Leadership

Letter To Shareholders

Dear Shareholders,

Fiscal 2016 was an interesting year for Corby: overall financial performance was solid, our craft whiskies earned critical acclaim and started to make a meaningful impact on results, and there were many examples of executional excellence across the Company, ranging from product innovations to new partnerships with customers and suppliers.

At the same time, the year presented some challenges. Sales of several Corby-owned brands were lower in the early half of the year, particularly those competing in the economy segments of rum, vodka and Canadian whisky, where segment trends were negative and competitors overspent on promotions and price reductions to fight for market share. In addition, the J.P. Wiser’s whisky propositions in the US export market struggled to achieve the necessary retail velocity to maintain distribution within the investment levels that Corby was willing to support. In both cases, course corrections were required and we made them.

I am extremely proud of the way in which our organization met these challenges, coming up with innovative, cost-effective ways to revitalize key brands and support export success. These efforts were already felt in the second half of fiscal 2016 and they have positioned us well for the coming year.

2016 Highlights

Revenue for the year rose 6% over fiscal 2015 and net earnings were up 25%. The primary driver of net earnings growth was the higher commission rate negotiated in August 2015 on sales of Pernod Ricard brands. The change contributed to increased commission revenues of $5.9 million, or 30%. With the Pernod Ricard brand portfolio more heavily weighted in high-growth spirit and wine categories, we not only earned more on each case sold, we also sold more cases. Shipments of Absolut vodka, Jameson Irish whiskey and Jacob’s Creek wines rose by 4%, 19% and 23%, respectively, over the previous year.

It was a fantastic year for our craft whisky portfolio. Lot No. 40 won Best Canadian Rye Whisky at the World Whiskies Awards, Canadian Whisky of the Year at the 2016 Canadian Whisky Awards, and Best Canadian Rye Whisky, Double Gold Medal at the San Francisco World Spirits Competition, and earned a 97 Points rating by Wine Enthusiast. Meanwhile, Gooderham & Worts, a newly launched four-grain whisky, took home one of the World Whiskies Awards’ biggest honours as the World’s Best Canadian Blended Whisky. The accolades helped drive up our craft whisky sales.

Innovation is an important pillar for seizing new profit and growth opportunities. A dedicated research, development and innovation team working at the Hiram Walker & Sons (HWSL) Innovation Centre in Windsor, Ontario, focuses on innovations in the blends, flavours and packaging of Corby-owned brands. In addition to Gooderham & Worts craft whisky, we launched two innovative variants of the J.P. Wiser’s family: J.P. Wiser’s Double Still Rye, a unique blend of two ryes, and J.P. Wiser’s Hopped, which was crowned Best Innovation at the 2015 Canadian Whisky Awards and Best Canadian Flavoured Whisky for 2016 by the World Whiskies Awards. The launch of J.P. Wiser’s Last Barrels was a wonderful story of collaboration between Corby teams and the Liquor Control Board of Ontario (LCBO). In addition, McGuinness mixable liqueur innovations such as Simple Syrup, which was among the first of its kind in the market, capitalized on the trend of home bartending.

Refined Export Strategy

Pursuing new growth opportunities outside Canada remains a strategic priority given the relative maturity of the Canadian spirits market. Three years after our re-launch in the US market, we have a deeper understanding of what works best for our business and have adjusted our strategy accordingly, reducing advertising and promotional (A&P) spend on J.P. Wiser’s brands and refocusing efforts on our craft whisky portfolio (namely, Lot No. 40 and Pike Creek), which has performed well in the US and distinguished itself around the world.

We now have a dedicated team that works in select US markets to build relationships and promote awareness and trial of the craft brands within the local bartending community. This incubation approach to entering new markets limits upfront investment until a proof of concept is successful. It’s a slower process, but we believe that it will set up the business for long-term success. We’re employing the same strategy in Australia, where we launched Lot No. 40 and Pike Creek in fiscal 2016, and intend to do the same in France and Germany in fiscal 2017.

Acquiring Tomorrow’s Brands

I am delighted that Corby has announced the agreement to acquire the premium spirit brand assets of Domaines Pinnacle, a Québec-based micro-distiller and entrepreneurial Canadian brand developer. Among the brands that will be acquired is Ungava Canadian gin, the number-two-selling deluxe gin by volume, which has also established a small but growing international business. Ungava gin, with its unique yellow colour, derived from Canadian botanicals gathered in northern Québec, has been receiving strong accolades from the bartending community, both in Canada and abroad.

