Charlotte's OMB - The Front Line In North Carolina's Beer War
The battle between craft brewers and distributors is escalating.
The fight is over how much beer local breweries can sell on their own, without going through a distribution network. Easing regulation seems like something Republican lawmakers would jump at. But so far that's not the case.
And the battle is centered right here in Charlotte.
It's rare to find a front line where you can also pick up a pretzel and a pint. These days the tap room at Olde Mecklenburg Brewery offers you just this opportunity.
I'm there before it opens to the public, as staff members take down the wooden benches and fill the ice bins behind the bar.
There to interview a man whose quick words show his passion for beer, this brewery and the fight it has been leading now for years. "My name is Ryan Self, age 38, I'm the director of sales at Olde Mecklenburg Brewery."
Self walks me through the beers OMB produces right here. "It depends on what time of year you catch us," he tells me before listing off "Copper, Captain Jack, Hornets Nest, South Side Weiss and Fat Boy, our Baltic porter, those five beers are produced year round."
And OMB's beers are popular. The company is successful, growth has been strong.
Back when Self started, OMB was barely a blip. "I think in our first calendar year we did 500 to 1,000 barrels total. So it was tiny."
But this barrel count has grown exponentially. "We very much believe we'll be at that 25,000 number this year."
And that number is the reason for this fight. 25,000 – as in 25,000 barrels of beer – an arbitrary limit set by the state legislature back in 2003. A barrel, by the way, is about 30 gallons of beer. Or roughly 220 pints.
Under current state law, any brewer who produces more than 25,000 barrels must sign a contract with a middle man known as a distributor.
That makes sense for some brewers. Take this video testimonial from Catawba brewery posted on the North Carolina Wine and Beer Wholesalers Association website, the trade group representing distributors.
"Fast forward a couple of years as we began to grow self distribution became problematic for us," explains Catawba's founder, "We failed miserably."
It goes on to tout how Catawba's sales spiked after signing with a distributor.
"Good for them," Says Ryan Self from Olde Mecklenburg Brewery. "Their business model was we don’t want to be in the logistics game. And we're not good at that side of the game. I think we are."
A quick tour of the back of the building shows this in action. A fork lift moves pallets of kegs into and out of the cold room, what amounts to a living room sized fridge. "And you can see the cases stacked over here and it really is, in the grand scheme it's not all that much beer."
There's a packing room nearby and a loading dock just wide enough for two delivery trucks.
When you listen to the distributors talk about this issue, it seems breweries like OMB are waiting to flood the market. Helped by a bill introduced earlier this year which would, in part, increase that arbitrary barrel cap to 200,000 per year.
In an email exchange, Tim Kent, the head of the North Carolina Wine and Beer Wholesalers Association, compared the proposed increase to the Keystone pipeline…not in terms of volume but length. As in if you line up the number of bottles of beer this new cap would allow, they would stretch from Canada to the Gulf of Mexico.
True, says Self, but not a serious argument.
"They're talking about this many bottles of beer laid end to end would go to the moon or whatever ridiculous thing they come up with. It's like which one of us is having an honest conversation here? I mean really, come on guys."
It is also worth noting the distributors don’t mind that volume of beer sold, so long as they are part of the process.
Back in the tap room, Ryan Self lays out why that doesn’t work for OMB. It has to do with what's called the path to market. When a brewery signs with a distributor, they sign away rights to sell their own beer in an area. "We sign with a distributor. They own our Charlotte rights. So there's one Budweiser distributor in Charlotte, they own that path to market."
And this contract comes with some major strings attached. "And if I decide I don’t like how my products being sold, I have to buy my rights back from that distributor. How much is that check? That's the other question. We have to sit down and negotiate that amount. If we can't agree, in the meantime my beer is not being sold."
An arrangement that gives the leverage to the distributor. And the brewers, like OMB have some influential friends pushing for their cause. Conservative groups like American's for Prosperity and the John Locke foundation have been active supporters.
Still, last week, an amendment to the proposed bill was introduced which would keep the smaller barrel cap in place.
Some lawmakers cited question about whether breweries are paying all their taxes. But that is an enforcement argument and not necessarily a production issue.
Ryan Self suspects campaign contributions may be playing a part in the opposition. And Democracy NC, a left-leaning group, has found the distributors have given nearly $1.5 million in political contributions to key lawmakers and their political committees over the last four years.
The bill remains in committee. A vote is expected to take place this week.
In the meantime, distributors say that proposed 200,000 barrel cap limit is too high. To that, Ryan Self says "that number was put out there as a starting point."
Let's talk, in other words.
The distributors say they haven’t been invited to talk.
"I don’t know if that's true or not," says Republican Representative John Bradford of Cornelius. At a press conference Monday he added "I judge no one. So I'm here to invite you to my table."
To again talk.
This is personal for Bradford, OMB is planning to build a new $10 million brewery in Cornelius. That project's future is unclear if the cap remains in place because Self says, if nothing changes math dictates that OMB would need to stop selling beer to other established customers in order to sell beer there.
And if OMB is forced to sign up with a distributor, that means they would likely have to fire the 15 people who currently sell and or distribute their beers.
There is one last twist in this fight. If the legislature leaves the barrel limit in place, the breweries could turn to the courts to break up what they see as the distributors monopolies - something Rep. Bradford brought up at his press conference.