ABBOTT D.

WEISS

Mucci Wine Imports: Deciding to Enter the New York Market

It was a hot afternoon on Tuesday, July 3, 2018, and Nick Mucci, owner of Mucci Imports in
Boston, MA, was just finishing his last delivery of the day. It was his 14th stop. Normally, he
and his brother, James, made deliveries to wine shops and restaurants on Tuesdays and Fridays,
but because the Fourth of July was on Wednesday, it all had to be done in the first half of the
week. As he got back in his car to head home, his thoughts turned again to the big questions on
his mind about his five-year old business: Am I ready to enter the New York market? Is this the
right place for us to expand now? How will I find the right people for this?

Nick had begun his start-up business as an importer and distributor in his home state of
Massachusetts in 2013, to promote indigenous Italian varietals from small, off-the-beaten path
growers with whom he had established close relationships. Having grown up in the south shore
town of Hingham, near Boston, Nick was familiar with the locale and had been able to establish
a successful business there quickly. Now, though, the question of expansion into New York
City, the largest and most competitive market in the country, was as daunting as it was attractive.

Background and Starting the Business

On his website, Nick explained the background of his starting the business:

After a couple years living in Italy, which began in Rome and culminated in an MBA in Food & Wine at
the University of Bologna, I decided to become an ambassador for small, high quality wineries and
promote them in my home state of Massachusetts. I was fortunate enough to discover every corner of
Italy through day-long drives in the Italian countryside, intense Ryanair flights, overnight trains or even
buses on some of Italy’s windiest roads where you felt like you might not make it out alive!

Sometimes you stumble upon three generations working together in the vineyards, or a local festival
where you taste that perfect wine and you realize all that crazy travel was worth it.

It was these adventures where I gained my appreciation and in-depth understanding of Italian wine.
Visiting smaller villages, wineries and agriturismos, I learned so much about what makes Italian wine
special. I learned quickly that each region is so diverse in terms of the spectrum of food & wine, but yet
the local flavors are always a perfect match for the wine, and it’s this harmony that needs to be
understood to truly appreciate Italian wine.

Returning home for holidays, I failed to find any of these wines or regions well-represented, or if they
were, it was from a large producer. The motivation was truly to tell these stories and break consumers
from the habit of drinking solely from the classic regions of Italy.

Nick initially started the business without any experience in the wine business, but he said, “I was
armed with the confidence that I would make inroads with key buyers and thus find a way to get the
business off the ground. The goal was to carve out enough business to make an honest living for myself,
nothing more than that.”

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Wine Importing and Distribution – About the Business

Regulations and Licensing

Activities associated with producing, importing, distributing, and selling alcohol in all 50 states
in the USA are highly regulated, by Federal as well as by state laws.

A two-page summary of the industry structure for Importing and Distribution is given in Exhibit
1. You may find an introduction to Federal regulations in this link to the Alcohol and Tobacco
Tax and Trade Bureau in the U. S. Department of the Treasury.

An application for an Alcoholic Beverages Wholesaler License (ABBC) in Massachusetts shows

a long list of requirements, as listed on their website.

Mucci Imports found these industry regulations took longer than expected and many hours of
work to resolve.

“The business of alcohol is quite convoluted, and depending on the week it can take up hours of your
time. My biggest challenge was learning on the fly, without prior experience. I can recall as if it were
yesterday going back and forth with the TTB and state of MA about my license for months before I finally
got my paperwork settled.

The regulations also required that I obtain warehouse space (temperature controlled, below 60º F) and
have it inspected before I could obtain a license. This, too, took time and money, and it all had to be
repeated as we grew and moved to new warehouse space.

Once we were up and running, in the day-to-day grind, you really have to have your ducks in a row and
stay organized. With each incoming wine shipment from Italy you need to have label approvals for each
vendor ready, confirm case count numbers and answer a number of unforeseen questions. In Italy before
the wine leaves, I need to line up trucking to the port of exit and generally just stay on top of my
producers to prepare their wine in time to ship (this is the biggest challenge of all dealing with farmers,
and Italians who don't quite have the same sense of urgency).”

