Following launch of Craft Freedom, battle begins to try and change N.C. self-distribution law

Courtesy of Craft Freedom
Craft Freedom is an initiative led by NoDa, Olde Mecklenburg and Red Oak breweries that is set out to change North Carolina's current self-distribution alcohol law

About a month ago, Olde Mecklenburg served as the setting for the official launch of Craft Freedom – an initiative led by OMB, NoDa and Red Oak breweries to change the current North Carolina law that states breweries must give up all distribution rights to a third party after brewing 25,000 barrels in a year.

A large crowd featuring local media, fellow brewers, craft beer supporters and the general public alike was on hand to hear from Olde Mecklenburg owner John Marrino and NoDa co-owner Todd Ford on how the law is handcuffing their respective businesses.

Over the next year, this initiative will take these local breweries to an unfamiliar space – the land of state politics. And while previous attempts to raise the distribution barrel cap have failed mightily, action is being put into place to make it a different fight this go-round.

“The problem is, up to now, no one had made an organized effort to educate people,” Marrino says. “And that’s what Craft Freedom is all about. So we’re going to spend the next year educating the legislature, media and citizens about this law.

“Nobody has known things like this exist, and it’s harming the state. It’s harming the economy, it’s harming job creation, and the more people hear about it, the more we’re seeing people being on board with us. It’s really an easy sell from my opinion.”

I first wrote about this subject last year, researching the issue as it has swiftly come to the local forefront. To quickly bring you up to speed, legislation attempting to increase the 25,000-barrel limit has been introduced six times in eight years, always passing the first reading but then dying in a committee. Red Oak Brewery stood alone for the longest time trying to get the law changed, and has since been joined by Olde Mecklenburg and NoDa in the fight. These three breweries are the closest to being affected by the self-distribution law, with unwanted changes already taking place as a result.

After investing $130,000 to expand into the Triad region, Olde Mecklenburg had to pull out of that expansion after just a year, unable to provide both that area and Charlotte with the amount of beer necessary to serve respective accounts. And while no jobs have been lost yet, OMB and NoDa cannot provide the additional positions that would be created with additional production and distribution. If either brewery were to sign with a third party, sales positions and other jobs would assuredly be eliminated due to a lack of need.

Three local breweries – D9, Sugar Creek and Unknown – have previously signed with distributors outside of its companies. Wicked Weed in Asheville was getting dangerously close to the cap and decided to go with a third-party distributor as well. Craft Freedom sees no problem with that, as every business and its long-term plan is different. What Ford argues is that, whether it’s self-distribution or someone else, every brewery should have the right to make the decision internally – not have it made for them.

“They made a business decision and that is a choice, and that’s what we’re supporting,” Ford says. “We’re supporting Wicked Weed’s choice to go with distributors, and at the same time we also support OMB and NoDa saying, ‘We’re going to stop at 25,000 (barrels) and not go over until this law is changed.’ It’s all about making that choice.”

Don’t look for anything regarding this law to happen this year, which is what’s known as a “short session” for the N.C. General Assembly. Instead, plans are for another bill to be introduced into legislation the following year, where a longer session will allow for more discussion (think six weeks vs. six months).

So why will 2017 be any different than the years past? That’s where Craft Freedom comes in. The initiative and people behind it will be working throughout this year, doing anything and everything they can to try and educate anyone who will listen about why the self-distribution cap should be raised.

“We’re having to do something that most brewers are not accustomed to doing, and that’s meeting with lawmakers and knowing the people who are printing the laws that we have to live under,” Ford says. “And what we’re finding is that they want to hear from us. They love stories of local businesses, especially ones that are doing well and hiring people, because that’s good news for North Carolina.”

On the other side of this issue stands the North Carolina Beer and Wine Wholesalers Association, a trade group that has been the most vocal in wanting to keep the status quo. The argument from this perspective is that the three-tier system has worked fine throughout the years, and any change could disrupt the market as it stands.

But with craft beer growing at an astounding rate in North Carolina over the last five years, it’s an unprecedented time for said market – and one where the breweries would finally like a say in controlling their future.

“For 20 years, there’s been only one group talking in the ears of all these people, saying ‘Everything’s great. Nothing needs to change; the system’s perfect,’” Marrino says. “And the system’s not perfect. It does need to be changed and there’s never been a voice until now to say that, explain it and educate people. And that’s what we’re going to do with Craft Freedom.”

And as Craft Freedom has begun to make noise, it’s certainly been noticed by the other side. In the last month, the N.C. Beer and Wine Wholesalers Association’s Twitter account has tweeted out a number of photos regarding visits from state senators and House members. This is not by accident – and it’s an easy guess that the distribution cap is being brought up with each visit, along with the opposition’s view. (After all, it doesn’t get any blunter than “Thanks to U.S. Senator Richard Burr for touring Mutual Distributing to see how 3-tier system delivers variety.”)

