2

BUSINESS IMPORT PLAN NEVADA 2012

Executive summary..................................................................................................................................1

Corporate Profile and Nature of the Business..........................................................................................2

the Black Fly pre-mixed spirits story....................................................................................................2

Humble Beginnings of Black Fly.........................................................................................................2

Black fly’s ready to drink spirit beverages...........................................................................................3

Black Fly’s Pillars of strength..................................................................................................................4

Black Fly’s big bite...............................................................................................................................5

Management and Human Resources........................................................................................................8

WELCOME TO NEVADA....................................................................................................................10

Target Market.........................................................................................................................................11

Environmental Scan................................................................................................................................12

Political factors...................................................................................................................................12

Legal Factors......................................................................................................................................13

Tax System.........................................................................................................................................15

macro Economic Factors....................................................................................................................16

forecasted sales of the Ready to Drink Alcoholic beverage Market in the united states....................17

importer-distributor alliance...................................................................................................................17

Market Entry Strategy of Black Fly........................................................................................................20

Risk management and financial risk.......................................................................................................22

Operations Overview..............................................................................................................................24

Reccomendation and Conclusion...........................................................................................................25

Bibliography...........................................................................................................................................26

Appendixes.............................................................................................................................................30

EXECUTIVE SUMMARY

Liquor has always been a social lubricant, and young people always enjoy partying with some of these beverages.
The liquor industry in U.S. (2008) was responsible for US $388 billion in the economic activities. Now a day, the
 3
globalization and ease of international trade has allowed some companies to engage business in foreign markets and
become multi-national enterprises. U.S. is an attractive market for any liquor producer; producers are constantly
innovating strategies and products in order to enhance the consumer’s experiences and increase their sales.
The Ready to Drink (RTD) and wine coolers products, were born around the 1980’s, with an impressive response
from the young population, this drinks became rapidly popular, offering a sweet flavor into a small bottle. Young
consumers usually are not attracted to the strong and sour taste of distilled spirit drinks. The RTDs represent and
important part of the U.S. market and some companies has engaged business with these products as malt-flavored RTDs
in order to lower the cost which also is an important fact for the young consumers.
Black Fly is an Ontario based company which engaged business in 2005, offering consumers a new high quality
product. Distilled spirit RTDs, giving the “not so sweet” taste of traditional products, Black Fly attracts even the male
consumers of the market. This company has managed to give a “big bite” in the Ontario market, being recognized as “The
best small-based supplier of the year (2011)” by the LCBO, at the Elsie awards.
The State of Nevada is a very attractive market due the wet laws of the State which allows the availability of
liquor 24/7, and the high inflow of tourists travelling every year for leisure and business. Black Fly will be competing
directly with the main players of the liquor business, Bacardi and Smirnoff, which has been doing business in this State
for several years. This highly competitive market, also represent a difficult challenge for Black Fly, under that dilemma,
this London based company must do a cost-benefit and risk analysis before engaging business in the State of Nevada.
 4

CORPORATE PROFILE AND NATURE OF THE BUSINESS

THE BLACK FLY PRE-MIXED SPIRITS STORY

In May, 2005 Husband and wife pair Rob Kelly and Cathy Siskind-Kelly started Black Fly Beverage Company,
Ontario’s first micro-distillery. Black fly has its roots in Muskoka, North Ontario. Rob chose the name Black Fly for his
beverage company, drawing inspiration from his youthful summer days spent in Muskoka, Northern Ontario. Black Fly
is infamous for being a menace and all over the place in Northern Ontario and in some parts of USA. They chose ‘Black
Fly’ symbolizing it to nostalgia for North Ontario days. They identified with the tiny Canadian insect in terms of that
they were also a small micro-business in Canada who wanted to come in under the radar and deliver a mighty bite
similar to that of blackly. The natural wild blueberry juice used in their vodka mixed drinks Vodka Cranberry and
Vodka Blueberry is also linked to the Black Fly name, in the sense that black fly pollinates wild blueberries.

HUMBLE BEGINNINGS OF BLACK FLY

Black Fly started its humble operations housed in the historic bank building in the
heart of downtown London. Initial distribution to the LCBO stores was small, to just a
handful of stores. They later expanded their production lines which were soon
followed by their distribution facilities expansion.
The instant popularity of drink inspired the owners to move their operations to a
state-of-the-art production facility, located in London’s leading industrial
quarter. Thus, in March, 2008 Black Fly shifted to a 6,600 square-foot facility in the heart of the city’s industrial sector,
conveniently next-door to the Liberty-Freezer cold storage warehousing plant.
Black Fly’s products are manufactured and bottled in London, Ontario. Over the
years Black Fly grew as a niche player in the Flavored Alcoholic beverages market,
gaining a reputed name in the Canadian market as a premium spirit beverage company.

BLACK
Tequila FLY’S READY TO DRINK SPIRIT BEVERAGES
Margarita
This 4Blackfly have designed
pack presentation a wide
offers amount of products
the experience during the 6 years of the
of a premium
Upper Right Picture: Black Fly’s first production plant located in London, Ontario.
company, some of those had
andtoperfectly
be takenblended
out because of themade
Margarita low acceptance
with Limeof the public,
Juice such as Blackfly Spiked Ice and
and Premium
Lower Left Picture: Black Fly’s actual producing plant in Liberty Freezers, London, Ontario.
Blackfly Black Currant Blueberry.
Tequila.
The actual family of the actual Blackfly
This is products
the most popularisproduct
the mostofpopular, best-seller
Blackfly, andonly
and is the widely accepted ones in
Canada, these products areMargarita
going to RTD
be theinones which must be offered in the State of Nevada.
the market.
 5

Vodka Cranberry
This presentation offers the consumers 4 bottles of a delicious
Cranberry Juice perfectly blended with world premium Vodka.
This is one of the first products of the Blackfly family which has
been very successful whiting the population.

BlackFly’s Party Pack

What can be better that Vodka Cranberry and
Vodka Blueberry, a BIG BOX of Blackfly’s Vodka
drinks with one of their new products, VODKA
CITRUS made with the best Lemon juice, this 12
bottle presentation is ready to party with you all night
long.
Vodka Blueberry
As simple as mixing World Premium Vodka and the Best Blueberry
Juice can only become the best Vodka Blueberry RTD ever made.
Tequila Sunrise
This presentation of 4 bottles of 400 Ml offers a great experience with
The big boy of the Blackfly family, this is the first 750 Ml bottle of the
the traditional great taste of Blackfly products.
product range of Blackfly, which offers the Best Tequila and freshest
Pomegranate and orange fruits, with a strong 15 % of alcohol, it will blow
your senses.