The Logistics of Importing

Once he obtains the required licenses for importing wine, the importer must arrange for all of the
logistics to get the wines from his growers in Italy into the warehouse location from which he
will make his sales and deliveries. For Nick Mucci, this typically involves:

• Evaluating when is the ideal time for the next shipment. This requires understanding current
inventories on hand of each wine, anticipated demand over the next few months, the economics of 20’
vs. 40’ container shipments, and cash available for payments to suppliers and shipping firms.
• Purchasing the desired quantity of wines for each line item, from each wine producer
• Arranging with a freight forwarder in Italy to contract with a shipping company for a container load
to be shipped on a specific date from Livorno, Italy, to the Port of Elizabeth, NJ.
• Arranging for the forwarder to consolidate multiple cases of wine delivered by truck from each winery
to the forwarder’s facility, all to be loaded into a 20’ ocean container, to be delivered to port in time to
catch the ship’s sailing

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• Contracting with a U.S.-based freight forwarder to receive the wine shipments in NJ, unload the cases
from the ocean container, and load the cases into a truck to be shipped to the warehouse in MA.

Wine Sales in the U.S. and in Massachusetts

One wine industry source, market research firm IRI Worldwide, Wines & Vines reported the U.S.
wine market was worth about $62 billion in 2016. It is important to note that wine distribution is
highly concentrated -- of the top 10 distributors on this latest listing, the top three startlingly
account for nearly $30 billion in wholesale wine movements; that’s big, and it clearly reflects the
move toward consolidation in the distribution industry over the past two decades. At No. 1 on
the list, Southern Glazer's Wine & Spirits alone accounts for about $16.5 billion in revenue.

This consolidation trend is prevalent in Massachusetts as well. The 7th largest firm nationally is
the Martignetti Companies, headquartered in Taunton, MA, with sales in Northern New England
and Rhode Island, and especially in MA. Now in its third generation of family ownership, the
history of the company is deeply rooted in Boston and the trade in alcoholic beverages:

Martignetti Companies began as a family-owned grocery business in Boston’s North End. Upon the repeal of Prohibition in 1933,
the Martignetti family received the very first beverage alcohol retail license issued in Massachusetts. Through the years, the
retail business included wine and spirits shops across the Boston metro area. In the 1970’s, the family expanded the distribution
and wholesale business, focusing on fine wines. Through organic growth, new supplier portfolio appointments and well
executed acquisitions, the distribution side of Martignetti Companies flourished. The Martignetti portfolio has now grown to
encompass the broadest selection of fine wines and spirits in the marketplace, from artisanal producers to global suppliers.
https://www.martignetti.com/about/overview

Although they were vertically integrated with their own retail sales for many years, market forces
caused them to sell the stores and concentrate on distribution. The last store closed in 2017.

To get an idea of the scale of their operations in liquor, beer, and wine, consider these figures:

• 13,000 SKUs (stockkeeping units) in their state-of-the-art MA Distribution Center

• Delivering 9 million cases per year to 7500 customers, 50% wine/50% liquor
• Shipping from 42,000 to 60,000 cases per night, and 18-24,000 uncased bottles
• Deliveries go out 4 nights/week, Tuesday through Friday

In wines their portfolio includes domestic and imported brands, and in MA only one distributor
handles each winery. In contrast, in 2018 Mucci Imports handled just 32 small Italian growers,
with annual sales of $615,000 from 3,600 cases/year vs. Martignetti’s 4.5 million cases of wine.

Thus, in Massachusetts 5-10 distributors control the majority of wines sales, with the remaining
portion of the business handled by about 140 distributors, including boutique shops like Mucci
Imports. State liquor sources quoted population of MA and NY as 6.6 M and 19.6 M,
respectively. Number of liquor stores were 1,900 in MA and 2,700 in NY. The State of New
York lists 720 wine and liquor distributors in the state, but does not show wine distributors only.

Exhibit 5 shows the top 10 wine consumption states in the U.S. for 2014. New York is number 3
and Massachusetts is number 7, with annual totals of 26.2 and 12.6 million cases respectively.

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Mucci Sales and Marketing Approach

Mucci’s website listed 39 restaurants and 36 wine retailers where customers could buy their
wines. When he described his target customers and his competitive edge, Nick explained:

When I started, I felt like my visits home proved that much of the Italian wine world was still untapped. I
also noticed that there was a knowledge gap from importers to the buyer in shops and restaurants. I had
first-hand experience to share, to help paint the picture behind these wines and people who make them.
Further, I have an understanding of how important it was to tell their story, which often gets overlooked
in favor of talking price/what the wine tastes like, etc.

