USA, NC: Charlotte’s two biggest craft brewers appear headed to court to raise their production limit

Charlotte’s two biggest craft brewers appear headed to court after a campaign to raise their production limit collapsed in the face of opposition from North Carolina’s influential beer wholesalers, the Charlotte Observer reported on April 19.

Olde Mecklenburg and NoDa breweries have spearheaded the so-called Craft Freedom fight, a bid to raise the 25,000-barrel cap on production before craft brewers must enter a distribution contract with a wholesaler.

But House Bill 500, which would have raised the cap to 200,000 barrels, was gutted on April 19, barely three weeks after it was introduced amid fanfare and support from the state’s more than 200 craft brewers.

“I’d say it’s disappointing, but disappointing doesn’t do it justice,” said John Marrino, owner of Olde Mecklenburg. “It’s outrageous. It’s backroom politics. … I’m not sure the General Assembly is the best avenue to ensure the success of the micro-brewery industry in North Carolina.”

If the 25,000-barrel cap remains in place, Marrino said he won’t be able to build a planned second brewery in Cornelius.

Todd Ford, owner of NoDa Brewery, said, “Apparently our only path to success is going to be a legal one.”

The two brewers and their advisers plan to meet Thursday with former N.C. Supreme Court Justice Bob Orr to explore their legal options.

Meanwhile, Tim Kent, executive director of the N.C. Beer & Wine Wholesalers, called the bill change “a positive step in the direction we were hoping for.”

The quick collapse of the brewers’ bill demonstrates the political strength of the wholesalers. Through its executives and political action committee, the wholesalers have given lawmakers nearly $1.5 million in political contributions in the last four years, according to Democracy North Carolina.

Craft brewers faced other hurdles.

Lawmakers were told earlier this month that nearly a quarter of craft breweries were not in compliance with excise tax reporting. And critics of raising the cap were named to the Alcoholic Beverage Committee, which heard the bill. One was House Majority Leader John Bell, who received $4,000 from the wholesalers’ PAC.

“In my area I have a tremendous amount of distributors who represent a lot of people,” Bell said. “This is an issue that could dramatically impact my district.”

Wholesalers themselves lobbied heavily.

“We’ve all contacted our legislators and explained the situation,” said Dean Proctor, owner of a Hickory-based distributorship. “Once they understand the situation, they’re generally on our side.”

There was virtually no effort to compromise, from, say, the 200,000-barrel cap to 100,000 barrels or less. Last year Olde Mecklenburg produced 21,000 barrels.

“We weren’t given an opportunity to provide any input on the bill,” Kent of the wholesalers group said. “We were sort of put in a position of take it or leave it. And we chose to leave it.”

But the wholesalers “shouldn’t be too complacent,” Jon Guze, director of legal studies for the conservative John Locke Foundation, blogged Wednesday.

“In recent years, litigators in other states have successfully defended economic freedom on the basis of those states’ constitutions,” he wrote.

Orr, the former N.C. justice, said the brewers might have a better chance in court.

“There’s a strong constitutional and legal claim that these craft brewers can make that these restrictions (on production) are unconstitutional,” he said. “It’s a very strong case under our state constitution of just pure economic protectionism for our wholesalers.”

Without an increase in the cap, Marrino and Ford said they’re going to have to slow the growth of their businesses. That’s why they may be willing to take their chances in court.

“At the end of the day,” Marrino said, “you have to ask yourself, ‘Who’s running the show? The legislators or the wholesalers.”

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