NC beer distribution law a model for other states

by Tim Kent, NC Beer and Wine Wholesalers, published in Rocky Mount Telegram, March 1, 2017.

The craft beer industry is booming and N.C. beer distributors are pleased to play a leading role in that movement. Beer lovers now have access to more than 14,000 labels of beer, and N.C. distributors are responsible for bringing most of those brands to the marketplace.

Our state has three of the top 20 craft brewers in the U.S. with East Coast operations in Western N.C.—Sierra Nevada, New Belgium and Oskar Blues. We have the most craft breweries (179) of any Southern state, and our beer distributors have helped dozens of N.C. craft brewers grow their brands and increase their sales.

Over the last 15 years, N.C. distributors have been a leader in developing the most permissive craft beer laws of any state in the South. Craft brewers may own up to three retail facilities, plus their brewery, and sell directly to consumers. That privilege is a big deal as the direct sale of a pint at $5 or $6 yields a huge profit margin for the brewer. They may also self-distribute their products up to 25,000 barrels a year, an amount equal to 8.26 million bottles---which when stacked end-to-end would be enough beer bottles to reach from North Carolina to Canada. By comparison, our neighboring states allow no self-distribution.

The premise behind N.C.’s self-distribution law is to help incubator breweries find a pathway to market, and the law has clearly succeeded in that regard. The number of breweries has exploded and 90% or more of the brewers in N.C.---and the U.S--- produce less than 7,000 barrels. Many small brewers run very successful businesses based largely on a model of neighborhood and local support.

So now there’s an effort to expand self-distribution that is being led by a handful of breweries, two of them located in Charlotte. It’s an effort to award themselves a special privilege that would put all other breweries and distributors at a disadvantage in a highly-competitive marketplace.

With all this competition, it’s no wonder two of the original Charlotte brewers now want to change the rules that helped make them successful in order to stack the deck in their favor.

It's important to note this legislative proposal would not have a positive effect on breweries located in Eastern North Carolina. Those breweries already enjoy the privilege of self-distribution and some of those breweries such as Mother Earth and Duck Rabbit Craft already have working relationships with distributors.

Make no mistake about it---this is a Charlotte-driven legislative initiative designed to squeeze out competition in the Charlotte market. Their legislative initiative is unfair and anti-competitive. It’s also unconstitutional.

A U.S. Supreme Court ruling (Granholm v. Heald) concludes it’s a violation of interstate commerce to award a special privilege to in-state suppliers at the expense of out-of-state suppliers. During its recent review of the Anheuser-Busch InBev and SABMiller merger, the U.S. Department of Justice also recognized the importance of independent distribution to the growth of craft brewers. Distribution owned by a brewery, at whatever size, is not independent.

North Carolina’s beer laws are considered a model by brewers in neighboring states. We have more consumer choice in the beer aisle than ever before. This is no time to undermine a successful marketplace by restricting fair competition.

http://www.rockymounttelegram.com/Letters-to-the-Editor/2017/03/01/tim-kent-letter-not-yet-published.html