Food & Drink

2 Charlotte beer makers are brewing for a fight over ‘Craft Freedom’

tsumlin@charlotteobserver.com

If you’re a fan of North Carolina’s rapidly growing craft beer world, get used to this phrase: “Craft freedom.”

Two brewers in Charlotte, John Marrino of Olde Mecklenburg Brewery and Todd Ford of NoDa Brewing Co., have joined other small to mid-size breweries across the state to launch Craftfreedom.org, a campaign to push for changes in state rules that require breweries to sign with an outside distributor when they reach 25,000 barrels a year.

“Craft freedom is critical to our business model,” says Marrino, whose 7-year-old brewery now employs 110 people and moved to a much larger building in 2014. “We create jobs – lots of them.”

The distributors, who act as the wholesalers between beer makers and retailers in the state’s three-tier alcohol system, are equally adamant that raising the cap would create an unfair advantage for a few fast-growing breweries while hurting the distributors.

Tim Kent, the executive director of the N.C. Beer & Wine Wholesalers Association, which represents the state’s 2 dozen or so distributors, says Olde Mecklenburg is asking for a change that would give a few larger craft breweries an advantage.

“What we want is a level playing field for everybody,” Kent says. “(Marrino) wants the legislature to give him an even larger bite of the apple in what is a fiercely competitive beer business.”

The fight is shaping up as a feud within a family that had been getting along. While the distributors were initially against Pop the Cap, the 2005 legislation that raised the alcohol limit on beer and birthed the current craft-brew industry, they eventually became supporters.

Kent points out that the current rules allow state brewers more leeway than most other Southern states, including allowing them to sell and distribute their own products up to 25,000 barrels. The current three-tier system dates back to the repeal of Prohibition, when states were given control over the regulation of the alcohol industry.

Although regulations and limits vary widely across the country, 37 states allow some form of self-distribution, according to The Beer Institute, which tracks beer regulation. Among the 13 that don’t, seven are in the South (Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi and South Carolina).

“We have the most permissive craft beer laws of any state from Virginia to Texas,” says Kent.

No one expects change this year. The N.C. legislature will only hold a short session in 2016. Craftfreedom.org is aimed at 2017, when a longer session will allow more opportunity for legislators to consider a change.

The brewers say that because distributors handle large national beer companies that produce much more beer, smaller beer-makers end up being ignored and getting less control over their products. Their alternative is to stay small to keep control of how their products are marketed and sold, even if it means cutting production and expansion plans.

For Olde Mecklenburg, that’s already happened. In addition to moving to a much larger facility in Charlotte and expanding his production line in 2015, Marrino had expanded to the Greensboro area, buying a distribution warehouse with access to major highways. After rapidly nearing the 25,000-barrel limit, that expansion was ended and Olde Mecklenburg pulled back into Charlotte.

“We can’t make business decisions,” says Todd Ford, who recently added a much larger new plant for his NoDa brands, including the popular Hop Drop ’N Roll. “We’re stuck.”

The current barrel limit has been raised a couple of times over the years, most recently in 2003, two years before the state raised the alcohol limit on beer. Proponents of raising or erasing the cap say the 25,000-barrel limit was arbitrary, a limit set when no one expected craft brewing to be more than a novelty.

Margo Knight Metzger, executive director of the N.C. Craft Brewers Guild, which represents many of the small breweries statewide, says her group doesn’t have an official role in the Craft Freedom campaign. But her members do support the change.

“If we want this industry to thrive, we need common-sense change,” she says. “Let the brewer make a business decision. You won’t find any other industry where this type of arbitrary rule is just plopped down.”

Several people in the industry say they expect the distributors to fight hard against the change. While wholesale distributors play a critical role in selling and delivering alcohol, they also wield a lot of political clout. Since 2014, the N.C. Beer & Wine Wholesalers Association’s political action committee has given more than $258,000 to candidates or political committees, election data shows.

In the 2013/2014 election cycle, the wholesalers association was seventh on the list of the top 200 PACs in the state, according to the N.C. FreeEnterprise Foundation. That was up from 14th in 2011/2012.

The brewers can expect support from at least one legislator. Rep. Chuck McGrady, R-Henderson, has been pushing for change for a couple of years and he wants to see action in 2017.

“What I’m hoping for is incremental change,” says McGrady, who would like the limit raised from 25,000 to 60,000 barrels.

However, he says he’d really like to see the legislature take a wider look at current alcohol regulations, which were mostly written before the existence of the rapidly growing craft beer industry.

He says he has asked the House to consider appointing a committee to study issues like the cap and regulations that make it difficult for brewers to move from one distributor to another in search of a better deal.

“Everybody agrees that the law here is really obtuse, sometimes contradictory, and is not keeping up with developments,” says McGrady.

“I tell the distributors if they continue to take the stance of no change, they may find themselves in a situation with more than incremental change.”

As a Republican, he sees it as an issue of supporting small business and less regulation.

“The way we’re treating the craft brewers is patently unfair,” he says. “They shouldn’t get to build their business to 25,000 (barrels) and then fall off a cliff.”

Staff writer Gavin Off contributed to this story.

Kathleen Purvis: 704-358-5236, @kathleenpurvis

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