In early January, Olde Mecklenburg Brewery made a painful yet necessary decision to pull their beer out of the Triad area. Living in Charlotte, you may be indifferent, thinking this move doesn’t affect you. You’re right, at least for now.
If a state law isn’t modernized, you may find yourself hard-pressed to find Charlotte-made beers such as OMB’s Copper and NoDa’s Hop Drop ‘N Roll, even around the Queen City.
What does this state law say?
Currently, North Carolina-owned and operated breweries can distribute the beers they make themselves, up to a point.
Up to a point?
When legislators granted this self-distribution ability, they set an upper limit. Once a brewery hits 25,000 barrels of annual production, they are legally required to turn over all distribution and even branding rights to a third party distributor — every last drop.
How much exactly is 25,000 barrels? That sounds like a lot.
It is but it isn’t. A barrel is a standard unit of measurement, 31 gallons. What you think of as a typical keg is a half-barrel, so this 25,000 barrel limit is 50,000 kegs filled each year.
By comparison, Anheuser-Busch cranks out 5,000 barrels of beer every single day at their St. Louis brewery alone. What these locally-owned self-distributing folks consider a great year, big breweries consider a slow week at one of many facilities.
What do you mean, it’ll be harder to find Charlotte beer in Charlotte?
Charlotte’s NoDa and OMB are going to hit that self-distribution limit in 2016, should growth projections stay on track. To stay under the cap, they’ve each sworn to produce no more than 24,999 barrels of beer this year.
OMB pulled out of the Triad in an attempt to free up some cap space, opting to focus on Charlotte-area accounts. This cut will only get them so far, and soon they could be forced to start trimming their local accounts, too. As demand for their beer increases at a few accounts, others will lose out entirely. This limits consumer choice.
What’s so wrong with going through distributors?
Absolutely nothing. If it weren’t for distributors, there’s no way we’d enjoy the plethora of beer options that we do currently in North Carolina. It’s far too cost-prohibitive for most out-of-state breweries to set up cross-country distribution networks. Smaller outfits wouldn’t be able to afford this expense, and beer selection here would look anemic.
Plus, lots of local breweries use distributors for needs they simply can’t handle themselves. For example, it doesn’t make sense for each brewery to visit individual grocery stores to restock shelves daily, so they’ll contract a distributor to handle that daunting task for them.
Some local breweries want to focus on just brewing beer, and choose to turn over all their distribution to area distributors to have one less thing to worry about.
If distributors aren’t that bad, why are certain breweries trying to avoid using them?
Fundamentally, it’s a control issue. Going the self-distribution route, they can maintain complete control over every step in their beer’s life cycle, from brewing all the way to delivering to a bar or selling in their tap room. They can make sure the beer is handled the way the feel it should be. They’d retain the rights to their own brands.
These breweries built themselves from the ground up, and some don’t feel they should be forced to turn over their rights to an outside distributor because of an arbitrary cap. It’s almost like a shotgun wedding. They simply want more choice in when they make this commitment.
Can’t breweries just set up their own distributorships?
North Carolina state law explicitly prohibits this. They also can’t just open a second brewery under a new name; they’d never be granted a permit. The laws are well-worded in closing those potential loopholes.
Just ignore the cap! What’s the worst that can happen?
Nobody’s quite sure what the consequences are, to be honest, but they can’t be good. The law’s not as clear in this regard. Breweries could face penalties from monetary fines up to an outright cancellation of some or all of their state permits.
That could mean no more tap room, no more distributing, no more brewing. This would be a game-ender, and breweries have sense enough to not play chicken with Alcohol Law Enforcement.
So what real options do these breweries have left?
They can maintain the course, and throttle production to stay under the self-distribution limit. They can abandon their principles and sign away their distribution rights, in which case they’re free to make as much or as little beer as they choose. Or, they can get the law updated in a meaningful way.
NoDa and OMB have teamed up, along with other area outfits, in a grassroots effort to have the self-distribution limit increased. For more information, check out www.CraftFreedom.org and/or stay tuned for future Axios Charlotte articles on this subject.
Any further questions you’d like to see answered? Let us know.