BLACK FLY’S PILLARS OF STRENGTH

Manufacturers, producers and suppliers of alcoholic beverages

Black Fly is the manufacturer, producer and supplier of alcoholic beverages to one the largest
alcohol retailers in Canada- the LCBO. They are one of the first few micro- distilleries of
the Ontario province, in Canada.
Ability to work with all kinds of spirits
 6
Black Fly has a distillery license for making new spirit mixed drinks giving them greater flexibility to play around with
the spirits and make new mixes. They have a very popular set of products such as the Vodka Cranberry, Vodka
Blueberry, Vodka Citrus, Tequila Margarita, and Tequila Sunrise.
Flexibility of packing
Black Fly has the capacity to package their products in any corrugated/boxboard configuration, if required. Thus for
Nevada, Back Fly can easily change their packaging design in order to suite the specifications required to ship to the
United States. They can also modify their regular pack size to 6 or more from their standard pack (of 4 bottles /pack) if
required for the US market.
Excise warehouse status
Black Fly has an excise warehouse status which enables them to classify the stock in their warehouse as “duty
suspended” thus avoiding the advance payment on goods which may not have been sold yet still reside at the warehouse
as stock for months. Otherwise, Black Fly would end up paying the duty plus VAT up front on all their stock, which due
to the excise warehouse status they can legally avoid paying for a considerably long period, thereby saving costs. It
helps Black Fly attract and win new contracts by appealing to a broader audience by offering bonded capability.
[ CITATION The121 \l 1033 ]
Space capability to expand the manufacturing plant
Black Fly’s current 6,600 square-foot manufacturing facility has the flexibility and capacity to expand if needed; even
add more state-of-the-art equipment and machinery, if required.
Ability to produce private label, custom packaging
Black Fly has done private label and custom packing in the past. Black fly is flexible enough to do the same in future for
the right price and volume of sales though they prefer to keep their own label for brand value retention and visibility
reasons.
Flexibility to fill the PET bottle to different heights
Black Fly can fill the PET bottles t different heights, if needed. The black Fly bottles are wide- mouthed and 400ml in
volume. This could be altered to the standard 375 ml fill height when entering Nevada State in the United States

BLACK FLY’S BIG BITE

Ready to Drink spirit beverages

Black Fly is a niche player in the competitive Ready-to-drink spirit beverage market which is flooded with global
bigwigs. Rob Kelly saw a great market opportunity in the RTD beverage market and made the best use of it, which gave
birth to the Black Fly Beverage Company. Black Fly offers winning quality products with a distinct Canadian profile,
innovative
Black Fly Vodka and Tequila
has contributed baseditspre-mixed
to ease drinks.footprint
environmental They used high several
through quality ingredients, real and pure juice to
produce Premium
cutting edge Vodka
green and Tequila
initiates, measuresbased
and convenience
good businesspre-mixed
practices.drinks
Blackwherein
Fly is all one has to do is pour and drink.
Green company
committed to reducing wastes at all levels from staff sorting to larger initiatives
requiring large recycling companies.
 7

 Their PET bottles are recyclable are often end up at a local Canadian recycling company wherein they are sold to
companies that make cloth, car parts and other plastics.
 They also use biodegradable shrink-wrap in their plant also encouraging their trade partners to do the same.
 Black Fly uses 3oz/6oz PLA corn-based biodegradable cups for sampling and tasting purposes and sales events.
 Corrugate and shipping material of Black Fly is also recyclable
 Black Fly also has a deposit policy with retailers to encourage return of the bottles in order to recycle the bottles.
The unique bottle design
 Black Fly makes their bottles from PET 1 which is one of the most recyclable and popular plastics used in the alcohol
industry.
 Their bottles are wide-mouthed, non-breakable and non-sealable, thereby offering more volume per bottle almost 15%
more volume per serving as compared to that of the competition. They do all of this by offering Black Fly at a
competitive price which is affordable to the consumer.
 Also, the Black Fly bottles weigh only 40 gms in comparison to the conventional glass bottles that weigh 260 gms. This
not only makes Black Fly bottles easy to transport but also greatly reduces their transportation costs.
Exclusive flavours
Black Fly produces great tasting ready-to-drink spirit beverages. Black Fly currently focuses on 5 exclusive products
namely – the Vodka Cranberry, Vodka Blueberry, Vodka Citrus, Tequila Margarita, and Tequila Sunrise. Prior to the
current product range, they had other products such as the Spiked Ice, Black Currant Blueberry, Premium Pour Cocktail
and Strawberry Rhubarb[ CITATION Sha11 \l 1033 ]. These items were strategically removed from Black Fly’s
product range as they chose to focus only on the most revenue generating products which is a smart marketing move.
Co-Packaging Technology
Black Fly uses cutting edge green solutions for their packaging purposes. Black fly uses the
following items for their packaging at their facility:
 Biodegradable pallet-wrap film sourced from the distributor named Canpaco Inc. of
Woodbridge, Ontario.
 Black Fly also use an organic liquid gum adhesive from Lock N’ Pop, an ITW Company to
strengthen and enhance the stability and durability of the pallet-wrap.
 CHEP, a global leader in pallet and container pooling, supplies its patented high-quality hardwood pallets for Black Fly’s
transportation purposes
Lower Right Picture: Black Fly’s Eco-packaging.
 8
 The latest Videojet Technologies Inc. manufactured 1210 small character inkjet coder for
applying lot code data to their filled bottle products.
 Carbon-dioxide gas tank supplied by Air Liquid to add carbonation to the Black Fly beverages.
 3M case-sealer for secondary packaging applications [ CITATION And11 \l 1033 ]
 Black Fly uses carriers provided by Rock-Tenn Company (formerly Smurfit MBI) that are
completely glue less and use specially designed system of folds and punch-through closures.
Distinctive high quality products
Black Fly offers more than just a simple alcoholic beverage drink, insisting on high quality products with premium
ingredients, having authentic taste. All alcoholic ready-to-drink beverages of Black Fly have 7% alcohol/volume. They
use pure, real and natural juices with no artificial color that is free from high-fructose corn syrup and has no gluten
content. Black fly produces premium and genuine Vodka and Tequila beverages which are more natural and less sweet.
Black Fly’s penchant for high quality ingredients, unique less sweet profile, innovative packaging and buying local set it
apart from its competitors and make them take notice of the tiny small family owned business.[ CITATION Pre09 \l
1033 ]
Black Fly’s Big Bite
Black Fly has received positive feedback and word of mouth publicity from the local media. Black Fly has enjoyed a
comfortable growth and has come a long way with its clever marketing, product demos and personal sales calls. It has
achieved succes and has an impressive stack of awards it received for its incredible performace in a short span of seven
years. The few noteworthy awards it received are listed below:
 Small supplier of the year 2011 at the Elsie Award: Black Fly received the 2011 Small Supplier of the year at the
Elsie Awards ceremony. This is an important and noteworthy accomplishment for Black Fly as LCBO is the worlds
largest buyer and retailer of alcohol beverages (ABOUT THE LCBO, 2012). Today, Black Fly’s beverage drinks are
sold in over 500 stores in the Ontario province and an additional 7 provinces across Canada (Featured Companies,
2010). Black Fly’s growth has been incredible and it has come a long way with its clever marketing, product demos and
personal sales calls. It has achieved succes and has an impressive stack of awards it received for its incredible
performace in a short span of seven years. This award speaks volumes about Black Fly’s performance in this fiscal year
 July 14, 2010: Black Fly Beverage Company was the recipient of the Featured Company of London Award by the City
Upper
of Rightand
London Picture:
LondonBlack Fly’s Videojet
Economic 1210 inkjet
Development printer applies
Corporation, lot code
for their data growth and impact on the London
success,
Source:http://www.canadianmanufacturing.com/packaging/products-and-equipment/learning-to-fly-
economy.
47519 22, 2010: Black Fly was nominated for the small business of the year.
 March
 2009: Black Fly was nominated for the small business of the year.

