Another craft beer cap that’s bad for business

The Observer editorial board

The craft brewing boom in Charlotte and across North Carolina is not only a great business story, but an example of good government.

The explosion of fine local breweries – the Charlotte area now has more than two dozen – wouldn’t have happened without the N.C. legislature deciding that it was standing in the way of entrepreneurs a decade ago. Then, the Pop the Cap movement convinced lawmakers to lift an antiquated rule that limited how much alcohol brewers could have in their beers.

Now, another old rule is blocking the state’s $1.2 billion craft beer industry from becoming an even greater success.

This legislative session, brewers and industry supporters hope lawmakers will change a state law requiring brewers to use a distributor once they reach 25,000 barrels of production a year. The rule, which is unique in the N.C. retail landscape, serves little purpose but to benefit distributors.

Here’s why: A distributor acts as a middleman between brewers and the restaurants and retail outlets that sell beer. Distributors can be helpful to small brewers who want some leverage in, say, convincing a bar to devote taps to the brewer’s product.

Right now, however, brewers that cross over the 25,000-barrel cap don’t have a choice about how they distribute their beer. They have to use a distributor – and they have to pay that middleman to do something they could do on their own.

Those distributors, by the way, are backed by the powerful N.C. Beer and Wine Wholesalers Association, which has several lobbyists in Raleigh. Alcohol wholesalers have given more than $740,000 to N.C. lawmakers since 1996, according to a 2015 report from the Center for Public Integrity.

It’s a rigged system, and it might already have slowed the state’s brewing growth. According to the craft beer Brewer’s Association, North Carolina is the largest state besides Florida without a Top 50 brewery. In part, that’s because the state’s most renowned craft brewers – including Charlotte’s NoDa Brewing and Olde Mecklenburg Brewery – are discouraged from crossing the 25,000-barrel threshold and losing money.

Brewers are hopeful that will change, and their Craft Freedom movement has hired prominent Republican political consultant Paul Shumaker to help persuade lawmakers on the issue. The conservative John Locke Foundation also is on board.

Their argument should resonate with Republicans. The 25,000-barrel rule is anti-free market. Business owners, who invest their own capital and take their own risks, should be free to do business with whom they choose.

We recommend lawmakers raise the cap to at least 100,000 barrels – as one bill introduced last week would do. That would give successful N.C. brewers significant room to grow. Eliminating the cap altogether might invite macro brewers such as Budweiser to come in and set up their own distribution networks. Yes, that’s free market, too, but it’s also bad for N.C. brewers and the N.C. economy.

To this point, that economy has benefited greatly from a decade of craft brewing growth. It’s time for lawmakers to get out of the way again.