Native Distilling: Innovations Catalyzing Native Economies

Understanding the Native Distilling Economic Model, the Tribal Beverage Network

and Talking Cedar

Moderator Dr. Eric Trevan, Ph.D.Match-E-Be-Nash-She-Wish Band of Pottawatomi Indians (Gun Lake, MI)

Bob WhitenerCEO - The Whitener GroupSquaxin Island Tribe (WA)

David Burnett CEO - Chehalis Tribal EnterprisesChehalis Tribe (WA)

Justin StiefelCEO & Co-FounderHeritage Distilling Company & Tribal Beverage Network

Panelists

Chehalis Tribe: How we got to this point

Chehalis Tribe – Executive Order Tribe (1864)

Congressional repeal of federal ban on distilling in Indian Country Andrew Jackson era statutory ban (25 U.S.C. 251, 1834)

Great Wolf Lodge tax case and its implications for Indian CountryChehalis Tribe vs. Thurston County (9th Circuit)

Learnings from tobacco ventures

CARES Act FundingYellen vs Confederated Tribes of the Chehalis Reservation U.S. Supreme Court

25 U.S.C. § 251 - U.S. Code - Unannotated Title 25. Indians § 251. Setting up distillery

Andrew Jackson - 1834

“Every person who shall, within the Indian country, set up or continue any distillery for manufacturing ardent spirits, shall be liable to a penalty of $1,000;  and the superintendent of Indian affairs, Indian agent, or subagent, within the limits of whose agency any distillery of ardent spirits is set up or continued, shall forthwith destroy and break up the same.”

H.R. 5371 repeals1834 statute.

This historical step was led by

Chehalis Tribe and HDC.

Dedicated to making premium craft beers with impeccable consistency

Can produce up to 120 kegs per batch with our state-of-the-art 60 barrel system

Capable of brewing 6 keg batches of one-of-a kind custom beers and private labeling

Working to sell beer to other Tribes for their casinos, convenience stores, hotels, etc

Produced 56 different styles of amazing craft beer in our first year alone

1,880 customer ratings on the UNTAPPD app in first 12 months

MOST AWARDEDHDC is the most awarded craft distillery in North America from the American Distilling Institute 7 years in a row. (Out of 2,000+ distilleries.)

#1 craft distillery in Washington in gross sales. 2020 Revenue surpassed the next 100 distilleries combined.

2019 HDC case volume accounted for more than 1% of all craft spirits volume in the U.S.

FAMILY & WOMAN MANAGEDFounded in 2011 as a family owned distillery. Still family led with a larger investor base. Largest independently owned Washington distillery.

MISSION

We celebrate the HERITAGE of our communities through the power of our award-winning spirits, visually intoxicating experiences and innovative programs, so that our customers become family, everywhere.

TRUSTED. LOCAL. SPIRITS.

• Cocoa Bomb ™ Chocolate Whiskey• Elk Rider® Vodka, Gin, Rum & Whiskeys

(HDC tasting rooms only)

• Batch No. 12® Vodka, Gin, Rum & Bourbon

• Naturally Flavored Vodkas• Dual Barrel Bourbon & Rye• 50 ml, 1 Liter & 1.75 L formats available

in select vodkas, gins and whiskeys• Heritage Series Vodka, Gin, Rum &

Whiskeys• D’s Seasoned Vodka

In partnership with Demitri’s Bloody Mary Mix

OUR PRODUCTS

• Tours, tastings, cocktails and bottle sales

• Cask Club® – subscription based customized barrel program (patented)

• Spirits Club® – subscription based regular pick-up or shipping of spirits (similar to a wine club)

• Spirits Growler® Line – refill and reuse your HDC growlers

Recurring Revenue Model

CONFIDENTIAL/PROPRIETARYProperty of Heritage Distilling Company, Inc.

CONFIDENTIAL/PROPRIETARYProperty of Heritage Distilling Company, Inc.

Tribe X

Tribe #4

Tribe #6

Tribe #3

Tribe #5

Tribe #4

Micro Hub

Regional Hub

(example – Chehalis 2020)

Retail

Retail

Tribal Beverage Network (TBN)

The Bracker Test White Mountain Apache Tribe v. Bracker, 448 U.S. 136 (1980)

(1) whether the regulated conduct occurs on or off a reservation;

(2) whether or not the party being regulated is a tribal member; and

(3) if the conduct being regulated does occur on a reservation, whether State interests outside the reservation are implicated.

“What Tribes Make, They Can Sell…..”

Manufacturer:Brewery, Winery, Distillery

Distributor/Wholesaler/State Control Agency

Retailer (store) /Bar-Restaurant / State Control Store

35%-55% Gross Margin

20-35% Gross Margin

25-50%+ Gross Margin/State Control Tax

100%

Bar/Restaurant –80% Gross

Margins

The traditional model for alcohol sales in the U.S.:“The Three Tier System”

• Exercise Tribal Sovereignty in this new industry (never legal before 2018)

• Keep state and local liquor taxes

• Create new amenities for repeat customer visits & higher spend by your guests

• Use local grains & supplies in your products

• Establish new jobs & industry in your community

• Improve food & beverage margins throughout all of your Tribal Enterprises, including casinos, convenience stores, hotels, golf courses, etc

Benefits for Tribes to Start Distilling

ROI to Tribes of 20%-45%

annually

Store Stacks/ Point of Sale

TV / Radio Ads

Sales Reps & Distributor Incentives

Store Sampling Events

Store Rebate Programs

Magazine/ Newspaper Ads

Sports Sponsorships

Paid Social Media Ads

Paid Social Media Influencers

Branding is expensive…..“How do I get the consumer’s attention?”

Boustead Securities Confidential - 15

Under the legacy system marketing dollars are spent on……

Boustead Securities

• Tribes own 522 of the largest on-premise alcohol accounts in the U.S.

• If any of your locations sell beer, wine, or cocktails……… you are already in the alcohol business……. 16

Solution: The New Modified Pull System

Manufacturer:Brewery, Winery, Distillery

Distributor/Wholesaler/State Control Agency

Retailer (store) /Bar-Restaurant / State Control Store

35%-55% Gross Margin

20-35% Gross Margin

25-50%+ Gross Margin/State Control Tax

100%

Bar/Restaurant –80% Gross

Margins

…but 2/3rds of the economic value is lost before it gets to you….

TRIBAL BEVERAGENETWORKTM

TURN-KEY PHASESOF DEVELOPMENT

Master Agreement

Phase 3 A/E Design

Equipment Spec./Ordering

Construction Support

Construction Admin. Support

Licensing / Permitting/State MOA

Pre-opening Hires

Opening

Operations Support

Marketing

Compliance Reporting

Training

Ongoing Training

Recipe Development

Opening Day

Phase 2 Scoping

Phase 1 Review

Construction Kick OffPhase 1 Phase 2 Phase 3

TRIBAL BEVERAGE NETWORK1) Execute NDA to Share Information2) Develop Site Specific Financial Projections3) Review Memorandum of Terms for Phase I Development and Beyond

Visit our booth - #1007 - to learn more

TBN@HeritageDistilling.com

Next steps for interested Tribes…