MANAGEMENT AND HUMAN RESOURCES

 9
Black Fly Beverage Company is a small privately owned family-run business started by husband and wife pair of R
Kelly and Cathy-Siskind-Kelly in the year 2005. Powered with Ontario’s first micro-brewery license in 100 years, the pa
sought to produce unique tasting vodka and tequila pre-mixed drinks, exploiting the opportunity they foresaw in the Ready-t
Drink cooler category. They focused on delivering a ‘less sweet’ cooler that was truly Canadian.
Black Fly now has 5 products sold in the Canadian market and for a start-up
company like black Fly, it has created significant buzz that is envious for most similar
small businesses. In the last seven from its inception, Black Fly has come a long way.
It today boasts of more than eight permanent employees and more than 20 part time
employees to aid their operations.
The vital operations of Black Fly are well taken care by capable and
enthusiastic key players such as the following. The Marketing and sales operations
of Black Fly is taken care by Mike Pearce, the young and dynamic Director of Sales, whose been a critical player in
Black Fly ‘small but effective measures in gaining publicity employing minimal resources. He has been successful in
expanding Black Fly’s. The actual bottling, inventory of raw materials, bottling and storage is taken care of the
Production Manager, Mike Nisker. Rosemarie Schmit(Controller) and Anya Turner(Accountant) are other key
employees who oversees proper and accurate financial reporting, contracts reviews, implementation and documentation
of internal processes, procedures and controls. They are responsible for ensuring accuracy and credibility of the
financial statements of Black Fly by analyzing accounting records, computing taxes, developing monthly/yearly
budgets, auditing and also providing financial consulting.
Black Fly’s Achilles heel is its low brand awareness. Being a small privately owned business, Black Fly has
limited resources for engaging in marketing, advertising and other capital-intensive brand promotional activities. But, it
Lower Left Picture: Co-founders of Black fly Beverage Co: Rob Kelly & Cathy Siskind-Kelly.
compensates it by using cost effective techniques such as sampling events, which have a high conversion ratio at the
LCBOs; they also have a fair representation in food and liquor industry trade events such as the Food and Drink shows,
Toronto Gourmet Food & Wine Expo etc.
Future Requirements
Backed with success in the local markets Black Fly’s intends to internationalize its business and enter the
Nevada market. For this purpose, Black Fly might need to hire a few supporting staff, keeping their budget constraint in
mind. They could hire people on part time basis to assist them and also keep their operation costs minimal. They could
use the services of a lawyer on hourly basis for sound legal assistance on the various laws governing entry and doing
business in the U.S. market; in order to cut costs instead of hiring a lawyer on full time. They would require market
researchers to assist them with market surveys to help Black Fly understand the new market, consumer behavior and the
changing trends in the RTD industry, changing tastes and preferences of the consumers. This would help Black Fly
identify their target market and develop marketing plans catering to their needs.
Depending on the company’s future performance they might need more people to accommodate the growing
operations of their business. Accordingly they could hire more people depending on their success.
 10
Market Research
Black Fly would require people to do a thorough market research before entering the Nevada market. They
would need to hire people with management degrees and relevant experience and requisite level of expertise in the area
of market research. They could economize by hiring freelancers or college/university grads with required experience
and qualifications as part-time employees. This option would be much cheaper than hiring permanent employees for this
specific purpose.
Legal assistance
In order to enter a new market, black Fly need to know the laws, rules and regulations pertaining to doing
business in Nevada, the dos and don’ts of doing business in the new market. They would require legal help in
understanding contracts and entering into new alliances with importers/distributors. Inability to do so and any minor
error due to negligence of this aspect, would cost Black Fly a fortune.
To avoid legal pitfalls, it is best Black Fly consults lawyers, on hourly as and when required so as to ensure
compliance with the local and international laws. As lawyers are quite expensive, taking the services of lawyer on
hourly basis is a more economically viable option for Black Fly. Another economic option for Black Fly is to consult
lawyers online as compared to the option of hiring a lawyer as the rates are much lower and also quite often some of the
legal advice online is free of cost.
Future Overseas (US) Operations
Also, in the future, in case Black Fly initial pilot project is a success, they could allocate someone to take care of
the US operations in order to put the plan into action and also to oversee the progress of the same. Till then, they could
rely on their importer/exporter and their chosen retailers, thus minimizing their operation costs.

WELCOME TO NEVADA

HOME OF SIN CITY AND THE BIGGEST LITTLE CITY IN THE WORLD.

The State of Nevada offer several attractive facts for the liquor producers beside being the home of Las Vegas and
Reno:

 Over 40 million tourists each year.

 One of the highest alcohol consumptions of U.S.
 A 24/7 wet law in all the state.
 Over 500 locations for alcohol product sales.
 11

TARGET
Lower LeftMARKET
Picture: View of Las Vegas, Strip.

The ability of the company to create special and unique RTD’s

allows Black Fly to enter a very interesting market and target the
young-at-heart population of both males and females. Those,
who like to enjoy a great tasting, strong and distinct Canadian
beverage different from the usual sweet and malt- based products
found in the markets.
The minimum legal age for alcohol consumption in the State of Nevada, is 21 years. Nevada has a population of
1,964,223 people above the age of 20 years as per the U.S. Census of 2010, making this market a very attractive prospect
for Black Fly. Black Fly’s ideal market would be within the age group of 21-35 years.
The distinctive flavours of the Black Fly RTD’s offer an unique experience to both female and male consumers and with a
State population of 49.5 % of females and 50.49 % males, Black Fly has a considerably large future consumer base in
Nevada. Though, this kind of ready-to-drink spirit beverages are typically consumed by the female population, Black Fly
has designed their products in such a way that it appeals to the male population as well. Nevada having approximately
similar percentage of both genders, offers a broad and exploitable market.
Nevada has an impressive figure of more than 40
million tourists flooding the State from all over the world
every year, mostly for business and/or leisure; the
tourists thus, constitute an interesting target market for
Black Fly in this state. Their products can be offered to
the tourist population which is 20 times greater than the
population of Nevada (above 21 years old) which is 1.96
million for the year 2010. The tourist statistics in
Nevada provide an exceptional opportunity for
Black Fly to exploit.
The Black Fly offers a range of spirit based flavored alcoholic beverages (FABs) which automatically differentiates them
from their competitors as majority of the FAB’s in Nevada are malt based and very few are spirit based pre-mixed drinks.
Upper Right Picture: Young people in Black Fly photo-shoot.
The 7% spirit content per volume classifies them into the less than 14% spirit alcoholic beverage category. Their unique
Lower Right Picture: Young people in Black Fly photo-shoot.
pre-mixed offering thus attracts consumers who would prefer a spirit mixed drink over that of a malt-based beverage.
 12
Nevada is one of the states with the highest consumption of spirits liquors (2,581 thousands of gallons for 2007 according
to the National Institute on Alcohol Abuse and Alcoholism). This fact makes Nevada a market where Black Fly can take a
bite of it.

ENVIRONMENTAL SCAN

POLITICAL FACTORS

NAFTA treaty: According to the United

States International Trade Commission,
the tariffs for Canada for Vodka and
Tequila spirits have been eliminated
under the NAFTA. This has helped reduce a
major political entry barrier for Black Fly.
Regulations: Nevada is an ‘open’ state
and thus it licenses retailers and wholesalers to handle the distribution and sale of alcoholic beverages. Public intoxication
is legal in Nevada; it disallows any county/local laws from making intoxication to be a public offense. Nevada has very
liberal laws with respect to alcohol. Alcohol can be sold 24/7 and can be sold in convenience stores, super stores, grocery
stores and bars. These regulations make Nevada an ideal location for Black Fly to do business.[ CITATION Sta11 \l
1033 ]

