At least for now, the North Carolina Beer & Wine Wholesalers Association has succeeded in quashing a proposal before the General Assembly that would have allowed breweries to self-distribute more of their own beer without having to go through a wholesaler.
The group has come out strongly against House Bill 500, which until Wednesday would have raised the self-distribution cap for breweries from twenty-five thousand to two hundred thousand barrels per year and would have made it easier for breweries to get out of distribution agreements. Apparently wholesalers were able to sway enough legislators to keep that language out of the bill altogether.
Just before the House Alcohol Beverage Control Committee was set to discuss House Bill 500 on Wednesday afternoon, bill sponsor Representative Chuck McGrady, R-Henderson, put forth a proposed committee substitute taking out those two provisions.
“The reason we struck them out is we didn’t have the votes,” McGrady told the INDY Wednesday night. “I didn’t have the votes in the committee, I wasn’t sure I had the votes in the House, and I was pretty sure I wouldn’t have the votes in the Senate.”
No vote was taken, so the revised version of HB 500 is still alive.
McGrady says the changes were made out of “political pragmatism.” The wholesalers association “made clear they weren’t going to discuss any of these issues,” so it came down to taking out those provisions and getting the rest of the nine-page bill through committee or trying to negotiate the barrel cap and risking that the entire bill be killed.
“They really haven’t come down willing to talk about the bill, and they haven’t really talked about what they would agree with,” McGrady says.
What’s left of the bill, which had been touted as a measure to modernize North Carolina alcohol laws, largely cleans up existing language and ambiguities in the law. Introducing the revised version to the ABC committee, McGrady called it a “shadow of its former self.”
Currently, North Carolina breweries that sell fewer than twenty-five thousand barrels of beer per year can get a wholesaler permit to distribute their own brews. Beyond that threshold, they must contract with a distributor. Critics of the current laws say these distribution agreements are near-impossible for breweries to break.
“The law really hasn’t kept up,” McGrady said during the meeting. “It hasn’t been revised with the intention of supporting a growing industry in North Carolina.”
Craft Freedom, a coalition of brewers, has led the charge for HB 500. They’ve rallied brewers and consumers to contact legislators and circulated a petition in support of the bill.
“We are disappointed with the outcome of today’s ABC Committee Meeting,” Craft Freedom posted on Facebook after the committee meeting. “The barrel cap & franchise reforms were stripped from HB500 before the vote to pass it. But, our fight continues… We are especially disappointed that some members of the General Assembly would side with an established foreign beer distribution cartel that has a long history of back room political deal making. It appears that backroom political pressure is more important than public opinion or fighting for North Carolina small businesses.”
Two breweries operating near the current twenty-five-thousand-barrel cap—NoDa and Olde Mecklenburg—are hinting at a lawsuit. According to The Charlotte Observer, the breweries are meeting with advisers today to discuss their options.
The N.C. Beer & Wine Wholesalers Association represents forty-eight distributors in the state and is known as a powerful lobbying force. In 2014, four of the association’s lobbyists were named among the sixty most effective in the state. During the 2012, 2014, and 2016 election cycles, the association gave a total of $696,462 in political contributions. For comparison, in the 2016 cycle, the Craft Brewers Guild gave $13,000 and New Belgium Brewing Company $8,000. Neither gave in the previous two cycles.
HB 500 was the ninth bill filed to try to raise the barrel cap since it was last raised in 2003. McGrady says he doesn’t see the cap being changed in the near future. He’s “not particularly happy” with the changes to the bill, but “sometimes you have to go incrementally.”
The revised HB 500 would still authorize the sale of crowlers (which are 32-ounce cans); let breweries, wineries and distilleries operate off-site storage locations; authorize the sale of unfortified wine at retail businesses; authorize tastings during brewery tours; let employees sample alcoholic beverages for analysis and quality control; let homebrewers take their brews to competitions; let breweries sell other alcoholic beverages with the right permits; authorize breweries with production facilities in other states to distribute to wholesalers; with approval, let breweries sell their products at the brewery regardless of whether malt beverage sales are allowed in the jurisdiction; and authorize brewers to sell beer made by contracted breweries at their retail locations. The bill also asks the Legislative Research Commission to “study a rewrite of ABC laws.”
Margo Metzger, director of the Craft Brewers Guild, spoke during Wednesday’s committee meeting. She said the group is “disappointed that the marquee provisions of the bill have been removed,” but still supports what’s left.
“We believe that the remaining changes are extremely important incremental changes,” she said.