Essentially my competitive edge is my experience on the wine trail and willingness to dig deep into lesser
known regions by traveling there and taking time to meet with producers -- and learn their stories. Living
in Italy, I have experience "being Italian" and thus am able to share how wine is tied culturally. Even
things as simple as what a certain wine gets paired with locally...Beyond this, we spend a ton of time with
our producers, and most of them truly became friends before we moved back to Boston to start Mucci
Imports. I think my customers can see this when I talk about these people and their wines, and it builds a
connection. It appears that few other importers have this type of connection.

One distinctive way in which his relationships with the growers helped to build strong loyalty to
Mucci wines was illustrated by a story Nick related about an enthusiastic consumer, David. As a
customer of Social Wines retail store, David had an opportunity to meet Nick at a tasting. A few
months later, he and his wife planned a 10-day trip to the Amalfi Coast in Italy. The customer
contacted Nick to ask if they could visit one of the producers (Reale), whose wines he
particularly enjoyed. Nick arranged it and emailed the customer the contact information, so they
could work out visit times during his trip. In fact, the visit included a tour of the vineyard, a
tasting of all his wines, and a private lunch made by the owner at his small restaurant.

Interestingly, that same customer had also found another winery, Le Vigne di Raito, on his own
through TripAdvisor. He was interested in the highly-praised tour and lunch offering. When he
found that the owner was also one of Mucci’s growers, he contacted Nick, who made sure that
the visit there was a great success as well. In both instances the growers demonstrated strong
affection for and loyalty to Nick and his wife, through their close working relationships. All of
this intensified David’s enjoyment of and loyalty to Mucci wines.

Marketing Strategy - My marketing strategy has been based on education and getting in front of as many
people as I can, whether it has been my customers or private consumers at wine tastings etc. My
philosophy has been to spread the gospel one customer at a time, and I always tell my brother that if we
can teach one person about, let’s say Pignoletto grapes, then we have succeeded today. This has been my
approach to growing my business and presence. We focus on small, family-owned wineries who are
dedicated to cultivating grape varietals that have existed since Greek or Roman times. These wineries
don’t have vineyards full of international varietals but local grapes unique to their region.

My sales strategy was to start by pounding the pavement, since I was an unknown commodity
representing completely unknown brands. I set out to target the top restaurants and boutique shops, who
I knew would be able to tell my story and sell these wines (to their customers). I think our strength is our

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incessant energy and willingness to tell the stories of our producers and to share our experiences in Italy,
which distinguishes us from competitors. When I do a Grand Tasting somewhere, I note this. Reps and
importers from other companies are talking about what the wine tastes like, while we spend as much time
as we have recounting the story of the producer. This also comes across on our website (thanks to
Kelsey!) and social media. It's really all about education for us.

I also think we are quite good at presenting the right wines to the right customers. We do our homework,
we listen, and we find out what our customers’ needs are before any appointments. Many salespeople
want to show just what is new, without considering the holes on the shelves or needs on the wine list.

Target Customer - My target customer is the Social Wines (wine shop in South Boston) and Giulia's
(Italian restaurant in Cambridge) of the world, where there is an attention to detail on pairings &
education at the restaurant level, and of course, a willingness to explore/educate on the retail level.

Pricing Strategy - For pricing I've really learned by doing and have grown to understand the importance
of the $20 price point to help drive sales and orders, particularly at a retail level. If there's a winery I'm
going to bring in, I am really conscious about finding a "driver" and a wine I can move in volume to ease
future orders and help me continue to grow.

That said, part of my success has been the fact that the wines in my portfolio were not chosen because of
price. Many were relationships cultivated before starting my business, and price was hardly discussed. I
also have resigned myself to finding wines that fit my mission statement from people in whom I truly
believe. If the price is a few euros more than another importer may want to spend, that does not stop me!

When I started, I realized that I was not properly pricing my higher end items, always chopping off a few
dollars in potential margins with the fear that a wine would be too expensive. As I've grown, I have
become more confident in pricing in line with the 30-40% margins that are a target for every item I sell.

When asked about customer retention, Nick provided additional insight into the continuous cycle
of the sales process:

In this business it's really a 2 to 3 week cycle, where I am hopefully in touch with my customer at least once
within that period – whether it’s an order, a delivery, tasting or just a stop at the bar for a drink. This is
crucial, particularly at the beginning of a relationship with a client. It starts with a tasting appointment, and
sometimes two. If I see there is opportunity, then I am going to be as aggressive as I can, to stay on their
radar for the following weeks/months. Sometimes it takes 2 or 3 months before you see that first order.

