N.C. House ABC Committee Meets, ABC Chief Administrator Presents Overview of Commission’s Role and Warns Committee that Breakdown of ‘Three-Tier’ System Will Result in ‘Huge Excesses’

By M.H. Cavanaugh
Christian Action League
March 10, 2017

RALEIGH – The House ABC Committee held its first meeting of the 2017-2018 Legislative Biennium on Wednesday. The meeting, which was held in the Legislative Office Building, was basically an orientation for committee members.

The committee consists of the following members:

The meeting started with an introduction of the state’s new ABC chairman, Zander Guy. Guy expressed his desire to be available to committee members for any ABC related questions. He cited the NC ABC’s annual report, which was provided to the committee, noting the words “Control,” “Service,” and “Revenue,” which he said, “sums it all up.”

Guy said North Carolina had the best model for alcohol control in the entire nation. He said ABC seeks to provide a balance between limiting access to alcohol, while also working with the very important hospitality and tourism industries in the state. He added that last year North Carolina generated more than $1 billion in the sale of spirits, with $380 million going into the state’s general fund, as well as providing revenue for local governments. This money, he clarified, is reoccurring. “So the system is good and the process is working,” he said.

Bob Hamilton, chief administrator for ABC spoke next. Hamilton gave an overview of the role and responsibilities of the state agency.

Hamilton addressed a common misconception concerning ABC saying, “We do not sell any alcohol in this state…We basically facilitate the sales through permits – through approving stores for ABC Boards across the state.” He said the only time ABC comes into contact with alcohol is in the state’s Warehouse – the place from which spirits are housed for suppliers and distributed to the 167 local ABC Boards. He said the level of alcohol sales were determined by local jurisdictions at the ballot box (local option alcohol referenda), which includes on-premises and off-premises beer and wine sales, ABC stores, and mixed beverages.

Hamilton explained that since communities decide the level of sales by alcohol elections, the landscape for alcohol sales considerably varies throughout the state. It’s the responsibility of the ABC Commission to keep up with what is allowed in the various jurisdictions and make certain the state’s ABC laws and rules are followed.

The ABC chief also said, “The growth pattern for the sale of spirits was very substantial right now.” He said population growth was contributing to this trend. He said local ABC Boards were keeping up with the demand by building new stores, making larger stores, as well as finding ways to make servicing customers more effective.

Hamilton seemed to speak with some force about the Three-Tier System’s critical function. The Three-Tier System, which has been in place since Prohibition, involves the Suppliers (Manufacturers), the Wholesalers and Distributors, and Retailers.

Hamilton contended the Three-Tier System was the model across the country. The model of the Three-Tier, he said, included Wholesalers and Distributors for beer and wine, and for spirits the state’s warehousing of spirits serves as the middle or second tier, determining what liquor can be sold in the state and its uniform pricing.

The Three-Tier System, said Hamilton, was developed because of the rampant abuses concerning the marketing and sales of alcohol, which ultimately led to Prohibition. The Suppliers before Prohibition essentially controlled the Retailers, which made alcohol too easily accessible and resulted in consumption levels that produced considerable social harm.

Hamilton noted a recent study that concluded how important the Three-Tier System is “and not mixing those Three-Tiers,” he said.

Then came Hamilton’s warning, “When you take a look at some of the bills you might be looking at – that’s one of the things you really need to think about. Because if you break down that system, you can have some huge excesses in alcohol in this state.”

Dr. Mark Creech, executive director of the Christian Action League, said he had grave concerns about two legislative measures filed in recent weeks that he believes would significantly undermine the state’s Three-Tier System.

HB 67 – Increase Small Brewery Limits, would increase the number of barrels a brewery in the state could produce without having to go through the second-tier of Wholesalers and Distributors. It would lift the cap from the current 25,000 barrels annually to 100,000 barrels. Creech says allowing breweries to go around that second-tier opens the door for abuses.

“To the degree, you diminish the system, you are undermining critical checks and balances that only approved alcoholic beverages are actually being sold, that there aren’t any sales being made to underage drinkers and that taxes are being properly paid,” said Creech.

He added, “The threat of direct shipments from suppliers to consumers reduces regulations about who can buy, how much can be bought, and you’re basically reduced to a kind of ‘honor system.’ There’s no-one in a position to make certain these suppliers (brewers) are accountable. And quite frankly, it’s not an exaggeration to say that would be disastrous.”

Dr. Creech also cited as SB 155 – Economic and Job Growth for NC Distilleries, a measure filed on the Senate side. He said SB 155 would allow distilleries to sell five bottles of liquor directly to consumers after taking a tour of the distillery. “That’s going around the sale of liquor in our ABC stores. In 2015, the distilleries petitioned the General Assembly for one bottle, now they want five. You can be certain it won’t stop at five. Not soon after, they will want a dozen or more. When does the bleeding stop?” said Creech.

Creech also said that SB 155 also allows for liquor tastings in ABC stores, which he contends is not the role of ABC. “ABC has never been, and never should be, about promoting the sale of spirits, it’s supposed to be about regulation and control,” he argued.

The ABC Committee meeting concluded with questions taken from committee members. It did not take up any legislation for a vote.