“We just want to have the ability to run our business here locally, and our business model is not the same as Sam Adams or Sierra Nevada or Budweiser.” John Marrino, founder of Olde Mecklenburg Brewery
While guiding a recent tour of Red Oak Brewery, brewmaster Chris Buckley told visitors about the unlimited distribution rights he said 22 states enjoy.
North Carolina is not one of them.
He hopes that will change this year.
Red Oak is part of a grass-roots effort to change a state law that requires brewers to use a distributor when they produce 25,000 barrels of beer a year. That effort has attracted attention from the North Carolina General Assembly. Rep. Michael Speciale, a New Bern Republican, filed House Bill 67 last month to increase the production cap to 100,000 barrels. Rep. Chuck McGrady, a Hendersonville Republican, has said that he plans to file a similar bill, according to news reports.
As breweries such as Red Oak grow, they say they’d like to have more freedom to choose whether to distribute their own product in the retail market or use a third-party distributor.
John Marrino, founder of Olde Mecklenburg Brewery in Charlotte, called the current system a “politically connected cartel,” where distributors have “absolute control” over the state’s beer market, and they don’t want to relinquish it.
“It’s really an issue of fairness,” Marrino said. “In no other industry are you forced to transfer ownership and control of your business to another private company at an arbitrary volume level like this.”
It’s not the first time craft brewers have tried to get the cap lifted. A bill filed in the General Assembly two years ago to raise the cap to 100,000 never gained steam.
Things are different now, Buckley said.
There are more than 185 breweries and brew pubs in North Carolina, according to the N.C. Craft Brewers Guild. That’s up from about 26 a decade ago. Buckley said the increase in breweries has led to more support for lifting the cap.
Marrino said North Carolina brewers have spent the last year educating legislators and the public about the issue through the Craft Freedom campaign, which has a website dedicated to the effort. He said the campaign hired a political strategist and also has lobbyists working on its behalf.
Still, Buckley said he is not against the current three-tier system that consists of production, distribution and retail. He just thinks brewers should have more say in the matter.
“The distributors offer a value-added service to those breweries who choose not to self-distribute,” Buckley said. “They just want to focus on brewing beer. But, again, this has to come back to a choice in the United States. Not a forced relationship.”
Marrino said the law is not set up to help small, local breweries like his. Olde Mecklenburg sold 21,300 barrels of beer last year — all within a 40-mile radius of the brewery.
He said the law does not recognize that breweries have different business models. He said distributors are valuable to breweries that want to sell long distance, but he’s not interested in that. He wants Olde Mecklenburg to remain local.
“We just want to have the ability to run our business here locally, and our business model is not the same as Sam Adams or Sierra Nevada or Budweiser,” Marrino said.
Marrino said he’s got his own sales and distribution team — his brewery has created 133 jobs in Charlotte since it opened eight years ago — that can do a better job of getting Olde Mecklenburg a sufficient share of the market in any given territory than a distributor could. Distributors have so many brands in their portfolio that they can’t focus on one and get it the market share it needs, Marrino said.
Kayne Fisher, co-owner of Natty Greene’s Pub & Brewing Co., has agreements with distributors that he signed 10 years ago. He said it was necessary to do so during Natty’s early years because those wholesalers had relationships with retailers that he and his partner Chris Lester did not.
“For us, that’s what’s helped grow our brand,” he said. “Without it, we wouldn’t be where we are right now.”
He said breweries starting out today wouldn’t necessarily have that same problem because there is more of a demand for craft beer than a decade ago. He supports breweries that want to self-distribute and said there shouldn’t be any barriers preventing them from doing so.
“If that’s your business path, then you should be able to follow it,” Fisher said.
Having brewed just 1,000 barrels last year, Mark Gibb of Gibb’s Hundred Brewing on West Lewis Street isn’t anywhere in reach of the cap. But he’s already made the decision that he’ll work with a distributor if he does get that big some day. He said he never wants to get to the point where he’s distributing 25,000 barrels by himself because it’s akin to running two businesses: a brewery and a distribution business. But he said he supports those brewers who do want to distribute on their own.
As for Marrino, he’s on track to reach that 25,000 barrel benchmark this year. But he said he’ll stop producing at 24,999 before he gives up his business to a distributor.
“Now, basically, that comes to a grinding halt after this year if this law is not changed, and it’s a shame,” Marrino said. “It’s not good for North Carolina.”
Contact Jonnelle Davis at (336) 373-7080 and follow @jonsieNR on Twitter.