By M.H. Cavanaugh
Christian Action League
March 14, 2019
RALEIGH – At a press conference held today at the North Carolina General Assembly, the North Carolina Beer and Wine Wholesalers Association and Craft Freedom announced what was called a “historic” agreement between the two.
For two years, both groups have been battling over a cap of 25,000 barrels annually placed on the amount breweries can self-distribute their products directly to retailers, without working through a Wholesaler.
The process is called the Three-tier system of alcohol control, which is made up of suppliers, wholesale distributors, and retailers. The Three-tier affords critical checks and balances. The independent buffer of a wholesale distributor between the supplier and the retailer provides critical safeguards against corrupt, manipulative, and abusive industry practices.
In 2017, craft brewers pushed legislation to circumvent the Three-tier system and lift the cap from 25,000 barrels to 200,000, but the initiative failed. The Beer and Wine Wholesalers were instrumental in the measure’s demise, and the Christian Action League delivered significant opposition to the same. The bill’s failure precipitated action by the brewers to file a suit against the state claiming the cap was unconstitutional.
During today’s press conference Craft Brewers and Wholesalers said they had reached a compromise that would now allow brewers to double their production of self-distribution from 25,000 barrels to 50,000, while also preserving the critical protections provided by the Three-Tier.
Bi-partisan legislation, HB 363 – Craft Beer Distribution and Modernization Act, sponsored by Representatives David Lewis (R), John Bell (R), Darren Jackson (D) and Robert Reives (D), reflects the compromise and was filed today in the House. A companion bill, SB 246, has also been filed in the Senate by Senator Bill Rabon (R).
Lawmakers who spoke at the press conference seemed very optimistic about the legislation’s passing.
Drew Erteshik, an attorney for the Craft Brewers, said because of the agreement the brewers would now withdraw their lawsuit.
After the press conference, Rev. Mark Creech, executive director of the Christian Action League released the following statement:
“For more than a decade the Christian Action League has fought alongside the Wholesalers against the assaults on the Three-Tier system made by the Craft Breweries. The League is very disappointed that the Wholesalers capitulated on this issue. They were always so staunchly resolute in the past.
“Our Wholesaler friends used lofty language today to say this legislation keeps the Three-tier and allows craft brewers to grow. I’ll grant it does preserve the Three-tier, but not without considerable damage to it.
“At the Press Conference, Susan Ford of NoDa Brewing, a large brewery at the center of the controversy, admitted that NoDa had never produced 25,000 barrels a year. Moreover, other data provided to me shows 92% of the breweries haven’t produced more than 7,500 barrels annually.
So what does all this mean? It means by raising the cap from 25,000 to 50,000, the small craft breweries have practically been given a pass around the Three-tier because none of them will ever likely produce as much as 50,000 barrels.
“The language in the bill about preserving the Three-tier is, in my estimation, window dressing. The Three-tier is unquestionably diminished should this initiative pass. And to whatever level the Three-tier is diminished, the clarity of the chain of custody that scrupulously traces the product from production to sale is lost. Abuses such as sales to minors, securities against contaminated or counterfeit products, and an accurate means of collecting excise taxes will in some way be negated.
“Saying that the Three-tier is preserved in the proposal is not untrue. However, it’s more like saying, ‘Well, someone has busted out the front windshield on your car and slashed two of your tires, but you’ve still got your car. Let’s celebrate!’
“I hate being the party-pooper during this ‘Kumbaya’ moment between the Brewers and the Wholesalers. Still, it seems to me that both may have somehow achieved and protected their interests, but not that of the people of North Carolina. And no matter how much money is brought to this state by the craft brewery industry, it will never offset the social costs that all of us pay whenever our alcohol regulations are reduced in their capacity to minimize alcohol-related harms.”
Sources tell the Christian Action League that HB 363 could be taken-up by the House ABC Committee as early as April 2.