From there to retain the customer, the same effort is required, particularly if they are not re-ordering the item
they purchased. I work hard to update them on other wines we may have tasted on our initial appointment (or
any follow-up tastings) and keep them posted on what new wines might be coming into the fold. Once I am in
the account, I am really working hard to build on what I've sold, and quickly. Otherwise, retaining a customer
can be very difficult since they might just switch off your wine a few weeks after they put it on their list.

Once you have a few wines in an account, the same vigilance is needed. For retail shops for example, we
usually check in on them every 2-3 weeks and make sure we are tasting new wines with them at least every
other month. Retail has the capacity to taste more wine, so you have to feed that appetite. There is more room
in a store than on a wine list, so they are always hungry to try new wines. Part of this retention work is often
humoring them by tasting wines that inevitably you know they won't order.

With restaurants I will follow up once or twice every month, trying to stay in contact. Ideally, they are re-
ordering the wines they have, so that you can get in to make a delivery and get some face time with the

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customer. A drink at the bar at 5:00 before things get busy that night doesn't hurt either. We can check in to
see how our wines are doing on this list. Lastly, I always try to push for staff education in order keep a
presence and to build some loyalty to our wines.

With some much wine out on the market, it's easy to lose our position despite all of this. Some restaurants
clearly like to work with many distributors. I've found them to be very cyclical -- where we have a good run of
success with them and then business falls off. Working hard to get back in front of them with new wines is
crucial to build a presence again on their list. The trouble with these accounts is that I don't feel like I'm really
building on early success. Sure, I'm leveraging the relationship I have with the buyer to ensure that I have a
seat at the table every few months, but my hope is that once a wine does well in a restaurant the customer will
want more, and all of a sudden you have 5 wines on their list. I have some accounts like this, but not enough
yet.

Current Situation

In 2018, the company operated with two full-time employees, Nick and brother James.
Individually or together, they handled all the work: travel to Italy to meet with current and
prospective growers, ordering shipments of wine from suppliers, arranging logistics, doing
tastings and sales activities with retail wine stores and restaurants (both current and prospective
accounts), picking up cases at the warehouse and delivering wine to wholesale customers,
arranging for administrative activities such as permits, labeling, event licenses, bookkeeping,
billing and collections, paying suppliers, and other marketing activities. Nick estimated that they
each spent 4 hours making deliveries on Tuesdays, and 8 hours each on Fridays.

His wife, Kelsey, handled graphic design, the website and other tasks as needed, only part-time.

Mucci Imports had a successful record of growth in sales and profits during its first 5 years:

Year Sales Gross Profit Net Profit (in $ thousands)

2013 (6 mos) $ 50 $ 18 ($ 35)
2014 $ 240 $ 95 ($ 10)
2015 $ 420 $ 150 $ 34
2016 $ 500 $ 197 $ 20
2017 $ 615 $ 230 $ 35

Year-to-date results for 2018 were up another 20%.

Other important financial information is shown below:
Average cost per bottle from growers = $8.00 (euro 6.80)
Average wholesale price per bottle to his retail and restaurant accounts = $13.00
Average retail price paid by consumers = $22.00
COGS = 47% of Sales, Freight Costs = 13% of Sales
Other Costs in 2016 = $177,000
At the current time Accounts Receivable were running at about $100,000, and they had $187,000 of inventory in their
warehouse in Braintree, MA. Accounts Payable were $53,000. Other liabilities included a loan in the amount of $15,000.

Nick summarized the economics of the business:

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We have been profitable for the last three years. More or less we have to sell about $40,000 worth of
wine on a monthly basis to break even. So far this year we are averaging close to $55,000 in sales which
has netted about $20-$25,000 in profits. The objective is to average $60,000 per month this year in hopes
of hitting closer to $70,000 next year. Realistically we could be a million-dollar business in 2020 if this
uptrend continues. In 2017 we had over 23% growth over the prior year.