Several other premium developing brands that complement the existing Corby portfolio will also be acquired, including Chic Choc Spiced rum and Coureur des Bois and Cabot Trail Maple whiskies and liqueurs. We are delighted that Charles Crawford, the entrepreneur behind these brands, will continue to develop the acquired brands for Corby and operate the micro-distillery and subsidiary in Cowansville, Québec, as an additional source of innovation.

Securing Our Future

Two other significant developments aimed at securing our future included extending key production and administrative services agreements with Pernod Ricard for another 10 years, and establishing new partnerships for the production and distribution of Lamb’s rum in the UK.

We have historically used a UK-based distributor and bottler for markets outside North America. In an effort to revitalize the brand in the UK, we decided to take a new approach, signing a five-year agreement with Pernod Ricard UK Ltd. to represent Lamb’s rum there. Our Pernod Ricard partners will leverage their extensive national distribution network to drive sales. We are also finalizing an agreement with a new manufacturer for production for international markets.

As a member of Spirits Canada, Corby has a voice within the domestic spirits industry to push for reviews of the barriers to growth in the Canadian spirits market. With unprecedented regulatory changes underway, we want to ensure a fair business environment to help us succeed in Canada and pursue growth in export markets.

Continually Improving and Evolving

As a company that is always looking to improve and evolve within our markets, we undertook an exercise this past year to identify who we are as a company and why stakeholders would choose Corby over any other company. Following a series of interviews and workshops, we articulated our core proposition: creating win–win memorable experiences. This sums up both how Corby has distinguished itself in the past and what we want to continue doing in the future. Over the coming months and years, we will be working to align everything we do with our purpose, beliefs and core behaviours.

In this annual report, we’ve included examples of Corby people living out our purpose, by creating memorable experiences with our brands, through our work and in our communities. We’ve also adopted an online reporting format, which is representative of the shift to digital that has occurred across our company and our industry, and allows us to discuss our year in a more engaging manner. I hope you enjoy it.

Heartfelt Thanks

In conclusion, I’d like to thank our Board of Directors for their guidance and support as we seek to drive growth and create value. Thank you as well to our employees for their passion, initiative and energy. Again this year, they went the extra mile to support our business. They also continued to be strong community supporters, enthusiastically pitching in to enhance their neighbourhoods through events like the sixth annual Responsib’All Day. Cheers to an exceptional team!

Sincerely,

Patrick O'Driscoll's signature

R. PATRICK O’DRISCOLL
President & Chief Executive Officer

*This annual report contains forward-looking statements, including statements concerning possible or assumed future results of Corby’s operations. Forward-looking statements typically are preceded by, followed by or include the words “believes”, “expects”, “anticipates”, “estimates”, “intends”, “plans” or similar expressions. Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions and, as such, actual results or expectations could differ materially from those anticipated in these forward-looking statements. Accordingly, readers should not place undue reliance on forward-looking statements. All financial results are reported in Canadian dollars.

Management Icon
Management Team

R. Patrick O’DriscollPresident & Chief Executive Officer
Stéphane CôtéVice-President, Sales
Paul G. HolubVice-President, Human Resources
Maxime KouchnirVice-President, Marketing
Antonio Sánchez VillarrealVice-President & Chief Financial Officer
Jim StanskiVice-President, Production
Marc A. ValenciaGeneral Counsel, Corporate Secretary & Vice-President, Public Affairs

Board of Directors

George F. McCarthy

George F. McCarthy

Chair, Board of Directors

Claude Boulay

Claude Boulay

Member, Board of Directors

Paul C. Duffy

PAUL C. DUFFY(1)

Member, Board of Directors

Robert L. Llewellyn

Robert L. Llewellyn

Chair, Audit Committee
Chair, Independent Committee

Donald V. Lussier

Donald V. Lussier

Chair, Management Resources Committee

Patricia L. Nielsen

Patricia L. Nielsen

Chair, Corporate Governance & Nominating Committee

Patrick O'Driscoll

R. Patrick O’Driscoll

President & Chief Executive Officer

Thierry R. Pourchet

Thierry R. Pourchet

Member, Board of Directors

Antonio Sánchez

Antonio Sánchez Villarreal

Vice-President & Chief Financial Officer

Philippe Dréano

(1) Effective July 1, 2016, Philippe Dréano retired from his position as a director of Corby and Paul C. Duffy was appointed as his successor, acting as one of Pernod Ricard's nominees.