LEGAL FACTORS
Middle Right Picture: Black Fly products, Tequila Margarita, Vodka Cranberry and Vodka
Product
Blueberry.Labeling: Regarding the labeling of the products, Black Fly would need to need to obtain the Certificate of
Label Approval (COLA). The Alcohol and Tobacco Tax and Trade Bureau (TTB) have a regulation that would affect
Black Fly’s entry into the US and its products. According to the TTB Black Fly products would need a Pre-COLA
approve letter before applying for the COLA certificate. All the alcohol producers who want to enter into the U.S. market
must apply for the Pre-COLA and COLA certificates. Thus, Blackfly should enter via an importer-distributor after
obtaining this certificate in order to have a smooth entrance in the Nevada market.
Conditions for selling to importer/wholesaler:
According to the NRS 369.386 Suppliers:
1. “A supplier of liquor may sell to an importer or wholesaler in Nevada only if,
 13
(a) Their commercial relationship is of definite duration or continuing indefinite duration; and (b) the importer is granted
the right to offer, sell and distribute within this State or any designated area thereof such of the supplier’s brands of
packaged malt beverages, distilled spirits and wines, or all of them, as may be specified.
2.  The supplier shall file with the Department a written notice indicating the name and address of each designated
importer. Each importer shall file with the Department a written acceptance of the designation.
3. A brewer, distiller, manufacturer, producer, vintner or bottler of liquor who designates an agent to sell his or her
products to importers into this State shall file with the Department a written designation indicating the name and address
of the agent, and the agent shall file with the Department a written acceptance of the designation.”
Following the above stated regulations the Black Fly products would be able to enter into Nevada preferably with
the assistance of an importer-distributor/wholesaler, as per the legal regulations of this State. Black Fly could also seek
the assistance of an agent who would represent Black Fly and take care of the sales and distribution of their products into
Nevada.
Legal requirements for the sale of liquor: Some US States have defined pricing bands for liquor products and regulated
stores to control sales. Thankfully for the Black Fly Company this isn’t the case in the Nevada. This State doesn’t have
value pricing or special prices for premium liquor products.

According to the NRS 369.180 the license requirements for the State of Nevada are as follows: “1. In addition to
Upper Right Picture:
the limitations imposedDelivery
by NRS truck with Black Fly logo.
597.210 and 597.220, a person shall not:
Import liquors into this State unless the person first secures an importer’s license or permit from this State.
Engage in business as a wholesale dealer of wines and liquors in this State unless the person first secures a wholesale
wine and liquor dealer’s license from this State.”[ CITATION CHA11 \l 1033 ]
Beside these rules there aren’t any prohibitions or regulations for the offering of alcohol products by retail stores.
[ CITATION NVA11 \l 4105 ]

The locations where these products are offered vary from groceries stores, corner stores, big chain retailers, bars,
casinos, strip clubs, and authorized on-street vendors. Thus, Black Fly needs to decide where it wants to be sold so as to
reach out to their target market. As Black Fly is a small company with limited funds, being available in almost all
locations may not be feasible due to the costs involved. Ideally, Black Fly must pick a few big players amongst the
grocery stores, big chain retailers and bars that have wide distribution and greater availability across Nevada as otherwise,
obtaining very high listings as aimed by Black Fly ( around 300) would not be practical.
Requirements to serve samples of alcoholic beverages on the premises of grocery stores in Nevada: According to the
NRS 597.225, in order to serve alcoholic beverage samples on the grocery store grounds, a license should be obtained “to
sell, at retail”. Otherwise, an annual permit from the local Nevada governing body, having the right to license and regulate
the sale of alcoholic beverages on the store premises, must be obtained. If the store operating guy “purchases any
 14
alcoholic beverages used for such samples from a wholesale dealer of alcoholic beverages who is licensed under chapter
369 of NRS”Another thing that needs to be taken care of is that the samples must be served only to people of legal age.
Thus, Black Fly should take care that its wholesalers or importer-distributors with whose assistance they intend to enter
the Nevada market have the required license. They should also check whether the stores through which their products
eventually reach the consumers have the license or the annual permit from the governing body to offer samples.

TAX SYSTEM

Import Tariffs on spirits: One of the primary obstacles that the Black Fly products would face to enter the Nevada
market are the regulations and conditions of the US Government for importing goods. This factor would be an important
determinant in terms of Black Fly’s product pricing and labeling aspects.
According to the United States International Trade Commission, the tariffs for Canada under NAFTA for Vodka
and Tequila spirits have been eliminated. This allows for a more suitable trading ecosystem for the introduction of the
Black Fly products into this international market.

Article Description Unit of Tariff under

Quantity NAFTA
Vodka: In containers each holding not over 4
litres: Pf. litres Free
 Valued not over $2.05/liter Pf. litres Free
 Valued over $2.05/liter
In containers each holding over 4 litres: Pf. litres Free
Tequila:
 In containers each holding not over 4 litres: Pf. litres Free
 In containers each holding over 4 litres Pf. litres Free
Information sourced from: Harmonized Tariff Schedule of the United States (2012)

Taxes levied: The Nevada Alcoholic Beverage Control (NVABC) is the regulatory body in this state. According to the
chapter 369 of NVABC [CITATION NVA11 \l 4105 ] the factors that would affect the entry and thereby the price of the
Black Fly products into this State are –
An excise tax levied on “all liquor and upon the privilege of importing, possessing, storing or selling liquor, according to
the following rates and classifications.”
Also, the tabular column below shows the excise state tax and other tax rates in Nevada on the distilled spirits as on Jan 1,
2010 are given below:

First Chart: Tariff

Statefor importing distilled
Excise tax ratesbeverages under Sales
($/gallon) NAFTA. Sourced
taxes from the Harmonized
applied Other taxes
Tariff Schedule of the U.S. (2012)
 15
Nevada 3.60 Yes below 14% - $0.70/gallon
below 21% - $1.30/gallon
[ CITATION STA101 \l 1033 ]

As Black Fly’s coolers have an alcohol content of only 7%/volume, thus falling into the below 14% alcoholic
beverage category and thus would be paying only 0.70$/gallon without any other special implications. Only the Black Fly
Tequila Sunrise has a 15% alcohol/volume thereby falling under the below 21% alcoholic beverage category, thus
requiring to pay 1.30$/gallon.

MACRO ECONOMIC FACTORS

Tourist attraction: The State of Nevada is recognized for being the home of Sin City (Las Vegas), The Biggest Small
City in the World (Reno) and the Hoover Dam. Nevada thus attracts millions of tourists each year who travel there for
business or leisure, bringing with them an impressive amount of money that is mostly spent in the hotels, casinos and
destinations for entertainment purpose. According to the U.S. Bureau of Economic Analysis, the 2009 GDP of the
Amusement, Gambling and recreation plus the Food Services and Drinking places was US$ 5,028,000,000.
The tourists present a striking market opportunity to Black Fly as they can be seen as prospective consumers
willing to try a different and new product that stands apart from the crowd of regular alcoholic beverages.
Nevada Economy Contributors: The majority of the local population of Nevada works around the leisure and
hospitality industry. Also, the contribution of the leisure industry to the GDP of Nevada is significant as of 2010 nearly
20,000 mil usd. Also, the per capita disposable personal income of Nevada for the year 2010 was 33,928 dollars.
[ CITATION Reg10 \l 1033 ]
This population is an exploitable market which might be willing to expend their money in high quality products
for a reasonable price. The introduction of a new product to the market and to their work environment might give Black
Fly products a competitive advantage in the local consumer market.

