Opinion: Daily Journal

Increasing allowable sales at distilleries would give businesses fighting chance as N.C. ABC trims product list

The N.C. Alcoholic Beverage Commission is trimming the number of products it lists because, to be blunt, some of those items — i.e. bottles — just aren’t selling.

In an email to suppliers Wednesday, sent on behalf of ABC administrator Agnes Stevens, the goal is providing “the optimum selection of products and sizes to meet customer expectation (both individual and mixed beverage customers).”

So, de-list products that aren’t selling for products that do. We get that.

The state would do well to offer more hard-to-find and specialty items. Products from Willett Distillery in Bardstown, Kentucky, for instance. Or Buffalo Trace bourbon, which is plentiful in other states but nearly impossible to find in North Carolina.

The same goes for products by North Carolina distillers, which are sometimes tough to buy, depending on where people live and shop.

The timing of the email raises questions.

ABC’s strategy, according to the email, would, in December, “de-list products that do not meet 2017/18 profit thresholds for N.C. ABC boards — $15,000 for vodkas, $10,000 for other, $5,000 for N.C. products, $1,000 for boutique … and use additional filters including trends and numbers of similar products to trim list to a maximum of 2,300 listed products.”

The ABC Commission website showed 2,695 items, as of Nov. 1, the ABC says.

“Before Jan. 2, 2019, the Commission will advise brokers of items that have been de-listed and need to be cleared from warehouse Jan. 21- Feb. 8, 2019. …”

Why so quickly? To be fair, ABC spokeswoman Kat Haney says the November email sent “to all brokers and suppliers is well in advance of the 2019 listing meetings that are scheduled for January and February. In the past, the conversations about delisting were held at the same time as the requests for potential new products being listed. Regarding public comments, product listings and delistings are an operational matter, and have not ever been a public hearing topic that I am aware of.”

Still, constitutional concerns arise, which Jon Guze, director of legal studies at the John Locke Foundation, explains here. The new ABC rules are akin to a state statute prohibiting brewers from producing more than 25,000 barrels a year unless they use a distributor as a means of selling it to retailers.

What Guze writes about brewers also applies to the state’s distillers: “North Carolina should be encouraging such people, rather than actively holding them back. If the General Assembly won’t protect their economic rights, don’t be surprised if they turn to the courts!”

Some of the state’s largest brewers have done just that.

Granted, the threshold for sales for N.C. distillers is lower, but it could prove problematic for many.

At $25 a bottle, ABC stores would need to sell about 450 bottles from a distiller to earn $1,000 in profits, according to estimates from Joe Coletti, a senior fellow at JLF who specializes in fiscal and tax policy analysis.

Fact is, many small distillers will fall by the wayside. Startups will stall.

Says Haney, “The state supports the health of the North Carolina distilleries and works closely with them. Each distiller meets with the Commission in advance of a product being listed. The Commission long has had graduated sales thresholds as a qualification to hold warehouse space for North Carolina distillers as well as out-of-state suppliers.

“The North Carolina distilleries that do not meet the sales threshold guidelines have the option to change their listing category from a regular listing to a special order listing,” Haney says. “This allows them to sell up to five bottles at their distilleries after tours and also to make their products available for sale by the case (prepaid at ABC stores) to individuals or mixed beverage permit holders.”

But will that be enough?

The state could avoid possibly putting these North Carolina producers out of business by allowing distilleries to sell an unlimited number of bottles from their distilleries, without requiring them to ship products to Raleigh to store in a warehouse. Much like the Virginia model, in which distillers, in effect, become individual ABC stores, under the respective local boards.

Also allow distillers to sell mixed drinks, loosening archaic rules and putting them on par with breweries and wineries. For many N.C distillers, that would be the next logical place to go toward revamping a monopolistic system with its roots in Prohibition.