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Unconstitutional Law Hurts Craft Breweries but Keeps Billions in the Distributors' Pockets

Last week, The Olde Mecklenburg Brewery and NoDa Brewery sued the state of North Carolina Monday, arguing that state laws that limit their production  to 25,000 barrels are unconstitutional.

The Craft Freedom fight, a bid to raise the 25,000-barrel cap on production before craft brewers have to enter a distribution contract with a wholesaler went to the General Assembly with a bill that would raised the cap to 200,000 barrels. But for unknown reasons, NC lawmakers decided not to vote on the bill.  The bill was just ignored after plans to hold a vote!

North Carolina’s craft beer industry is against a powerful distribution system that dates back to  the Prohibition era. Former state Supreme Court Justice Bob Orr, who represents the brewers, called it “one of most significant economic liberty cases we’ve seen in the state in a long time.”

Distributors have a $1.9 billion economic impact in North Carolina. These distributors gave politicians and lawmakers over $1.5 million in campaign contributions over the last four years, according to Democracy North Carolina. Some wonder if that is why they would not allow the bill to go through for a vote.

Craft brews made up 12.2 percent of the beer market in 2015, and that percentage continues to grow, according to the Brewers Association, a national trade group. NC has more than 200 craft breweries with an annual economic impact of $1.2 billion. The Olde Mecklenburg opened in 2009 and then three dozen more micro breweries have sprung up in the Charlotte.  

The distribution industry has deep roots in North Carolina, in the US and does not want to raise the cap for small breweries. The 21st Amendment, which ended Prohibition in 1933, left it to states to regulate alcohol. North Carolina and other states adopted a “three-tier” system of producers, wholesalers and retailers designed to avoid monopolies of giant brewers. In 2001, according to the suit, only five brewers controlled 90 percent of the U.S. market.

The 25,000-barrel cap, in effect since 2003, means that if a brewer exceeds that self-distribution limit by even a single barrel they must turn over all their distribution rights to a wholesaler. This law then gives distributors control over sales, marketing, delivery, quality control and even pricing! The distributor essentially controls the rights in perpetuity.

“If OMB, NoDa, and Craft Freedom’s members exceed the 25,000-barrel cap, they will lose their self-distribution business, distribution rights, and future profits,” the lawsuit states. Craft brewers also argue their brand would get lost in the scores of products carried by each wholesaler.

The real question is... Why are politicians protecting the large Distributors while hurting small craft breweries that are bringing hundreds/thousands of jobs to our state? Who are they really representing?  

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