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Craft Brewers, Wholesalers Lift Glass To Distribution Deal

Small North Carolina brewers and alcohol wholesalers raised glasses on Thursday to what they call a legislative compromise that allows the breweries to keep control of their products longer as they grow.

Legislators from both political parties and industry representatives announced an agreement in General Assembly bills filed this week to let these craft breweries sell double the amount of their beer annually on their own compared to what current law allows.

The agreement "marks a new day in building a strong industry-based economic model for all craft beer businesses," Suzie Ford, co-owner of NoDa Brewing Co. in Charlotte. "Out of conflict has grown resolution to establish a framework that allows existing and new microbreweries to become economic engines for our state and provide a clear pathway to grow and prosper."

Right now third-party distributors take over all sales, marketing and pricing of a brewer's products at retailers once the brewery sells more than 25,000 barrels in a year — roughly equivalent to what can fill an Olympic-size swimming pool.
Lawmakers had declined to change the limit, which was supported by state's beer and wine wholesalers group. NoDa and Olde Mecklenburg Brewery sued in 2017, arguing the limit was unconstitutional and stifled competition by discouraging companies from exceeding the hard cap. Craft brewers also formed an advocacy group to fight the limit. In recent years, some had made political donations to legislators, as have the well-established and well-funded wholesalers' association.

The agreement, if signed into law, would end the litigation, according to industry attorneys. The legislation would allow the creation of a new classification of brewers that can self-distribute up to 50,000 barrels a year. While these mid-sized brewers would still be able to sell up to 100,000 barrels, distributions above the first 50,000 barrels would have to be performed by a wholesaler.

Ford said the proposal, which also continues to exempt sales at the brewery or at three other affiliated retailers from the limit, will give her brewery more options to expand, even statewide with the use of a distributor.

"We have never been anti-distributor," Ford said. "We want the choice to decide what direction we go. This bill definitely gives it to us."

Ford said NoDa and Olde Mecklenburg are likely the only craft breweries currently close to the 25,000-barrel cap, but signs point to more bumping up against it without a change. The number of craft breweries in the state has grown from 45 in 2010 to over 200 today, according to the North Carolina Craft Brewers Guild. And the environment has attracted larger breweries like Sierra Nevada to build its East Coast operations in North Carolina.

The agreement, reached over lengthy negotiations, will help keep North Carolina remain a destination location for malt beverages, North Carolina Beer and Wine Wholesalers Association CEO Tim Kent said.

"It's great news for consumers, craft brewers and wholesalers alike," Kent said. "North Carolina is going to continue to be a leader in the craft beer industry."
Craft beer sales increased nationwide in 2017 while overall sales fell, according to the Brewers Association, a national organization representing small and independent brewers. Kent pointed to data showing the beer industry directly creating over 6,000 jobs in the state, and with suppliers and other transactions added generating $11 billion in total economic output.

The legislation could be on tap in House and Senate committees as early as next week, according to Rep. David Lewis of Harnett County and Sen. Bill Rabon of Brunswick County. Each leads the powerful rules committee in his respective chamber.

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