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Distilling/Contracting Hybrid


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I'm located in NC, recently graduated college, and eventually want to move towards opening my own distillery. I've developed one or two formulas for spirits through significant experimentation while developing a brand that I believe will serve a specific niche. However, I do lack significant capital and distilling experience. For this reason I'm aiming to begin by contracting with a local distillery and hope to be as hands on as possible to gain experience (I do have enough savings for this, including a limited marketing budget). I have created an LLC and submitted my application for a wholesaler's basic permit with the TTB. I'm familiar with most contracting agreements with distilleries where the DSP holds the formula and COLA for a firm, and a firm grants permission for a DSP to use it's name, logos, trademarks, etc. for production purposes, the wholesaler then buys the bottles from the DSP, then sells to .

My specific questions:

1. Can my company hold the formula and COLA? The TTB asks for the basic permit # in the submissions for formula and COLA, and I understand that the DSP generally holds this. I'd like to hold formula/COLA as the formula does have something (I consider to be :)) unique I'd rather not share, for ease in case I need to change which DSP I contract out to, and for ease when we eventually build our own DSP. As I understand a DSP almost always submits and holds formula/COLA, but I want to know if a wholesaler can do this.

2. How hands on can I be in producing the product? I have some familiarity with tied house laws and understand the three tier system. As a wholesaler contracting to a DSP, can I physically be in the DSP producing/bottling the product? I would buy the product from the DSP as a wholesaler (or brokerage in NC), which would then be sold to the NC ABC system.

3. What are the laws (or where can I be pointed) regarding a wholesaler storing product? I understand bonded warehouses for a DSP or even an importer, however, I can't seem to find much information about storing bottled spirits after they have left the DSP and all taxes have been paid.

Just to bring this all together so everyone knows how everything will flow, this is what I would like to do:

I will get my TTB wholesaler basic permit, after basic obtained apply for NC brokerage permit, after basic obtained submit and get formula approval, after formula obtained submit and get COLA, contract with local DSP and order supplies, assist DSP in production and bottling of first order, I buy bottles from the DSP, fed excise taxes are paid and bottles are removed from bond, bottles are stored at a different location not under bond, bottles are sold to the NC ABC system (go to central warehouse and then to retail locations).

Of course there is a lot of hard work and marketing going on, but that's just what I'm envisioning as my legal procedure.

I apologize for any of my ignorance regarding this topic, thank you for any and all help!

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First off, congratulations. There are people far more knowledgeable about the TTB than I am, but from a formula standpoint, I wonder if a simple non-disclosure agreement (NDA) would be sufficient.

Best wishes,

Brian Kolstad

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