I am paying out between $30,000 and $40,000 to suppliers each month now. The huge challenge in
managing inventory is understanding what is moving, and what will have sustained movement. I've over-
invested in the past on particular wines. That created a drain on finances. I have also made a huge effort
to invest in my inventory (really leveraging sales to do this), so that we are as reliable as any larger
distributor for those who want to pour a wine by-the-glass (BTG) or just continue to have it on their
shelves. This has created a large advantage for me over similar-sized companies who prefer to put
earnings in their pockets, instead of reinvesting, or prefer not to take the risk of carrying too much
inventory.

Market Changes and the Future

A Forbes magazine article recently described changes taking place in the industry:

“Most of the top 10 distributors on the list can claim roots either before Prohibition or as the result of repeal. These
businesses have been protected by legislation favoring tight controls over who gets to handle and sell wine. Until
very recently, they have had little incentive to change their way of doing business; consolidation has been a way of
growing revenue, not to mention growing influence. Although individual state laws still favor the producer-to-
distributor-to-retailer three tier system, and the laws often favor large distribution companies, the internet is
already the cause of rules changes. The threat to complacency is real in wine distribution. It will be interesting to
watch how the top ten companies face that challenge and which ones rise and fall in the list.”

https://www.forbes.com/sites/thomaspellechia/2017/09/20/revenues-at-three-wine-distributors-tally-almost-half-of-the-u-s-wine-market-
value/#5b773fda299f

Nick had been thinking about ways the market was changing, too.

In the last five years it has only become more competitive, and I think with the advent of social media has also
skewed how cult wines come to be. Now there is a wine Instagrammed in a trendy New York wine bar, and suddenly
everyone wants to carry that.

There has also been consolidation at the top of the food chain, with a few larger distributors and big retail players
like Whole Foods & Total Wine putting smaller shops out of business. For those that survive, however, I see this
creating two really different segments in the market. Total Wine & large retail are courting these larger
distributors. Therefore, the boutique shop can now really focus on…well, being boutique -- and working almost
exclusively with suppliers like myself. This has been aided by the organic/small grower/ natural wine movement,
since this type of wine is almost exclusively procured by a smaller importer like me, and not by these larger players.

Growth Opportunities and Challenges

As Nick climbed back into his car to drive home, he started to think about all the questions in his
head about where to go next to grow his business. New York seemed like the obvious next step.
It’s possibly the most important market in the country, and it was hard to resist the appeal of
proving his ability to carve out a successful niche in NYC, as he had done already in Boston.

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What other markets might be alternatives, now or later? Portland, Maine, and surrounding areas
represented one choice – closer, smaller and safer, in the sense that failure there would not be as
impactful. Washington, DC, was another, although he had tried a relationship there with a
distributor which had been unsuccessful in producing incremental sales. A similar experience in
Vermont had led him to conclude that the best alternative for expanding was to become a
distributor in another state – as opposed to going through an established distributor already in the
market: “it requires the most work and investment, but it's the only way our stories will be properly told,
and the wines will still remain viable in terms of price point”, he thought to himself.

I want to take this model into a few other markets like New York City as a way to not only grow myself,
but also to help my producers grow, to continue to cement their footprint in the US. Several of my
younger-generation producers have 10 hectares of vines now and are thinking of planting more in nearby
fields to earn a decent living.

The biggest question for me is trying to determine the best way to grow and take the model I have been
successful with in MA and move it to other markets. Whom and how do I hire, how much energy do I give
personally to this challenge, and how much can I leverage my current success on growing a new market?
I started by bootstrapping this without more than just a couple of family loans, but now do I go to a bank
and ask for funding? What will they demand from us?

Nick had met one or two people in New York whom he thought he might hire to lead his efforts
there. One woman was Andrea Caruso, who had been in the trade for 7 or 8 years, seemed
knowledgeable and energetic, and had demonstrated an interest in his strategy. Should he take
the time to spend a day or two now in New York, to meet with her and explore that path?

As he considered that opportunity, a brief flash of concern popped into his mind:
July is not our busiest time in MA, and yet James and I are flat-out now with everything on our plates.
Kelsey wants me to take some time off and go up to visit family and relax in Vermont. And in two more
months, we will need to travel back to Italy to visit with growers and look into the new suppliers we met
at Vinitaly in April. Where am I going to find the time to start the long process of entering the New York
market? And how will we be able to maintain the growth and momentum we have going in Boston?

