Looking back on fiscal 2020

Letter from outgoing CEO Patrick O’Driscoll

It is with bittersweet emotions that I write my last letter to shareholders. After a 28-year career with Pernod Ricard, including 11 years with Corby, I decided to retire at the end of the 2020 fiscal year to enjoy a new chapter of my life with family and friends here in Canada.

There are so many moments to savour and challenges to remember. Yet I can safely say I’ve never encountered anything like the COVID-19 crisis that upended our lives in 2020. If we at Corby needed a test of our agility and resilience as a company, or our commitment to our values and purpose, this was it. The global economy collapsed, our on-premise customers were forced to shut down, consumer engagement events were cancelled, our offices were closed, and our friends, families and communities suffered hardship and loss.

I’m pleased that our organization passed the test, rising to the unparalleled challenges and continuing to create win-win memorable experiences for our customers, consumers, shareholders, employees and communities. Never would I have thought that the Hiram Walker & Sons distillery would be producing hand sanitizer for health care and other frontline workers or that we’d be partnering with one of our competitors to support hard-hit hospitality workers. At the same time, we can’t help but feel that there are no real winners in all of this — only survivors — and we’re proud to have behaved as a responsible company should.

Strong financial performance

The COVID-19 situation created a unique set of circumstances in 2020. The introduction of lockdown measures in March led to major disruption throughout the hospitality industry with the closure of restaurants and bars and the cancellation of social and sporting events. With retail stores remaining open, there was some “pantry loading” at the beginning of the crisis and overall consumption levels rose slightly.

While our overall volumes were strong, we did see a de-premiumization in the market, as luxury and super-premium brands were challenged but standard and premium categories performed well. Brands with a particularly strong on-premise footprint, such as Jameson Irish whiskey and Polar Ice vodka, found it harder to maintain momentum in a purely retail environment.

The net effect was revenue growth of 2% compared to fiscal 2019, attributable largely to the domestic performance of our wholly-owned brands and increased commission income. Net earnings rose 4% to $26.7 million driven by strong top-line growth and strict prioritization of investment and structure costs during the uncertain times.

I’m pleased that our organization passed the test, rising to the unparalleled challenges and continuing to create win-win memorable experiences for our customers, consumers, shareholders, employees and communities.

Creating value for investors

Corby maintains a generous dividend policy, currently providing for dividends to be paid quarterly at the greater of 90% of net earnings in the preceding fiscal year and $0.60 per share, subject to business conditions and opportunities, and appropriate adjustment for extraordinary events. While the COVID-19 crisis and economic contraction generated unparalleled volatility, the demonstrated resilience of our business model enabled our Board to maintain a dividend payment in line with the policy and to provide a dividend yield of over 5% (based on the share price on June 30, 2020).

Maintaining a strong dividend and the underlying value growth are predicated on the success of Corby’s strategy. Through our portfolio of wholly-owned and represented brands, our priority is to build passion brands to beat the market. To do this, we innovate on brands through packaging redesign and product launches, working closely with customers to adapt our offerings in line with consumer demand. We are focused on driving value, rather than volume, with particular emphasis on revenue growth management and on adapting our teams’ work routines to use data to improve promotional planning and execution. Finally, we continue the slow build of our export business as an important source of future value. You can find out more on the Strategy page of this report.

Many of the accomplishments that I’m most proud of from my tenure as President and CEO of Corby are tied to our strategy and to our underlying commitment to sustainability and responsibility. They include the revitalization of the J.P. Wiser’s Canadian whisky brand; our purchase and scaling-up of Ungava gin and Cabot Trail cream liqueur brands; our development as a credible wine player, which included acquiring the Foreign Affair winery; our strong relationship with Pernod Ricard; and our embrace of Responsib’All Days and #CorbySafeRides on New Year’s Eve, which have become regular community events.

In implementing our strategy, we have always been extremely diligent in gathering and using consumer insights to adapt and adjust as appropriate for the moment, and to build for the long term. Corby’s flexibility and agility will become all the more important over the coming months as the company — and society at large — enter uncharted territory recovering from the pandemic. I have full confidence in the ability of the Corby team to excel in this environment.

Fond farewell

As I bid farewell, I’m delighted to pass the baton to Nicolas Krantz, who was Chief Executive Officer of Pernod Ricard Winemakers, Spain, until his appointment as Corby President and CEO as of July 1, 2020. I’ve known Nicolas for almost 20 years and am certain that his vision, energy and significant leadership and industry experience are just what the company needs to continue its momentum and grow shareholder value. I look forward to watching the progress.

I would also like to thank the many people with whom I’ve had the pleasure to work over these past 11 years, including those on Corby’s Board, executive management team and all of our staff. I consider it one of the great privileges of my life. I leave with fond memories of convivial times with you all.

Sincerely,

Patrick O’Driscoll signature

Patrick O’Driscoll

Looking ahead

Letter from incoming CEO Nicolas Krantz

As I take the helm at Corby, it’s with a deep sense of gratitude to Patrick O’Driscoll and the executive management team for the solid foundation they’ve built.

The Corby brand portfolio has everything, from emerging local brands like Ungava gin and Cabot Trail, to longstanding Canadian favourites like J.P. Wiser’s, to big international brands like Absolut, Jameson and The Glenlivet. The Corby team, including executive management and throughout the ranks, has a diverse mix of skills and experience, and an incredible passion for the industry. Through the course of the COVID-19 pandemic in particular, they demonstrated their values-based leadership, adaptability and strong commitment to our customers and communities.

I’m excited to be joining this group and working with them to reach new heights. While we must balance the short and long term, I believe there are opportunities to be had for companies such as ours as the world emerges from the health crisis. Although we cut costs in some areas during the pandemic, we also continued to invest in our strategic brands. It’s at times like these that smart companies can make progress and take share. So, while we may double down on short-term opportunities, it’s always with a view to building long-term value.

While we must balance the short and long term, I believe there are opportunities to be had for companies such as ours as the world emerges from the health crisis.

Our top three priorities for fiscal 2021 are as follows:

Brand portfolio — We want to develop ambitious, well-constructed brand plans and execute them with excellence, adapting the plans every quarter as needed to try to win share on brands that matter.

Transformation — We want to accelerate Corby’s transformation into an ever more consumer-centric company, leveraging Pernod Ricard’s transform-and-accelerate strategy. This means taking concrete steps to work more efficiently and capitalize on digital innovations across marketing and distribution channels to get closer to consumers and the experiences they seek.

People — Recognizing that everything starts with our employees, we plan to invest in them and ensure that everyone is engaged and working in the same direction. As I see it, when you invest in your people, you also help improve their ability to do a good job on your brands, and profits will follow.

I look forward to reporting back to you, our shareholders, a year from now. As we create deeper connections with consumers, customers, communities and our fellow employees, I’m convinced that Corby will be an even better company and deliver ever stronger returns.

Sincerely,

Nicolas Krantz signature

Nicolas Krantz