Politics & Government

Craft beer deal would allow North Carolina’s biggest breweries to expand

Charlotte craft beer brewer: So much has changed, so fast

Brewmaster Chad Henderson of NoDa Brewing talks about the early days of Charlotte's craft beer scene.
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Brewmaster Chad Henderson of NoDa Brewing talks about the early days of Charlotte's craft beer scene.

North Carolina’s biggest craft brewers — including two in Charlotte — would be able to significantly expand under bills introduced this week in the General Assembly.

Sponsored by leaders from both parties, the bills would end a two-year battle over a current law that brewers claim stifles their growth by capping production. The bills would allow some brewers to at least double their output.

Suzie Ford, co-founder of Charlotte’s NoDa Brewery, told reporters the compromise “marks a new day . . . for all in the craft beer business.”

Tim Kent, executive director of the N.C. Beer and Wine Wholesalers Association, called the measures “a win, win, win, win proposition” that would benefit brewers, distributors, consumers and lawmakers, for whom it would end a long impasse.

The brewers and distributors have been at odds for more than two years. That’s when Ford, her husband Todd and John Marrino, owner of Charlotte’s Olde Mecklenburg Brewery, began fighting for what they called “Craft Freedom.”

They wanted to raise the 25,000-barrel cap on craft beer production. Producing one barrel more forces brewers into a costly contract with a distributor. What’s known as the franchise law then gives the distributor control over sales, marketing, delivery, quality control and even pricing — in perpetuity.

The effort pitted the fast-growing craft beer industry against wholesale distributors, a group that reinforced its clout with nearly $1.5 million in political contributions in the last four years. The state’s more than 300 craft brewers have an annual economic impact of $2 billion, according to the N.C. Craft Brewers Guild.

After an effort to raise the cap failed in 2017, the brewers took their case to court.

The compromise announced Wednesday would create a new category of “Mid-Sized Independent Breweries” such as NoDa, Olde Meck and Red Oak Brewery of Guilford County. Those brewers could produce 50,000 barrels before having to use a distributor. But they could produce up to 100,000 barrels and keep their “mid-size” designation.

Both brewers and wholesale distributors welcomed the compromise.

Prohibition-era system

For brewers, it opens the door to growth.

A reporter asked Ford if NoDa could begin selling its beer as far east as Wilmington.

“That is correct,” she said. “We’re now looking at all of our options and probably will start talking to our distribution partners. We don’t believe we can self-distribute the entire state. We’re realistic.”

Olde Mecklenburg already is planning to expand to Cornelius by next year.

For whole distributors, the agreement preserves the so-called three-tier system — brewers, wholesalers and retailers — that has deep roots in North Carolina and across the country.

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, five brewers controlled 90 percent of the U.S. market.

A lawsuit filed by NoDa and Olde Mecklenburg challenged that system. “The old laws aimed at preventing a few mega-breweries from capturing 100 percent of the market also apply to each of North Carolina’s … breweries, which each hold only a tiny percentage of the craft beer market,” the lawsuit said.

Talking — and listening

Parties on all sides hailed the compromise that, for now, has left everybody happy.

Republican Rep. David Lewis called it “an example of how good public policy is made.”

Kent said both brewers and wholesalers took the “opportunity to listen to each other.” Drew Erteschik, the attorney for Craft Freedom, agreed.

“It really is as simple as that,” he said. “I don’t know that anything changed. I think this is a situation where these parties sat down with each other and talked and more importantly listened, and learned that our differences were not as great as we originally thought.”