1. Shelf Schematics Process and Principles Debi J. Besser, C.P.M Director of Purchasing

2. Previously managed through partnership with major suppliers Suppliers with leading brands in each category Category specialists: Segment captains and primary validators Strategy still based on industry best practice History

3. Why do it ourselves? Faster revision cycle Real-time product additions and deletions Maintain the partnership with DRAW (Distillers’ Representatives Association of Washington)  Major reviews every six months On-line availability

4. Why do we care? Customers were confused  Over 900 Spirit SKUs in an average Washington Store  Don’t understand the differences between products Additional opportunities by making the spirit shelves easier to shop  Improved customer service  Increased profitability

5. Principles Grouped stores in “clusters” How much: Days of product supply Where: Positioning priorities

6. The Marketing Continuum Every Store Examined Independently All Stores are Created Exactly Equal Stores Clustered into Distinct Groups No Upside Opportunity Doesn’t Meet Shoppers Needs Creates a Manageable Framework More efficient than store by store Meets shoppers needs better than all stores created equal Operational Nightmare Too Complex & Expensive Why Use Store Clustering?

7. Determining Clusters Spectra CAM clustering Three distinct store groups were developed:  Cluster One………………..Rural  Cluster Two………….……Urban  Cluster Three…………….Suburban

8. WSLCB Clusters Rural Urban Suburban

9. Clusters The variations in demographics drive the distinctions between clusters: Cluster 1 skews towards lower income and education levels, with a occupation skew towards service and blue collar jobs. Within this cluster, there is a larger than average Hispanic population. Cluster 2 stores are mainly urban stores. This cluster has a propensity for higher income levels, skews towards households without kids. Cluster 3 skews towards high income, highly educated, white collar households with children. These stores are mainly located in suburban areas.

10. Clean SAM2 data  52 week average movement  Off Premise volume only  Specific to stores in cluster  Remove special packs and special orders Enough facings to allow for minimum 14 days of product on shelf How much?

11. Where? Positioning Principles  Category  Price Segment  Shelf level  More expensive to left  Sign Post Brands  Brand Family Blocking  Line Extensions  Sizes (small to large)

12. Category Flow encouraging impulse purchases Front Suburban Cluster Enter here

13. Positioning by Price Segment

14. Use nationally known brands to identify a category to the consumer Sign Post Brands

15. Group products together by brand family Brand Family Blocking

16. More Positioning … Line Extensions (8 yr., 16 yr, etc) Product Size (small to large) Price (low to high) $18.95 $22.95 $31.95 $59.95 Bourbon (top shelf)

17. Summary Cluster stores by demographics and purchasing patterns 14 days of supply of product Positioning  Category  Price  Shelf level  More expensive to left  Sign Post Brands  Brand Family Blocking  Line Extensions  Sizes (small to large)

18. Questions?