Brew’s Views: John Trump

Brew’s Views

Brewers continue fght to loosen archaic ABC laws

fforts by North Carolina brewers to ease restrictions on how they sell and distribute their locally made products will continue, regardless of what happens in a lawsuit challenging the distribution caps.

Te struggle to change the state’s draconian laws regulating alcohol started soon after North Carolina became a control state and implemented what has become an intractable ABC system. Te battles — in the legislature and in court — will continue and intensify.

Lawmakers probably won’t address changes to the laws during the session this spring. But, as one brewer told me, expect an active session in 2019. Te cap issue will likely come up, as will moves to establish a legitimate “happy hour” in bars and restaurants and, on the spirits side, an effort to allow distillers to sell their products directly to consumers.

It seems, in many ways, the alcohol industry — especially brewers and vintners — have flourished in spite of state “control,” a word lawmakers like to bandy about when defending North Carolina’s restrictive laws, which inhibit free markets and oftentimes strangle entrepreneurship.

As I write this, N.C. Superior Court Judge Allen Baddour of Wake County had yet to rule on a complaint filed May 15 of last year by Craft Freedom LLC, Te Olde Mecklenburg Brewery LLC and NoDa Brewing Co. Te complaint — which the state wants dismissed — says the distribution cap and beer franchise laws are inflicting injury and threaten to impose additional damage to the brewers, who can produce no more than 25,000 barrels of beer each year without contracting with a distributor.

Te lawyers for the brewers — Bob Orr and Drew Erteschik — argue the law amounts to economic protectionism and interferes with the plaintiffs’ constitutional right to earn a living, which the N.C. Supreme Court has called inalienable. Te three-tiered system — producers, wholesalers and retailers — isn’t pure but rather, the lawyers say, cracked and frayed, with myriad exceptions to rules, including those governing home brewers and tastings and sales at festivals and other events.

Te rules enrich one party in lieu of another, they argue.

“It’s no Holy Trinity,” Erteschik said in court March 20.

Te plaintiffs’ latest brief says the “arbitrary” distribution cap punishes craft breweries for their own success by forcing them to relinquish the distribution rights. If a brewery exceeds the limit, the rule says, every ounce — including the first — he brews must be sold by a distributor.

NoDa and Olde Meck refuse to contract with a distributor. Tey already have the means to distribute their beer as they choose, they say. Wholesale distribution will weaken the respective brands and impede the brewers’ paths to their own well-worn markets. It destroys relationships between brewers and customers, brewers say. Te distribution model, depending on how the beer is transported, could affect brewers’ products.

A legislative move to raise the limit last year failed, in large part because of vehement opposition from the powerful N.C. Beer and Wine Wholesalers Association. Te wholesalers say the current arrangement works well, and removing the cap would provide a competitive advantage to a small group of North Carolina breweries to the disadvantage of everyone else, including other small breweries that appreciate the convenience of having a larger company handle direct sales and marketing.

On April 26 of last year, the state House voted 95-25 to approve House Bill 500, a watered-down plan that originally would have raised the barrel limit to 200,000. Tat provision was stricken from the bill. Te political-action committee affiliated with the wholesalers association gave more than $500,000 to political candidates of both

Eparties and the parties themselves in the five years prior to this election year, according to state campaign finance records and reported by Te Associated Press. “As is typical for middle men whose role is not market-driven, the distributors’ profit margin has always been, and continues to be, enormous,” says the original complaint from the brewers. Voters, a survey found, don’t like the cap. Te survey of 800 likely voters, prepared last year for the industry group Craft Freedom by Strategic Partners Solutions and overseen by Republican political consultant Paul Shumaker, finds the more voters learn about the impact of the production cap on North Carolina breweries, support for the production cap nearly completely vanishes. Tat goes for people who voted for President Trump or Hillary Clinton. “When the voters who favor the production cap learn that producers lose their brand and marketing rights,” says the survey, “support for the cap diminishes to 1.6 percent” — two Republicans, three unaffiliated voters and eight Democrats from the 800 voters surveyed. North Carolina has almost 260 breweries, more than any other state in the South. Brewers support other state industries, including farmers who malt and grow barley as well as produce wheat and blueberries. Te brewing industry in the state had, according to figures from 2015, an annual economic impact of $1.2 billion, says Craft Freedom, providing $300 million in wages and more than 10,000 jobs. Te numbers continue to increase. Todd Ford, a founder of NoDa, last year asked lawmakers a simple question: Why does the state penalize the brewers who have invested the most? NoDa products comprise just 1 percent of the Charlotte beer market, he said. Olde Meck’s sales make up about 2 percent of that market. “Quite honestly,” Ford said, “it’s the best of the worst, and we should aim higher.” Te proverbial jury, so to speak, remains out. Still, things are about to get quite busy. John Trump is managing editor of Carolina Journal and author of “Still & Barrel: Craft Spirits in the Old North State” (Blair 2017).

By John Trump

62 | Carolina Brew Scene | Summer 2018

Summer 2018 | Carolina Brew Scene | 63