FORECASTED SALES OF THE READY TO DRINK ALCOHOLIC BEVERAGE MARKET IN THE

UNITED STATES
First Chart:
The Nevada
alcohol State
markettaxes for US
in the distributing
continuesdistilled spirit beverages.
to be marked Sourced from:
by the consumer Nevada spirits
shift towards Tax and wine from the
Rates ondrink
popular distilled
beer.spirits (2010) of the alcohol industry has resulted in a significant total volume growth in the flavored
The saturation
alcohol products especially the Vodka industry which has become saturated with added flavors launched in the previous
years. This trend also resulted in the slow and steady rise of the cocktail-based ready-to-drink beverages. This market has
rapidly developed in the last few years.
 16
Post the US economic crisis, RTD sales saw a significant improvement for the year 2011. The growth can be
largely attributed to the industry continued efforts to attract new consumers. Focusing on smart marketing, innovative
products, and health-conscious has marked the trend of RTD beverages industry. The malt-based RTDs are the most
popular in US. The marketing efforts are trying to attract the male population. The malt-based RTDs are being socially
accepted by the male population of the United States.
The pre-mixed RTD beverage industry in the United States is anticipated to expand at a CAGR of 1%, for the
forecast period from 2011- 2016. By the year 2016, the RTD sales volumes are estimated to reach 565 million liters in the
United States [ CITATION Rtd12 \l 1033 ]

IMPORTER-DISTRIBUTOR ALLIANCE
According to the NVABC regulations, in order for a supplier to enter the State of Nevada, the designated
distributor must have all the rights and freedom of sales. Thus, for Black Fly to access the Nevada market they need to
identify an importer-distributor/wholesaler that has a widespread and efficient distribution system in place. The main
liquor distributors for this State that offer or carry products similar to that of Black Fly or have a line of products that
allows the entrance of new RTDs are:
Company Competitor Products Importer/Distribut
or
First Graph: Historic Sales of spirits and RTDs. Sourced from: http://www.ats-sea.agr.gc.ca/amr/5531-
Wirtz Beverage Group – Mike’s V Hard Lemonade Importer/Distributor
eng.htm#e
Nevada
Bonanza Beverage Smirnoff Ice Distributor
Blach Distributing Company Bacardi Silver Importer/Distributor
Capitol Beverages Company Smirnoff Ice Distributor
New West Distributing Mike’s V Hard Lemonade Distributor
Beers of the World Mike’s V Hard Lemonade & Smirnoff Distributor
Ice
Azandra Wines & Spirits - Importer/Distributor
BEVI Beverages LLC - Importer/Distributor
Southern Wine & Spirits - Importer/Distributor
List made by: Kochu & Sustacha (2012)

Some of these companies are distributors of Black Fly’s primary competitors such as Smirnoff Ice, Bacardi Breeze
and Mike’s V Hard Lemonade. Diageo is the primary distributor of the Smirnoff products and they are the market leader
for spirits. It is the maker of some well-known brands such as Smirnoff, Captain Morgan, Grey Goose and Crown Royal.
The companies on the above list have a big variety of products and most of them works with beer, malt-based, wines and
RTDs.
The Nevada Tavern Owner association is the only group that assists businesses regarding health care, beverage
licenses, network opportunities, insurance, training and education. This association only works with Tavern retailers and
 17
they do not offer any benefits for suppliers who want to enter into this market. So, Black Fly should seek alliance with a
distributor that is a member of the Nevada Tavern Owner association.
The State of Nevada offers wide opportunities for listings and offering RTD’s products, from big chains of
groceries, convenience stores, wholesales, casinos, bars, clubs, restaurants and local corner stores. Some of the main
wholesalers or retailers that can be found are:

Big Chain Liquor Casinos & Pubs & Nightclubs & Gentlemen's
Restaurant
Retail Stores Stores Hotels Bars Dance Floors Clubs
First Chart: List of authorized importers/distributors in the State of Nevada, for more information
Tony The
Wal-Mart
refer to appendix table 09 Romas Bellagio
Over a Over 170 Over a
CVS Over 200
Red Lobster Luxor thousand Nightclubs Hundred
Pharmacy retail
Pubs and and Dance Gentlemen's
stores Over 91
Planet Bars Clubs Clubs
Walgreens Hotels and
Hollywood
Casinos
List made by: Kochu & Sustacha (2012)

One of the biggest retail store having a number of chains and outlets in Nevada and has public information of their
RTD’s listings in this state is Wal-Mart. Thus, Black Fly can ensure their products are distributed to Wal-Mart so as to
reach out to the majority of the population in Nevada throughout the year. The selected distributor must work toward the
goals of Black Fly, with 24 Wal-Mart locations, 200+ liquor retail stores, 85 CVS and 77 Walgreens, The 300 listings the
company has proposed can be reached. These locations are the main retailers of products for house parties, and the local
population of the State goes to these places in order to obtain liquors. Wal-Mart, Walgreens and CVS have 24 hours
policy and thanks to the laws of the State, Black Fly products can be sold anytime in these stores. Some of these are
located in highly transited places as the Strip in Las Vegas.
Also the State of Nevada is known for having a wet policy on all of their counties, and according to the NIAAA
the alcohol consumption from 1997 to 2007 has noticeably increased.
Nevada Beer (1,000's Wine (1,000's of Spirit (1,000's Total (1,000's of
Alcohol of Gallons) Gallons) of Gallons) Gallons)
Consumption
2007 77,411 10,061 2,581 90,053
2006 77,182 10,193 2,589 89,964
2005 73,421 9,330 2,372 85,123
Sourced from: NIAAA (2009)
 18

The State of Nevada population is heavily influenced by the trends in the principal and most populated cities, the
top three cities in this state are:

State of Nevada Name 2010

Population(million)
1 Las Vegas 583,756
2 Henderson 257,729
3 Reno 225,221
Sourced from: US Census Bureau (2010)

First Chart: Retailers in the State of Nevada. For more detailed information refer to the appendix 08.
All the information regarding alcohol consumption is focused mainly in Las Vegas, and Reno trends. These are the
Second Chart: State of Nevada alcohol consumption. Sourced from: NIAAA (2009)
primary markets that Black Fly should target for the entrance and profit of the company. The liquor stores in these cities
Third Chart: State of Nevada main cities and population. Sourced from: U.S. Census Bureau (2010)
offer different marketing plans to attract consumers. Most of the nightclubs and bars pay to know celebrities to celebrate
or partying in their clubs, some liquor companies also take part in these marketing strategies, advertising with the
celebrities. Local retail liquor stores are focused in the use of tastings, coupons and liquor sales to attract customers to
their stores and to get products. The State of Nevada is a market that offers different opportunities to engage business, and
all these strategies are negotiated by the distributors.
Las Vegas Distillery is the only spirit distillery focused on spirit drinks, and mixed spirit drinks (not RTD’s) and
they are located in Las Vegas. In 2011, this local competitor tried to get the distillery license but the application arrived
two days after the legislature meeting finished. The owners of this company have been able to offer eventually tastings by
special support of the Las Vegas Government. Las Vegas Distillery is the only local competitor Black Fly would find in
this market, and they would try to obtain the licensing in 2013.

MARKET ENTRY STRATEGY OF BLACK FLY

Black Fly must preferably choose a market such as Vegas or Reno to enter. They can try pilot testing in one or two
markets and depending on the response, plan or ramp up (or exit the market if it’s not viable) their sales and take a more
aggressive stand in order to grab a slice of the attractive Nevada market share.
Marketing Strategy
Black Fly can adopt a number of marketing strategies. But, it should start with creating market awareness for its
products in the Nevada market. For a small micro-distillery like Black Fly the key is to keep its budget strings as tight as
possible. It could effectively create awareness and build its professional virtual presence in Nevada by social media
marketing. By using social networking platforms such as Facebook, Twitter, Myspace. They can upload videos about the
various events or awards they have received in the past on Youtube can also greatly affect their popularity. They can
effectively and efficiently utilize these tools to reach out to its target markets.
 19
People of United States are usually highly ethnocentric in nature. Black Fly being a “truly Canadian “company
would have to overcome this socio-cultural aspect in order to enter and do business in the Nevada State. Blackfly would
have to enter into this market without referring them as a Truly Canadian Company, and offering free products to
customers would attract a lot of customers.
For the Market strategy plan Blackfly first should consider 3 different scenarios, the pessimistic, average and
optimistic. All the scenarios would have the same “one importer, one distributor” condition, an important condition is that
they must negotiate with the distributor to which kind of retailers the product must be offered, so they can be aware of the
market entry promotion. For all the scenarios the markup for wholesaler and retailer would be according to the scenario
they belong. The sales tax for all the scenarios would be the Clark County sales tax of 8.1 % which is the higher one in the
whole State.

