NABI Membership and Board Meeting Presentation Materials

The following slides are provided as background for both meetingAttendees and members who were not able to be in New York on March 23rd.These notes are not intended on substituting for meeting minutes but can give you An overview of the gathering and the topics discussed.

Presentation by Jim Squeo, Chief Executive Officer of the National Alcohol Bverage Control Administrators

Jim made a presentation onThe current status of PrivatizationWithin the control states. His PowerPointPresentation slide follow.

Details of Jim’s

presentation in these balloons

Control States - Spirits

Montgomery Co.Worcester Co.

Control States - Wine

Wholesale Distribution

Spirits Only

Spirits & WineSpirits, Wine & Beer

Retail Distribution

Government

Government & Agency

Private

Agency

WV

Privatization

•Washington•Virginia•North Carolina•Pennsylvania

•Ohio

Washington

Back

Following the defeat of both referendums on system revision state ABC officials have promised to change

the system to make retail more accessible and convenient. They have

suggested providing shipping to Washington state consumers of retail

items. COSTCO is suggesting more pressure to change the system including legislation or a new

referendum

Virginia

Back

Privatization as a legislative process is finished for this session in VA. Governor

McDonalds fellow republicans in the legislature did not support his bill. The lack of a reliable

revenue stream to replace the annual $120M from current

alcohol sales doomed McDonald’s plan. He has vowed

to bring a modified plan back next year.

North Carolina

Back

The NC system is decentralized down to

the county level where 167 ABC

boards run 422 retail sales operations and retain the profits for

use within the county. This creates a disincentive to

privatize without replacing the revenue

stream

Pennsylvania

Back

Pennsylvania Gov. Corbett has

established a commission to study

privatizing. He is from a policy point of view

opposed to state government operating

a business of this type. State Senator

John Pippa has a hearing scheduled for May 4 in Harrisburg, PA to vet the issue.

Ohio

Ohio Governor Kasich has proposed setting

up a quasi-governmental unit called JobOhio that would use alcohol

taxes to pay off bonds.

Energy Drinks

There is a continuing

interest by state administrators in

this category. They may be looking at the

consequences if the size and

alcohol content of flavored malt beverages from

a tax standpoint.

Editor note: Monster Energy is

not one of the

products targeted by

FDA and TTB and

ought not be included

in this category.

H.R. 5034

Though NABCA supported this bill in

the past the board has not yet taken a position

of the new bill HR 1161. NABCA ‘s annual meeting will be held in Phoenix, AZ on May 17. NABCA officers have a conference call on May

4 to discuss their position on the current

bill.

Alcohol is Alcohol

Jim made the point that as beverage alcohol

products morph into new variations not associated with their basic style and type administrators may

be looking to assign higher tax rates and

placement restrictions.

Author Daniel Orkent speaks at the annual NABImemberhsip and Board meeting

Author Daniel Orkent

spoke to the group about his book “Last Call: the rise and fall of Prohibition. Mr. Orkent answered

questions and signed copies of his book

for meeting attendees. In

response to one question he revealed

that Joe Kennedy was not in fact

involved in the illegal prohibition liquor

running activity but was well positioned to take advantage of the end of the “dry”

era.

2011 NABI Budget Status

Actual Dues Income $456,720Reflects new members andnon renewal of a few small associatemembers

2011 Budget 450,000YTD Expenses 165,769Avg. Monthly Spend Rate 33,153

Spending at the same rate asprior year in spite of additionalmeeting expense in Jan. 2011

Projected Total year revenue and spend within budget.

Budget / Expenditure detail in the Conf. Materials

Cash on hand

Capital One Cash on hand $ 383,343

Eagle Bank CD 105,039

PNC Bank 95,438

Total $ 583,820

Outside Audit Report and Letter

• NABI outside auditors state that all accounts and practices are in conformance with generally accepted accounting principles. The Association receives a clean opinion.

• Auditors recommend establishing a policy on staff leave accumulation. – Action Step: Conduct a review of leave hours over

the past year, apply any adjustments and determine final current leave balances. Report to

Audit report continued

report to offices on the next monthly conference call

Leave Policy for Association StaffFollow the Federal Government policy to accumulate

not more than 240 hours of vacation time to be carried over from year to year. Leave earned at the rate of 4 hours per pay period or 15 days per year.

Sick leave earned at 4 hours per pay period or 15 days per year. No cap on sick leave ceiling but no cash value.

Audit report continued

Personal days available not to exceed 15 days per year.

