North Carolina Proposes Some Common-Sense Amendments to Modernize Its Brewing Laws That Advance Rights for Craft Brewers In the Face of Changing Times

Jim Koch (of Boston Beer fame) wrote an excellent polemic for the New York Times last week questioning some American attitudes towards beer.  A salient point from that article was that many state distribution laws developed over time from the end of prohibition and haven’t been updated since the 1970’s.  These distribution statutes were created to help “mom and pop” distributors in fights against big beer.  Through consolidation, many states now have very few distributors and those that exist are behemoths that control major market share and are using the statutes designed to help them against big beer to beat up on small craft brewers.  

Craft should be treated differently because, well, it is different.  This position isn’t just a lobbying effort, it is a fact.  Production, consumption, and sale of alcoholic beverages has changed and modernized and the laws regulating it across many states have not.

In a small nod to this fact, North Carolina has recently proposed amending its statutes to encompass some new realities in a manner and with allowances that every craft brewery and other small manufacturers across the country should be pushing their own state legislatures to emulate.

You can read the North Carolina Craft Brewers Guild’s summary of the proposed new legislation (ABC Omnibus Bill 500) here.  You can find the actual bill and track its legislative history here.

Some cool stuff from it:

• Most notably, the cap on self-distribution and the definition of a small brewer is raised from 25,000 barrels to 200,000 barrels.  This really hits home with Jim Koch’s point about distribution and common-sense approaches.  There are states that don’t come anywhere near this level for no other reason than that their legislative efforts were vehemently opposed by distribution lobbyists without any thought or study from the legislature to understand that 200,000 or something like Wisconsin’s 300,000 are a drop in the bucket compared the Molson and Anheuser levels that really are the justification (if there is one) for having some separate distribution systems in place.
• Small breweries (those making less than 200,000 barrels per year) will be able to terminate a distribution relationship immediately (without the presently required notice or “good cause”) with fiar compensation to be negotiated/paid later.  Importantly, parties will be allowed to establish fair compensation in their distribution agreements in advance of any disputes – which brings distribution law into a line with fair contracting methods and standards that allow parties to determine how their relationship should end.
• Brewery tap rooms would now be definitively allowed to sell other alcoholic beverages, not just their own beer. (NC actually allowed this but the law was ambiguously written before.)
• Sales of crowlers will be authorized – the law right now requires “resealable” containers can be sold by retailers which means giant crowler cans have been interpreted as verboten.  
• Brewery’s will be allowed three additional retail locations as opposed to just allowing those classified as small breweries to do so.
• Taprooms would be exempted from many of the current tied-house restrictions on giveaways and promotional efforts in place between manufacturers and retailers.  Seriously, there have been apparent enforcement efforts against breweries for promoting themselves at their taprooms… talk about an twisted and asinine application of tied-house restrictions.
• A big change that many states face comes in the form of allowing “off-site” or non-contiguous storage (think barrel aging at a distant warehouse) at a warehouse when the brewer has obtained approval from the federal government for this activity (the feds approve of this practice with proper notice – the problem is that many states don’t understand it and haven’t caught up with the times in specifically allowing it.)

My personal favorite – the bill proposes a legislative study to determine whether the statutes should be rewritten to “address and reflect the rapidly changing alcoholic beverage industry.”  And even sets a deadline asking that a report from a specially established commission be provided to the 2018 Regular Session of the 2017 General Assembly.  So if it passes in this form, there could be a very interesting state legislative report from a state commission to help support changes and lobbying efforts throughout the country.