I must admit that I have trouble relinquishing control, and I fear that as we grow I will have a hard time
hiring and delegating responsibility. This is my baby, but I am approaching a time in the life cycle of my
company where I will need to hire and delegate.

At the same time Nick had voiced a set of personal goals which were important to this decision.

The goal for the business is to develop a presence in a few additional markets, but never to get too big for
our britches, and give up on the original mission. Currently I am working with a new generation of
producers, almost all of whom are my age, so the idea of growing together for the next few decades is
very appealing. I understand how much a part of their growth I can be, and this is something that
motivates me to strive forward.

Personally, Kelsey and I would love to spend more time in Italy. It wasn't an easy decision to leave Italy
and move back home in the first place. Part of our hearts remain there, without question. I think our goal
in the end is to be able to spend 2 to 3 months of the year in Italy, particularly when we start a family. In
fact, buying property in Italy is part of our plan for the next 5 to 10 years.

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Exhibit 1

SO YOU WANT TO BE A WINE IMPORTER? WHAT SHOULD YOU KNOW?

© Law Offices of John P. Connell, P.C., 2013.

The Players: Importers vs. Distributors

In the United States, the key players in the alcoholic beverage industry make up a three tier system and this
three tier system is the law in most states. With respect to wine, the top tier of this system is the winery or
manufacturer that is producing the wine. Foreign manufacturers often obtain an agent who represents and acts
on the winery’s behalf within the United States. This agent, called an “importer,” is licensed and authorized to
bring wine into the United States from the manufacturer’s foreign country in the course of trade. The
“importer” therefore may be considered to stand in place of the winery when referring to the top tier of the
three tier system.

The wholesaler or distributor represents the middle tier. The wholesaler/distributor is the person or business
licensed and authorized to purchase wine from the importer for resale. The wholesaler/distributor transports
the wine purchased from the manufacturer or importer and resells it to the bottom tier; the “retailer,” which is a
restaurant, liquor store, or bar.

Those desiring to “import” wine into the United States must first distinguish what they really want to be: just
an “importer,” or an agent of the winery, or both an importer and a “wholesaler/distributor,” so they may
actually sell the wine to retailers. Many “importers” are actually both: they act as the wholesaler/distributor as
well as the importer for foreign wineries.

The Requirements For Becoming Just An “Importer”

An importer, not a wholesaler/distributor, has the following general responsibilities: communication with the
foreign winery; receipt and forward of purchase orders; arrangement for delivery by ship or air from the
foreign winery, either directly or through a freight forwarder; customs clearance once the wine arrives in the
United States; arrangement for the transport from customs to a bonded warehouse near the port of entry;
storage of the wine at the warehouse; selection of a wholesaler for distribution to retail outlets; and assistance

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with the promotion and sale of the brands. The importer, as the foreign winery’s agent in the U.S., therefore
has a great deal of control over the brand and how it will be distributed within the U.S.

Exhibit 1 (continued)

Legally, to import wine only, a person needs to obtain a license on the federal level, but generally does not
require any license on the state level. The Federal Alcohol Administration Act (FAA) requires those wishing
to import alcoholic beverages into the country to obtain an Importer’s Basic Permit from the Federal Alcohol
and Tobacco Tax and Trade Bureau (“TTB”). To apply for the Importer’s Basic Permit, a person must attach a
Letter of Intent with a foreign winery to his or her application. The letter, which must be signed by the foreign
supplier and written on its letterhead, should be a statement by the supplier conveying its intent to supply the
person with its wine. While this Letter of Intent is not binding on the parties, it is required by the TTB for the
Importer’s Basic Permit to even be processed.

The TTB also requires a Certificate of Label Approval (COLA) for each product item or each brand of wine
being imported. Since each product must have its label approved before entering interstate commerce,
application for COLAS should be done as soon as the Importer’s Basic Permit is obtained and the labels are
ready.

Finally, in order to import wine from some foreign countries, a certification is required to show that the
practices and procedures used to produce the wine in the manufacturer’s country, comply with the
requirements of the Miscellaneous Trade and Technical Corrections Act of 2004. This Country of Origin
Certification consists of a statement from the manufacturing country’s government regarding the results of lab
analyses conducted on the wine and stating proper cellar treatment was employed. Many international trade
agreements, however, have exempted most countries from this requirement. The list of countries exempted
from the certification requirement are found at the TTB website.

What If An Importer Wants To Resell The Wine As Well?

