March 2010 ShipCompliant, Inc Where are we now? The Direct Shipping Saga Continues… NABCA Legal Symposium Arlington, VA March 10, 2010 Jason Eckenroth Founder & CEO

March 2010 ShipCompliant, Inc Goal Perspective of Wineries and Retailers  Growth of direct shipping since Granholm  Size of the direct shipping market  Ongoing challenges for direct shippers, consumers and regulators

March 2010 ShipCompliant, Inc About ShipCompliant Technology company that automates alcohol compliance Initial focus in wine direct shipping, now also wholesale compliance for wine & spirits suppliers  1,700 wine brands in 27 states utilize ShipCompliant  Completed 10 millionth compliance check in November Industry partnerships Power Wine Institute’s direct shipping rules portal Affinity programs with WineAmerica, Oregon Wine & Grape Growers, Washington Wine Institute FedEx and UPS

March 2010 ShipCompliant, Inc Producer Direct Reciprocal Limited Other 83% of US population

March 2010 ShipCompliant, Inc Retailer Direct Limited 9% of US population

March 2010 ShipCompliant, Inc Retailer/Importer vs. Winery GranholmGranholm

March 2010 ShipCompliant, Inc Challenge for Non-Producers Retailers losing ground Options for retailers, importers and virtual wineries  Legislative change  Build network to utilize existing 3tier distribution (wine.com)  Utilize a modified 3-tier network Challenge: Like most distribution options not explicitly governed by legislation, this is currently a fluid situation and open to interpretation

March 2010 ShipCompliant, Inc Challenge – Domestic Producers

March 2010 ShipCompliant, Inc Challenge – Domestic Producers > 700 state reports per supplier per year

March 2010 ShipCompliant, Inc Benefit of Technology Technology has enabled direct shippers to scale

March 2010 ShipCompliant, Inc Direct Shippers 6,223 Wineries

March 2010 ShipCompliant, Inc 6,223 Wineries, Who is Shipping?

March 2010 ShipCompliant, Inc % of State Wineries Participating in Consumer Direct

March 2010 ShipCompliant, Inc Main Obstacles to Licensing

March 2010 ShipCompliant, Inc NY has 8x more consumption Wineries Direct Shipping to These States NY has 8x more consumption

March 2010 ShipCompliant, Inc Licensing vs. Consumption Relative Ranking 22% of direct shippers licensed in North Dakota, 3rd worst market

March 2010 ShipCompliant, Inc Supply Chain Changed Past 40 Years 500 Wineries 5,000Wholesalers 6,000 Wineries 820 Wholesalers

March 2010 ShipCompliant, Inc Marketing Options Industry is creating new marketing options to meet consumer demand Examples:  Producer Direct Marketplace  Modified 3-tier Direct Shipping

March 2010 ShipCompliant, Inc State Regulatory Challenges Enforce statutes Generate much needed revenue Eliminate ambiguity eFiling

March 2010 ShipCompliant, Inc Summary of Challenges Retailers  Few legal options Producers  Cost and complexity impede direct channel  Lack of consolidated marketing State Agencies  Paperwork burden, tiny checks  Eliminate ambiguity

March 2010 ShipCompliant, Inc Shipcompliantblog.com

March 2010 ShipCompliant, Inc