Vacation leave balance for the President would not be paid out at end of employment or be an obligation of the association.

Special Projects expenses – auditors commented that dues can be taken as a valid member business expense. Other payments to the association would have to meet the criteria to be taken as business expense. Expense for “lobbying” may not meet this criteria.

Ratification of Auditors

• Auditors – Linton, Shafer, Warfield & Garrett, P.A. have agreed to be retained for the coming year at the same rate as last year $7,500.– Action: Approve Auditors for the current fiscal

year.

The board approved retaining Linton, Shafer… as association

auditors for 2011-2012

Election of Board of DirectorsKatja Zastrow Anheuser-Busch InbevMarc Pl Goodrich Banfi VintnersJames P. Ryan Crown ImportsWilliam J. Deutsch W.J. Deutsch & Sons, Ltd.Barbara J. Anderson DIAGEO-Guinness USAJohn R. Frank Sidney FrankDavid Francke Folio Fine Wine PartnersT. Daniel Tearno Heineken USA IncRobert DeRoose Kobrand CorporationChristopher J. O’Rourke Moet Hennessy USA IncJohn F. Beaudette MHW, Ltd.Timothy Scully Miller Coors LLCMichael P. O’Brien Palm Bay InternationalDavid P. Babkow Remy Cointreau USA, Inc.John A. Scribner Terlato Wines InternationalFred Cooper Wirtz Beverage

This slate of officers were approved by

the membership

Election of Executive Committee

James P. Ryan Crown ImportsWilliam J. Deutsch W.J. Deutsch & Sons, Ltd.Barbara J. Anderson DIAGEO-Guinness USAJohn R. Frank Sidney FrankDavid Francke Folio Fine Wine PartnersT. Daniel Tearno Heineken USA IncRobert DeRoose Kobrand CorporationChristopher J. O’Rourke Moet Hennessy USA IncJohn F. Beaudette MHW, Ltd.Timothy Scully Miller Coors LLCMichael P. O’Brien Palm Bay InternationalDavid P. Babkow Remy Cointreau USA, Inc.John A. Scribner Terlato Wines InternationalFred Cooper Wirtz Beverage

This slate of members were

approved by the board as an executive

committee. In addition member

Anheuser-Busch Inbev

was elected to the executive

committee

Election of Officers

Chairman Board of Directors Michael P. O’BrienChairman of the Executive Com. John F. BeaudetteVice Chair Board and Exec. Com. Michael J. RudyTreasurer T. Daniel TearnoPresident William EarleVP, Asst Treasurer & Corp Sec. Bernadeen P. Emamali

These individuals were elected by the board to be the officers of the association for the 2011-2013

period. Board member T. Daniel Tearno was elected to fill the position as Treasurer. Past Chairman Jim Ryan was congratulated on his

productive leadership of the association.

NABI Executive Committee duties, goals and alignment

By-laws designate the Executive committee to act on behalf of the board between Board meetings. The Executive committee currently has 14 members representing all product segments Response from the Board and Executive committee as a whole have often been slow on time critical issues.

Issue: The association often needs to act promptly in responseTo issues, actions or positions confronting the import community

Proposal to the Board

•Designate the immediate past Chairman of the Board a member of the Executive committee leadership team

•Continue to endorse the Executive Committee Chairman, Officers and members to act on behalf of the Board of Directors between regular meetings of the board consistent with the by-laws

•Recognize the following positions as forming a quorum for actions by the Executive Committee. This group will meet on the first Thursday of each month by conference call

Chairman of the BoardImmediate past Chairman of the BoardChair Executive CommitteeVice Chairman of the BoardTreasurer

•NABI staff will promptly advise the Board of all actions taken on its behalf

•Remind Executive Committee members of the need to remain engaged and responsive to requests for their input and approval

Significant turmoil in the budget and funding authorization area Agency is being asked to justify its allocation of resources Prior approval of Labels under review

Last year processed 103,000 labels average of 7,000 per weekLabel review staff has been held at about 10 positionsAlternatives such as requiring label filing without approval, shifting review to market samplingThe value of the system for use by other federal, state, and local agencies is recognizedUser fees may be proposed once again

TTB Update

EU wine negotiations 2nd phase labeling talks underway in Brussels March 23.Traditional terms, semi generics, champagne, Vintage dated varietals. Currently barred by US

regulations for wines with an national appellation. EU petitioned the US in 2010 to provide reliefTTB is writing a proposed rule to respond to the petition and

seems agreeable to support a change. This would also mean that domestics could label nationally with a vintage date.