Promotional strategy
The strategy for the market entry would be the creation of a special Giveaway promotion of Black Fly cases which
will consist in the improvement of sales by winning codes.

1. Once the product arrives at the retail stores a combination set of banners and pamphlets should be placed at the
retailer outlets.  This would impart information about Black Fly’s new products and promotions created to the
shoppers at the store and probable future Black Fly consumers.

2. The Black Fly caps would have special codes that the consumers would have to enter online on a special Black Fly
webpage where people would have to register into a customer database that will have important facts about the
products and direct links to the social networks of Black Fly.

3. In the webpage, consumers would submit the special code of the package that would immediately show if the
person wins a 4 pack of Vodka Citrus, Tequila Margarita or the 3rd model that Black Fly wants to introduce to the
Nevada Market.

4. If the customer wins a case they would be able to exchange it in any of the authorized retailers which will give
them the 4 pack and then introduce the information to receive the money of the given away case.

The following charts have detailed information on the Black Fly Giveaway market entry promotion. There are 3
different scenarios made with information sourced from Mike Pearce in order to complain with Black Fly’s markup, and
capital designated for marketing. For every scenario the amount of cases sold varies, indicating the profit for the company
and the amount available for the market entry strategy. The total amount of packs for the Give-a-Way promotion is
indicated for each scenario and the base cost is the same for all of these. These values are used in order to do a financial
risk for the company.
 20
Scenario Cases Sold Total Profit Amount Marketing Packs Gifted
Optimistic Retail price 40000 $320,000.00 $60,000.00 3397
Realistic Retail price 30000 $240,000.00 $45,000.00 1825
Pessimistic Retail price 20000 $160,000.00 $30,000.00 482
Total money Cost of Extra Money for Contingency
Scenario spend in Implementing for additional fees and special
giveaway packs the Promotion requirements
Optimistic Retail price $32,400.00 $24,000.00 $3,600.00
Realistic Retail price $18,900.00 $24,000.00 $2,100.00
Pessimistic Retail price $5,400.00 $24,000.00 $600.00
Charts made by: Kochu & Sustacha (2012)

RISK MANAGEMENT AND FINANCIAL RISK

The Nevada market is a very competitive one, the major companies are always developing new strategies in order
to increase the sales and gain market share. Black Fly being a small company with few resources at hand might find it
difficult to establish alliances with the principal liquor retailers, the hotels, casinos and bars. The low level of awareness
in the U.S. and the international community to the Black Fly products also creates an unlikely environment for alliances
between Black Fly, distributor and the major retail liquor wholesalers and retailers.
The principal competitors of Black Fly are mainly focused on the tourist and the locals and places for leisure,
these companies also have a major role in wholesalers, and retail stores. The Black Fly products fit more into the house-
party, college/university crowd ambience; this is a problem the company might face in order to sell big amounts of
product. In this State, the biggest share of the market is related to the leisure industry. To engage business with this, Black
Fly must reshape their business model and start investing in advertising to create awareness, so they can attract consumers
in this industry and gain a part of the market share.
In order to enter any U.S. market, the Pre-COLA and COLA label certificates must be approved. Black Fly must
apply to this certificate before engaging a business contract with any importer or distributor. This certificate has an
average wait time of 35 business days.
The competitors RTDs prices are lower than the Black Fly prices, the fact of having an expensive price in the
market, and Summary
First Chart: being a new
of product,
scenarioscan
forbecome
the Givea aproblem for theentry
Way market localpromotion.
consumers due the U.S. economic crisis.
SecondIn orderCost
Chart: to make
of theanmarket
international shipment Black Fly needs to work with a truck shipping company and a custom
entry promotion.
broker.
For moreThe use ofinformation
detailed these services for to
related a controlled salesplease
the promotion scenario
refermight
to theraise the cost.
appendix tableThe
1-7 use of an importer who also
owns a Nevada authorization for distribution will eliminate the additional cost for those services.
The use of an outsourced distributor can become a problem to Black Fly’s listing goals; without a strict control
over the distribution channel, there is a possibility that some of the retail stores might face a stock out due to inefficiency
of the distributor. The Nevada State laws give the distributor the complete control of sales, leaving Black Fly in a difficult
position to ensure the listings of their goals.
 21
The U.S. population is widely recognized as an ethnocentric culture, which usually doesn’t accept easily foreign
products. The “Truly Canadian” company tagline is a barrier that Black Fly must overpass in order to obtain a bigger slice
of the Nevada market.
The give-a-way entry promotion also represents a monetary investment risk that the company would have to face
before engaging business and entering into this market. And approximated value of CAN $24,000 would be needed for
this promotion beside the scenario and the cases given away. If Black Fly doesn’t have a good response from the
consumers, the company would faces loses. To avoid this, Black Fly must sell 3693 cases to break even and thus be
successful in their pilot market entry project. For further information refer to the appendix XX
In order to address the possible risk in this market, Black Fly should
engage in business with an importer who owns a Nevada distributor license.
To avoid the use of a custom broker or the paperwork of international
shipping, the importer/distributor must have a warehouse in Canada, or
complain with picking up the shipment in Canadian territory. An important
condition for the one year controlled scenario is that the distributor must
agree with the business model of Black Fly, and ensure the availability of
the product in the wholesalers and retail stores in order to complain the goals
established by Black Fly.

OPERATIONS OVERVIEW
First Graph:
Black Profit Vs.been
Fly has Market Entry Cost
a pioneer in the micro-distillery business and thus do not rely on the traditional business
For more
model, detailed
they information
have an effective related to theprocess
production promotion pleasethat
in place refer to the
leads to appendix table 11product- Premium Vodka and
a great tasting
For more
Tequila detail information
Beverage. for risk
This involves management
procuring refer alcohol
pre-made to appendix table
(vodka 10 tequila) and juice mix from outside sources.
and
First Graph:
Black Fly BPE
then for the and
mixes financial
poursrisk.
theseFor more information
ingredients refer
in stainless to the appendix
containers XXtransfers the mixture to bottles, labels
or boilers,
and ships the products out immediately. The actual distillation would disrupt and even make the entire process slower and
most capital intensive; thus Black Fly’s process for a small company is highly efficient and effective. Also, the distillery
license gives them the freedom to mix and experiment with new mixes, flavors, thus churning out new products putting
their expertise and creativity to the best use. (Mitchell, 2007)

Black Fly very smartly economizes their inventory as they have an excise warehouse status which enables them to
classify the stock in their warehouse as “duty suspended” thus avoiding the advance payment on goods which may not
have been sold yet still reside at the warehouse as stock for months. Otherwise, Black Fly would end up paying the duty
plus VAT up front on all their stock, which due to the excise warehouse status they can legally avoid paying for a
considerably long period, thereby saving costs.  (The financial benefits of bonded warehousing, 2012)

But, despite its operational efficiency, there are a couple of things Black Fly needs to take care of when entering a
new market. Black Fly needs to upgrade its machinery in order to automate several processes. This would help them
 22
increase their production capacity, reduce their work shifts and keep their employee count low; thereby keeping their
operational costs minimal. Also, when entering the U.S. Black Fly also needs to consider the shipping and logistics aspect
of their business. Since they do not own any cargo vehicles and rely totally on the retailers to pick up the consignment;
they must use the services of a custom broker to eliminate shipping issues, as suggested by Mike Pierce. Alternatively, the
preferred option would be that they look for an importer/distributor who would take care of the logistics aspect for Black
Fly. To secure themselves of payment issues for the pickup, Black Fly must consult a Canadian consulate.

