This new bill is about way more than raising a brewery’s self-distribution cap

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CharlotteFive archives
Olde Mecklenburg Brewery

Next Wednesday, the Alcoholic Beverage Control Commission will meet to decide whether House Bill 500 makes it out of committee. If passed into law, the bill would raise the amount of beer a brewery can self-distribute from 25,000 to 200,000 barrels, a move breweries around the state (most notably NoDa Brewing Co. and The Olde Mecklenburg Brewery) have been championing through the Craft Freedom initiative.

But that’s not all HB 500 aims to do. As an omnibus bill, it actually proposes 12 provisions to current Alcoholic Beverage Control Commission laws, all of which were up for discussion during an ABC committee meeting in Raleigh last week.

Some of these provisions are completely new additions to the legislation, and others include “clean up” language to allow for things that are already happening across the state, but which are technically not allowed under current legislation (like allowing the sale of crowlers  — yes, that’s crowler with a “c” — guest taps, tastings during tours, and permitting brewery employees to sample beers for “sensory analysis, quality control, or education”).

Heist Brewery Crowler and Growler, Charlotte brewery legislation, distribution
A crowler and growler

“The alcoholic beverage code was written at a different time,” said Rep. Chuck McGrady, A Republican representing District 117 and one of the bill’s primary sponsors. “It reflects a very different way of producing beer and wine and cider. It’s just not a fit for the way things are done now.”

Some of these provisions were noted by the ABC commission, and others were brought to McGrady’s attention by the North Carolina Craft Brewers Guild and other groups. Outside of these clean-up efforts and the big change to the state’s self-distribution laws, here are a few other changes proposed by HB 500.

Amend homebrewing laws: Operation Liberate Homebrew, an effort from the Beer Army Foundation, has been campaigning to allow homebrewed beer (and homemade wine) at festivals and other events. If HB 500 passes, you could see the Carolina BrewMasters and other homebrew groups serving their beers at “organized affairs, exhibitions, or competitions.” A similar piece of legislation can be found in SB 604, which is currently in the Senate. 

Off-site storage locations: This would allow breweries, wineries and distilleries to store their product at a “noncontiguous storage location” — in other words, somewhere other than the brewery. McGrady noted an instance where a Charlotte brewery was looking to expand but was unable to do so next door. This should give more options to breweries across the state that need more storage space but not necessarily another brewery.

Benford Brewing, Charlotte brewery legislation, distribution
Benford Brewing is a farm brewery in Lancaster, South Carolina.

Authorize farm breweries: This provision states that if a farm brewery grows any kind of agriculture (“including barley, other grains, hop, or fruit”), they can sell their beers for on- and off-premise consumption regardless of “any local malt beverage election.” Like some of the other provisions, this one came at the recommendation of the North Carolina Craft Brewers Guild. 

Termination of franchise agreement: If an N.C. brewery wants to leave its distributor, it is free to do so. The catch is that the brewery has to pay “fair market value” to buy back its brand, and that value is usually set by the distributor. A new provision would allow breweries to terminate their agreements “without good cause” at any time, after which the brewery and distributor would have to agree upon fair compensation. If they can’t do that within a year, they go to arbitration.

Because a “small brewery” is defined as one producing fewer than 200,000 barrels (which is also the amount that a brewery could self-distribute if this bill passes), that means a lot of breweries in the state could cut ties with their distributors. As more breweries shrink back their territories, it might be an appealing path for some.

Naturally, that last provision has distributors concerned. While many of the provisions in HB 500 are what McGrady describes as uncontroversial, that’s certainly not true of the proposed changes to the franchise laws and the self-distribution cap.

“The distributors at this point are just unwilling to talk about it,” said McGrady. “None of these provisions are as controversial as the two provisions related to distribution.”

The ABC committee will meet Wednesday to vote on whether HB 500 should make it out of committee. If it doesn’t, the bill is unlikely to move out of the house by the necessary deadline.

Want to know more?

Craft Freedom, in partnership with Generation Opportunity and Americans for Prosperity, will host a Taxpayer Town Hall at OMB on Thursday, April 13. If you want to contact state representatives about H.B. 500 ahead of next Wednesday’s meeting, Craft Freedom has listed contact information for ABC Committee members.

Photos: Heist Brewery, Daniel Hartis.

 

 

1 COMMENT

  1. The termination of franschise agreement should go ahead and state a percentage of gross sales for the buy out. This will have a clear path that both parties will understand. If not, it will always go to arbitration and the process will always take over a year. If the distributors perform as agreed, no reason to change. If the gross sales are low and a change is necessary, then the buy out should be obtainable to the brewery. This would also make NC breweries consider the distributing network that benifits everyone. This will save everyone money, including the tax payer.

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