TT B Update

World Wine Trade Group –Negotiating and MOU among the members to

forgo certification requirements among member states. Currently Argentina requires certificate of analysis from the US.

South Africa has not signed the mutual acceptance agreement with the group. Therefore South African imports are still required to certify for entry. SA Parliament has been slow to act.

TTB Update

Certification for 2006 Brunello has been received from government of ItalyTTB is requiring two more years of certification.

The 2008 vintage will be the last to need a certification.

The Italian government could certify all stocks currently in inventory as meeting the standard and no further certifications would be required.

TTB Update

French Pinot Noir – French are not providing certifications. Import of this category (Languedoc-Roussillon Region) continues to require that the importer holds a certification from the French government.

TTB acknowledges mixed and misleading messages between FDA under 7% wine products, FMB, wine and distilled spirits specialty labeling.

TTB Update

FTC Federal Register notice – comment on information collection on compliance with self-regulatory advertising code. Up to 14 of the largest beverage alcohol advertisers will be selected. Smaller companies previously audited likely excluded. Comments due April 26, 2011 Commission not backing off it’s position that the voluntary standards should move from 70 % to 75% above LDA. Census data may counter this position. Still working on caffeinated alcohol beverages would not comment on follow on actions.

Federal Trade Commission Update

Near term Events FDA’s First Public Meeting on the FDA Food

Safety Modernization Act: Focus on Imports March 29, 2011, Silver Spring, MD

FTC Notice Seeking Comments on Proposed Information Requests to Beverage Alcohol Manufacturer: Comment due April 26, 2011.

FDA issues guidance on calorie labeling for food items on menus for businesses with 20 or more units: Imminent

Petitions submitted by

Center for digital decency and

Berkley Media Estimated burden

cost $253K

Industry has recommended use of the King

Country, WA standard

The FDA has announced that information about menu labeling will be

posted to: http://www.fda.gov/Food/LabelingNutrition/ucm217762.htmFDA deferred to TTB and

exempted beverage alcohol from the menu requirement pending

comments in their notice.

FDA to Convene Public Hearing on Ensuring the Safety of Imported Foods and Animal Feed: Comparability of Food Safety Systems and Import Practices of Foreign Countries:College Park, MD, March 30-31,2011

( future events continued)

The Agricultural Marketing Service (AMS), US Department of Agriculture (USDA), National Organic Program – Continued need for the regulations; Complaints or comments received; Complexity of regulations; Extent of overlap in the regulation, duplicate, or conflict Length of time last evaluated or the degree to which technology, economic conditions or

other factors have changed in the area affected by the regulations.

Comment by April 26, 2011

Both Bernie and Bill

attended this event

(Near Term events continues)

Follow up on TTB advance notice of proposed rulemaking to define estate bottled to encompass terms including estate, estates, estate grown, proprietor grown, vintner grown, orchard, farm, single farm, single ranch, proprietors blend, Old vine, Barrel fermented, Old clone, reserve, select harvest, bottle aged…………….NABI commented on this advanced notice

These terms are in broad use and harm could result in new definitionsNo evidence they are misleading by consumer complaints

The New CARE ActHR 1161

Introduced by Congressman Chaffetz (R-UT) on March 17. Wholesalers have legal protections, franchise laws in place One Third fewer wholesalers over 20 years Craft brewers, small wineries proliferating, wholesalers no

long the only source of product Texas case rejected by the Supreme Court Doesn’t seem that sponsors asked state administrators for

input No crisis of deregulation Wholesalers will seek additional co-sponsors 50 + co-sponsors as of April 29, 2011

Gray Market ProjectFocus on the FDA Compliance Policy guide

Require that Importers provide the manufacturer registration number and other information required by the Bioterrorism ActRequire FDA coordination with the authorized US based manufacturer’s agent when Key information is missing from prior noticesEngage Hill and Administration officials with the goal of developing critical changes to the CPGRetain Capital Counsel to complete the final phase of this project

Member benefit

Congress in you PocketFor Blackberry

Available soon on the NABI websiteMember resources page

http://www.congressinyourpocket.com/

blackberry.cfm

Other Business

Renewal of office lease for 3 yearsActivities of the Wine and Beer CommitteesBenefit for Jeff Becker –May 2, 2011American Beverage Licensees Opening night reception, June 18, Milwaukee, WIPerformance Plans