RECCOMENDATION AND CONCLUSION

Black Fly must seek alliances with an importer/distributor for their market entry strategy. This would ensure elimination
of the additional expenses that would be incurred in case they do their own shipping arrangements.
Black Fly must address its low brand awareness issue when entering Nevada, by increased marketing efforts to increase
brand visibility, awareness and equity. Given its limited resources, Word of mouth (WOM) marketing using social media
campaigns by creating a buzz on social networking sites such as Facebook, MySpace, Twitter etc is a suggested economic
and effective way of publicity for Black Fly. Also participation in trade shows, fairs and exhibitions in the United States
would enable them to increase their brand awareness and visibility.
They also need to hire part time support staff such as market researchers or free lancers to assist them in their pilot project
in understanding the market and the changing customer tastes and preferences and take the hourly/online services of a
lawyer to get sound legal assistance regarding entering the Nevada market.
In order to break even, in Nevada, based on the calculations done in the financial and risk analysis Black Fly must sell
3693 units of cases so as to cover their costs and ensure future profitability.
As Black Fly intends to expand its business and operations to the United States it must consider ramping up its machinery
and equipment so as to increase their production capacities; automate processes; reduce the number of people on the floor
to a minimum. Based on the success of the pilot project they must expand and upgrade their production processes so as to
accommodate future uncertain demands and thereby avoid production and supply problems.
To summarize, though Nevada is an attractive market, being a wet state but from a pilot project point of view, Nevada
may not be the ideal market for Black Fly to enter at the initial stage. This is because; entering Nevada might entail selling
Black Fly to the hotels, casinos, clubs, bars, shows etc instead of selling it to the retailers. Also, it would require greater
investment in marketing efforts to overcome the low brand awareness that Black Fly suffers in the US, particularly in
Nevada due to the high competition of liquor beverages in Nevada. Also, the primary target for Black Fly in Nevada is the
tourist population. Thus, owing to Black Fly’s limited budget constraints and current size, Nevada as the first market
choice in the United States may not be apt in the initial stages. But, in future, in case Black Fly’s pilot project is
 23
successful and they seek to expand to other markets, then Nevada would be a potential market for Black Fly to conduct
business.

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 26

APPENDIXES
Table 1
OPTIMISTIC SCENARIO

Vodka Tequila
Markup % Citrus Margarita 3rd Model
Selling units 4 pks 4 pks 4 pks
Selling units per
case 6 6 6
 
Cost of Producing
Product per case $ 17.00 $ 16.50 $ 16.00
Additional costs to
be covered  
Freight est(per
case) $ 2.50 $ 2.00 $ 1.50
Marketing est (per
case) $ 2.00 $ 1.50 $ 1.00
 
Cost per case
including
Freight/Mktg $ 21.50 $ 20.00 $ 18.50
 
Black Fly Markup
required 40% $ 8.60 $ 8.00 $ 7.40
 
Selling Price to
IMPORTER $ 30.10 $ 28.00 $ 25.90
 
IMPORTER Markup
required 33% $ 9.93 $ 9.24 $ 8.55
U.S.A. Tariff for
Vodka and Tequila
0% $ - $ - $ -
products imported
from NAFTA-CAN
$ 40.03 $ 37.24 $ 34.45
 
 
WHOLESALER
Markup required 20% $ 8.01 $ 7.45 $ 6.89
US$ 0.7 per
Wine Gallon or
State of Nevada Tax Equivalent (3.79
for spirits between Liters) Tax
0.5 and 14 % of value per
alcohol Blackfly Case $ 2.53 $ 2.53 $ 2.53
 27
$ 50.57 $ 47.22 $ 43.87
 
RETAILER Markup
required 20% $ 10.11 $ 9.44 $ 8.77
Nevada State Tax
over sales (Clark
County) 8.1% $ 0.82 $ 0.76 $ 0.71
$ 61.50 $ 57.43 $ 53.35
 
 
Estimated Retail
price per selling
unit $ 10.25 $ 9.57 $ 8.89
 REALISTIC SCENARIO
28
Table 2
Tequila
Markup % Vodka Citrus Margarita 3rd Model
Selling units 4 pks 4 pks 4 pks
Selling units per case 6 6 6
 
Cost of Producing
Product per case $ 17.00 $ 16.50 $ 16.00
Additional costs to be
covered  
Freight est(per case) $ 2.50 $ 2.00 $ 1.50
Marketing est (per
case) $ 2.00 $ 1.50 $ 1.00
 
Cost per case including
Freight/Mktg $ 21.50 $ 20.00 $ 18.50
 
Black Fly Markup
required 40% $ 8.60 $ 8.00 $ 7.40
 
Selling Price to
IMPORTER $ 30.10 $ 28.00 $ 25.90
 
IMPORTER Markup
required 33% $ 9.93 $ 9.24 $ 8.55
U.S.A. Tariff for Vodka
and Tequila products
0% $ - $ - $ -
imported from NAFTA-
CAN
$ 40.03 $ 37.24 $ 34.45
 
 
WHOLESALER Markup
required 25% $ 10.01 $ 9.31 $ 8.61
US$ 0.7 per
Wine Gallon
or Equivalent
State of Nevada Tax for (3.79 Liters)
spirits between 0.5 and Tax value per
14 % of alcohol Blackfly Case $ 2.53 $ 2.53 $ 2.53
$ 52.57 $ 49.08 $ 45.59
 
RETAILER Markup
required 25% $ 13.14 $ 12.27 $ 11.40
Nevada State Tax over
sales (Clark County) 8.1% $ 1.06 $ 0.99 $ 0.92
$ 66.78 $ 62.34 $ 57.91
 
 
Estimated Retail price
per selling unit $ 11.13 $ 10.39 $ 9.65
Table 3
29
PESIMISTIC SCENARIO

Tequila
Markup % Vodka Citrus Margarita 3rd Model
Selling units 4 pks 4 pks 4 pks
Selling units per case 6 6 6
 
Cost of Producing Product
per case $ 17.00 $ 16.50 $ 16.00
Additional costs to be
covered  
Freight est(per case) $ 2.50 $ 2.00 $ 1.50
Marketing est (per case) $ 2.00 $ 1.50 $ 1.00
 
Cost per case including
Freight/Mktg $ 21.50 $ 20.00 $ 18.50
 
Black Fly Markup required 40% $ 8.60 $ 8.00 $ 7.40
 
Selling Price to
IMPORTER $ 30.10 $ 28.00 $ 25.90
 
IMPORTER Markup
required 33% $ 9.93 $ 9.24 $ 8.55
U.S.A. Tariff for Vodka
and Tequila products
0% $ - $ - $ -
imported from NAFTA-
CAN
$ 40.03 $ 37.24 $ 34.45
 
 
WHOLESALER Markup
required 30% $ 12.01 $ 11.17 $ 10.33
US$ 0.7 per
Wine
Gallon or
Equivalent
(3.79 Liters)
State of Nevada Tax for Tax value
spirits between 0.5 and 14 per Blackfly
% of alcohol Case $ 2.53 $ 2.53 $ 2.53
$ 54.57 $ 50.94 $ 47.31
 
RETAILER Markup
required 30% $ 16.37 $ 15.28 $ 14.19
Nevada State Tax over
sales (Clark County) 8.1% $ 1.33 $ 1.24 $ 1.15
$ 72.27 $ 67.46 $ 62.65
 30
 
 
Estimated Retail price
per selling unit $ 12.05 $ 11.24 $ 10.44
31
 Table 4
1
Parameters
Scenario Cases Sold Vodka Citrus Tequila Margarita 3rd Model
Optimistic Retail price 40000 $ 10.25 $ 9.57 $ 8.89
Average Retail price 30000 $ 11.13 $ 10.39 $ 9.65
Pessimistic Retail price 20000 $ 12.05 $ 11.24 $ 10.44

