News: CJ Exclusives

Changes in Beer Franchising Law Have Distributors Happier Than Brewers

Measure passes House by near-unanimous margin

RALEIGH – The state House has said cheers to a compromise beer distributorship agreement that will make changes to the state’s decades-old beer franchise law.

“It gives those [beer distributing] companies greater assurance about the long-term investments they’re making in equipment, warehouses and jobs,” said Tim Kent, executive director of the N.C. Beer and Wine Wholesalers Association.

Kent likened opposition to a previous version of the bill that passed the Senate last year to a “13 1/2-month family disagreement.”

Doug Bailey, regional vice president for Anheuser-Busch, said in a statement that while not perfect, the compromise worked out with the distributors is a significant improvement over the bill that was approved by the Senate last year.

“This bill addresses several aspects of North Carolina’s beer industry, and represents an important step forward in allowing brewers large and small to continue to grow and invest in the state,” Bailey said. “That being said, we remain concerned about the impacts of a structured pricing model on consumer choice and North Carolina’s free market.”

Bill Sherrill, owner of Red Oak Brewery in Whitsett, said the law should allow breweries to distribute how they want.

“It didn’t do anything for us,” Sherrill said of the bill, calling the distributorship system a “state-sanctioned monopoly.”

“Wouldn’t you like to inherit a government-sanctioned monopoly?” he asked rhetorically. “That’s what a beer distributor is.”

When it comes to distribution, Sherrill said that brewers should “be allowed to do what we want.”

A number of breweries had joined Anheuser-Busch in opposing the bill, including New Belgium, Sierra Nevada, MillerCoors, Crown Imports, and Heineken.

While the bill would still make more than two dozen changes to the beer franchise law, brewers would have flexibility in promotional activity for their products and would allow for flexibility in choosing a distributor if there is a change in the distributor’s ownership.

The distributors would gain in that there would be uniform pricing from the breweries. That means that breweries essentially would have to sell their products to distributors at the same price throughout the state.

Kent said that the compromise provided accommodations for some of the smaller breweries in the state.

“If a smaller brewer … is unhappy with a distributor relationship, the legislation provides the smaller brewer with a reasonable path to self-distribution,” Kent said.

Kent said the legislation would help smaller breweries and consumers.

“Smaller brands will be able to get their product to the market and consumers will have more choices,” Kent said.

The Senate approved a version of the bill last year. On Wednesday, the House approved it by a 113-1 vote. It now goes back to the Senate for final approval.

Barry Smith is an associate editor of Carolina Journal.