As this battle continues to roll on over the next year, one of the major keys will be sustainment. Essentially, the NCBWWA has “Big Beer,” as it’s known, behind it, and with that comes a lot of cash for print, television and digital media ads, along with candidate donations. Two of the three largest 2014 donations from the N.C. Beer & Wine Wholesalers Association went to Phil Berger ($10,000) and Tim Moore ($7,500). Berger is the current N.C. Senate President Pro Tem, while Moore is the current N.C. Speaker of the House. If you’re not up to speed on state politics, those two positions are the ones that assign members to the respective legislative committees. Jamie Boles, who happens to be the chairman of the N.C. House Alcoholic Beverage Control Committee, has received more than $11,000 from the NCBWWA over the last two election cycles.

Craft Freedom, on the other hand, will be taking a more grassroots approach. The CF movement may not have as deep of pockets, but it is building steam slowly but surely, with more than 70 businesses (including a number of breweries across the state) pledging their support to help change the law.

“Red Oak was out there in the wilderness all by themselves, fighting like hell,” Marrino says. “The other side was able to dismiss them easily. And now we have 70 affiliated companies – and we’ll have over 100 in the next couple of months across the state – that are saying, ‘This has to be changed.’ So now it’s all of us and with this group, I think we can get it done.”

One huge change is that this time, the breweries’ side will be represented in Raleigh by a lobbyist. Interviews have taken place over the past month, and Craft Freedom is hiring a lobbyist (just one for now, with the possibility of another down the road), whose job will be to educate lawmakers and make them aware of the current self-distribution law’s impact on various industries. Craft Freedom’s lobbyist will not only be advocating for the initiative, but also report back to the breweries regarding any activity on the issue in Raleigh (just in case the folks in the state capital happen to call any more expedited meetings).

“We’re going to be meeting more lawmakers, hire our lobbyist and make sure lawmakers have our message,” Ford says. “We recognize that this is a fight that has been going on without Olde Mecklenburg and NoDa for about seven years. Unfortunately, there hasn’t been a lot of ground made up during that time but we’re expecting that now that we have a little more time and it’s applicable to three breweries now … I think it’s a more poignant conversation and we’ll be able to get the message to lawmakers to understand how important it is to be open to this issue. Beyond that, we’re just going to hope for good common sense, and then we’ll have success.”

And the breweries have already taken action into their own hands in reaching out to influencers. There were a few local politicians on hand for the Craft Freedom launch press conference, while Marrino has personally spoken with N.C. Lieutenant Governor Dan Forest and Secretary of Commerce John Skvarla about the subject.

“It doesn’t take very long through the presentation before they understand very clearly that we have a problem and it needs to be fixed for the good of North Carolina,” Marrino says. “And the thing is; it’s not going to harm distributors at all. That’s the beauty of it. It’s not anti-distributor; it’s pro-manufacturing in North Carolina.”

Many of Charlotte’s breweries are standing in unity with Craft Freedom and were well-represented at the CF launch party. Marrino says he’s appreciative of the backing of the fellow breweries, and hopes that by changing the law, it will pave the way for them in the upcoming years.

“I was in their shoes a few years ago and I know they’re going to be facing this,” he adds. “And I don’t want them to be in the position I am now, which is the uncertainty and having to slam the brakes on your company while not being able to make long-term decisions. I don’t want them to have this problem.

“There’s plenty of room for a lot of breweries in North Carolina. We drink a lot of beer in this state, and we’re only making a small percentage of it. So I want everyone to grow, and it’s great for everyone else to stand up and recognize this now.”

Adds Ford, “We’re very thankful … and what I say to them and others is that, they’re one medal away from having this situation, or one seasonal beer that takes off and is traded crazily all over the country before they run into something similar to what we did. I can tell you right now, I never thought we’d make this much beer but now that we are, it’s really not that much beer. It’s 1/3 of 1 percent of the Charlotte market.”

Until the law is changed, it will continue to force Olde Mecklenburg and NoDa to make tough decisions regarding how much beer they produce and who gets that beer. The breweries understand they are in a battle (and one against a deep-coffered opponent), but remain optimistic for a new self-distribution era in North Carolina come 2017.

“By and large once people understand the situation I think they’ll be supportive,” Ford says. “There are some who won’t want to change the law because as it is right now it benefits them and nobody else. But I think we have a large number of grassroots supporters, we can explain our situation and we can do so intelligently. And I think we’re going to win.”

Categories: Beer, By Matt McKenzie