Table 5

Total
Estimated Sales for
Blackfly Cost of Amount
Year one Cases Total
Markup Marketin designated
Controlled (Units) Profit
Average g Average for
Scenario
Marketing
$320,000.0
Optimistic Scenario 40000 $8.00 0 $1.50 $60,000.00
$240,000.0
Realistic Scenario 30000 $8.00 0 $1.50 $45,000.00
Pessimistic $160,000.0
Scenario 20000 $8.00 0 $1.50 $30,000.00

Table 6

Cost of
Total
Cost of Creating the
Amount Total amount Vodka Tequila Model
Banners Promotion
Marketing Strategy designated left for Citrus Margarit 3
and other Webserver and
for promotion Packs a Packs Packs
fees IT retailer
Marketing
System
Optimistic Scenario $60,000.00 $9,000.00 $15,000.00 $36,000.00 3512 3762 4049
Realistic Scenario $45,000.00 $9,000.00 $15,000.00 $21,000.00 1887 2021 2176
Pessimistic Scenario $30,000.00 $9,000.00 $15,000.00 $6,000.00 498 534 575
Promotion Strategy Vodka Citrus Tequila Model 3 Packs Total Packs Total money spend in
 2
Margarita
Packs (1/3 of the
Packs (1/3 of (1/3 of the top
top allowed
the top allowed allowed packs Gifted giveaway packs
packs to
packs to to giveaway)
giveaway)
giveaway)
Optimistic Scenario 1054 1129 1215 3397 $32,400.00
Realistic Scenario 566 606 653 1825 $18,900.00
Pessimistic Scenario 149 160 172 482 $5,400.00

Table
7
Amount Cost of
Extra Money for Contingency
Total Market Entry Designated Implementin Cost of Packs
for additional fees and special
Promotion for g the Given Away
requirements
Promotion Promotion
Optimistic Scenario $60,000.00 $24,000.00 $32,400.00 $3,600.00
Realistic Scenario $45,000.00 $24,000.00 $18,900.00 $2,100.00
Pessimistic Scenario $30,000.00 $24,000.00 $5,400.00 $600.00 Table 8: List of
Las Vegas
Casinos

Strip (30) Close to the Strip (10) Downtown(13) Other (25)  (78 total in Las Vegas)

Aria Monte Carlo East of the Strip At the Fremont St. East North
Bally's New York New York Ellis Island Experience Arizona Charlie's East Aliante Station
Bellagio O'Sheas Hard Rock Hotel Binion's Boulder Station Bighorn Casino
Bill's Gambling Hall Paris Hilton Fitzgeralds Eastside Cannery Cannery Casino
Caesar's Palace Palazzo Hooters Four Queens Longhorn Casino Fiesta Rancho
Casino Royale Planet Hollywood Terrible's Fremont Sam's Town Jerry's Nugget
Circus Circus Riviera Tuscany Golden Gate Poker Palace
Cosmopolitan Sahara(closed 5/16/11) Westin Golden Nugget West Santa Fe Station
 3
Encore Slots-a-Fun* Plaza Silver Nugget
Excalibur Stratosphere West of the Strip Vegas Club Arizona Charlie's Speedway Casino
Flamingo Treasure Island Palace Station Gold Coast Texas Station
Harrah's Tropicana The Palms Other downtown Orleans Wildfire
Imperial Palace Venetian Rio casinos Rampart
Luxor Wynn California Red Rock South
Mandalay Bay El Cortez Suncoast Silverton
MGM Grand *Slots-A-Fun is the only Gold Spike Wild Wild West South Point
Mirage one that's a casino only Main Street Station
(no hotel) The Western

Company
Wirtz Beverage Group –
Nevada
Bonanza Beverage
BMC fine spirits
Blach Distributing Company
Great Basin Beverages LLC
Capitol Beverages Company
New West Distributing
Johnson BrothersLiquor
Company
Beers of the World
Azandra Wines & Spirits
BEVI Beverages LLC
CCR Beverage Imports LLC
Luce & Son Inc
Southern Wine & Spirits
TC Specialty Brands, LLC
DIAGEO
Table 9 : Black Fly competitor list in Nevada
4
Competitor Products Importer/Distribut
or
Mike’s V Hard Lemonade Importer/Distributor
Smirnoff Ice Distributor
- Distributor
Bacardi Silver Importer/Distributor
- Distributor
Smirnoff Ice Distributor
Mike’s V Hard Lemonade Distributor
- Distributor
Mike’s V Hard Lemonade &Smirnoff Distributor
Ice
- Importer/Distributor
- Importer/Distributor
- Importer
- Importer
- Importer/Distributor
- Importer
- Importer
 5
Sl. Step 1: Risk Identification Step 2: Risk Assessment
No.
List of Possible Internal Risks Likelihood Impact (H/M/L)
(H/M/L)
1 Difficulty in making alliances with major liquor M H
retailers, the Hotels, Casinos and Bars owing to the
small size, limited resources at disposal and market
competitiveness of Nevada.
List of Possible External Risks
2 In Nevada, the biggest share of the market is related H H
to the leisure industry d most of the liquor beverages
are sold to hotels, pubs, casinos and bars. But the
Black Fly products fit more into the house-party,
college/university crowd ambience; this is a problem
the company might face in order to sell large
quantities of product.
3 Black Fly needs to obtain the Pre-COLA and COLA L H
label approval certificates in order to engage in any
business contracts with any importer or distributor.
4 International shipments to the US might be an issue M H
for Black Fly as it doesn’t own any fleet of vehicles
and thereby considerably increase their operational
costs.
5 The use of an outsourced distributor might pose a H H
problem to Black Fly’s listing goals as the Nevada
State laws give the distributor the complete control of
sales, leaving Black Fly in a difficult position to
ensure the listings of their goals.
6 The ethnocentricity so typical of the United States H H
makes the “Truly Canadian” tagline for Black Fly
disadvantageous to enter the US market.
7 The give-a-way entry promotion also represents a H H
monetary investment risk that the company would
have to face when entering the Nevada market, in
 6
case its unsuccessful.
Table 10: Risk Analysis
Table 10: Risk Management (contd)
Sl. Step 3: What needs to be done to mitigate the risks Timescale Level of Risk
No. (ST/LT) * (H/M/L)
Internal Risks
1 Black Fly must increase the awareness of their ST H
products in the U.S. and the international community
in order to engage in promising alliances with major
distributor and retail liquor wholesalers/retailers.
External Risks
2 To engage in business with the retailers/distributors LT H
in Nevada, Black Fly must reshape their business
model and focus their advertising effort to create
awareness, so they can attract consumers in this
industry and thus increase their market share.
3 Black Fly needs to apply to obtain the Pre-COLA and ST L
COLA label approval certificates in order to engage
in any business contracts with any importer or
distributor.
4 Black Fly must engage in an alliance or partnership ST H
with an importer/ distributor in Nevada and thus
reduce the shipments costs and risks.
5 Black Fly must negotiate a better deal with the ST M
outsourced distributor that gives them some control
over the inventory replenishment.
6 Black Fly must drop the “Truly Canadian” image in ST H
order to be successful in the US.
7 Black Fly must sell 3693 cases to break even and thus LT H
be successful in their pilot market entry project.
 7

11. Assumptions made for the same:

Average of the profit/markup= 8$
Marketing estimate/money spent per case=1.5$
Total no of cases sold= 30000 cases (Realistic Scenario)
 8

Table 12. Assumptions for the

calculations
Assumption Parameters Units in CAD
Cost of production the product per 16.50
case
 9
Average Black Fly Markup per case 8
Average Marketing costs per case 1.5