Once processed and approved, the Importer’s Basic Permit allows import of wine, but it does not allow
wholesale of wine. If an existing importer later wishes to become a wholesaler/distributor as well, so that he or
she may resell the wine, then he or she must apply for the appropriate wholesaler’s licenses on the Federal and
State level. For someone doing business in the state of Massachusetts, for example, this means the person
should obtain a Wholesaler’s Basic Permit from the TTB and an Application For A Wholesaler’s License from
the Alcoholic Beverages Control Commission (“ABCC”), in addition to his or her existing Importer’s Basic
Permit. Having a licensed warehouse where the wine must come to rest after entry into Massachusetts and
licensed trucks able to transport the wine to retailers within Massachusetts are also licensing requirements the
wholesaler applicant should be cognizant of before desiring to obtain a wholesaler license.

An applicant for an Importer’s Basic Permit who also wishes to apply as a wholesaler/distributor at the outset
of his or her business need not go through the process of completing each permit application and submitting
supplementary documents for both. Instead, the applicant may check appropriate boxes on his or her
Importer’s Basic Permit application and combine supplementary application documents, indicating intent to
apply to be both an importer and wholesaler/distributor. This is an option only for those persons who will be
importing to, and distributing from, the same location, whether that be a home office if distributing on a small
scale, or a large warehouse if planning to distribute nationally.

Once in possession of a federal and a state license to both import and distribute wine to retailers, the person
desiring to “import” wine in its classic sense is now ready to conquer one state at a time, or entire regions at a
time depending upon the demand for the wine brand. Building that brand demand prior to having the brand
distributed in the United States is a sophisticated process unique to the wine world, and an aspiring importer
should be cognizant of this market’s peculiar tastes not, just the importer’s palate for wine.

© Dr. Abbott Weiss, 2018 10

ABBOTT D. WEISS

http://www.connelllawoffices.com/so-you-want-to-be-a-wine-importer-what-should-you-know

Exhibit 2 -- Snapshots from Mucci Imports Website

Mucci Imports, LLC

© Dr. Abbott Weiss, 2018 11

ABBOTT D. WEISS

Exhibit 3
Statement of Income
For the Year Ended 12/31/2017

Revenues
Products 611,000
Other 4,000
Total Revenue 615,000

Costs
Cost of Goods 282,000
Freight, License Fees, Excise Tax MA 103,000
Total Cost 385,000

GROSS PROFIT 230,000

Operating Expenses
General and Administrative -
Travel -
Insurance -
Payroll Taxes Not available
Rent -
Salaries and Wages -
Sales and Marketing -
Other -
Total Operating Expenses 187,000

OPERATING INCOME 43,000

Non-Operating or Other
Interest Expense 1,000
Depreciation and Amortization 100
Total Non-Operating or Other 1,100

PRE-TAX INCOME 41,900

Taxes
Income Tax Expense 7,200

NET INCOME $34,700

© Dr. Abbott Weiss, 2018 12

ABBOTT D. WEISS

Exhibit 4
MUCCI IMPORTS, LLC
BALANCE SHEET
12/31/2017
ASSETS

CURRENT ASSETS
Cash: $1,600
Accounts Receivable: 106,700
Inventory: 129,000
Prepaid Expenses: -3,900
Other Current Assets: 125,100
TOTAL CURRENT ASSETS: $237,300

FIXED ASSETS
Machinery and Equipment: $29,800.00
Accumulated Machinery and Equipment ($2,200.00)
Depreciation:
Furniture and Fixtures: 0
NET FIXED ASSETS: $27,600

TOTAL ASSETS: $264,900

LIABILITIES & EQUITY

CURRENT LIABILITIES

Accounts Payable (A/P): $53,000

TOTAL CURRENT LIABILITIES: $53,000

LONG-TERM LIABILITY

Other Long-Term Liabilities: $28,300

TOTAL LONG-TERM LIABILITIES: $28,300

OWNER'S EQUITY

Paid-In Capital: $148,900

Net Income: $34,700
TOTAL EQUITY: $173,700

TOTAL LIABILITIES & EQUITY: $264,900

© Dr. Abbott Weiss, 2018 13

ABBOTT D. WEISS

Exhibit 5

https://www.shipcompliant.com/wp-content/uploads/2015/11/JohnBeaudette_BACS.pdf

© Dr. Abbott Weiss, 2018 14