster 5 – Metro Ethnic
- 36 stores
- Warehouse 1 only

11. Former Clusters Cluster 6 – Brown Goods & Low Tier Wine
- 117 stores
- Warehouses 2 & 3 only
Cluster 7 – Brown Goods Development
- 151 stores
- Warehouses 2 & 3 only
Cluster 8 – Urban Ethnic
- 36 stores
- Warehouses 2 & 3 only

12. Why We Changed? Less is more Increased Efficiency
Greater store similarity (Demographics)
Less variance in category performance
Increased Efficiency
Core Assortment
Marketing Plans
Clusters no longer defined by warehouse
HH Income / Cost of Living by Region

13. Objectives Core List Marketing Plans
i.e. Distribute and Promote the Correct Codes in the Correct Stores

14. Clustering Process Demographic Data Pull Demographic Analysis Step 1
- Original Cluster Designation
Step 1

15. About the Demographic Data…
Store Specific Demographic Data
Adult Population
Referenced Against Total Pennsylvania
Indices Generated For
Income
Education
Lifestyle
Ethnicity
Primary Indicators of Consumption Patterns
Secondary Indicators of Consumption Patterns

16. Process Sales Data Pull Sales Data Analysis Step 2 - By Store / Code
- Secondary Cluster Designation
Step 2

17. Analysis DEVELOPMENT INDICES GENERATED FOR Hierarchy of Analysis
Price Segmentation
Display Category
Hierarchy of Analysis
1. Price Segmentation
2. Category Development
3. Demographic Data

18. Process PLCB Regional Manager / Broker Validation Final Recommendation
Step 3

19. 5 Clusters Identified
Cluster 1 – Upscale Metro / Suburban (105 Stores / 26.5% TTL $ Sales)
- Avg. Household Income - $91K
- Education Level - 41% College Graduation Rate
- Ethnicity – No Statistical Significance
- Key Price Segmentation – Super Premium
- Display Category Drivers – Specialty, US Cab, US Chard, Scotch, Tequila
Cluster 2 – Mid-Scale Suburban (122 Stores / 25.7% TTL $ Sales)
- Avg. Household Income - $70K
- Education Level - 29% College Graduation Rate
- Ethnicity – No Statistical Significance
- Key Price Segmentation – No Discernable Driver
- Display Category Drivers – No Discernable Driver
Cluster 3 – Rural / Blue Collar (226 Stores / 31.0% TTL $ Sales)
- Avg. Household Income - $55K
- Education Level - 21% College Graduation Rate
- Ethnicity – 93% Caucasian
- Key Price Segmentation – Value / Standard
- Display Category Drivers – Economy, Box, Beverage, Blended, Canadian

20. Cluster Overview
Cluster 4 – Rural / Low Volume (102 Stores / 5.4% TTL $ Sales)
- Avg. Household Income - $49K
- Education Level – 15% College Graduation Rate
- Ethnicity – 97% Caucasian
- Key Price Segmentation – Value
- Display Category Drivers – Blended, Bourbon, Canadian, Beverage, Economy, Box
Cluster 5 – Metro / Ethnic ( 66 Stores / 11.5% TTL $ Sales)
- Avg. Household Income - $47K
- Education Level - 20% College Graduation Rate
- Ethnicity – 38% African-American
- Key Price Segmentation – Value
- Display Category Drivers – Brandy/Cognac, Gin, Beverage, Economy, Flavored Wine

21. Future Goals
Modify Core Assortment Methodology

22. Future Goals Develop Category Adjacency Methodology
- Vendor Partner Consumer Research Driven

23. Future Goals Generate Category Specific Shelf Set Template
Bring in 3rd Party Validators

24. Future Goals Implement Store Specific Shelf Sets Bi-Annually
Generate Using Store Level Sales
Will Allow for “right-sizing” of Categories

25. Become Category Management Self-Sufficient!!
Ultimate Goal
Become Category Management Self-Sufficient!!

26. THANK YOU