News

McGrady's distillery reg reform bill advances

By John Trump, Carolina Journal News Service, Published: June 11, 2019

RALEIGH — A measure that North Carolina craft distillers are counting on to help them thrive and, in some cases, simply survive is moving in the General Assembly.

Senate Bill 290 was amended and debated Wednesday, June 5, in the Senate Commerce and Insurance Committee, but no vote was taken. It’s expected to be approved at the next committee meeting. House lawmakers filed a companion bill, but Sen. Rick Gunn, R-Alamance, is effectively taking a lead on the measure, called the Distiller Regulatory Reform Bill.

Gunn and Rep. Chuck McGrady, a Republican from Hendersonville, have long been proponents of reforming the antiquated system and are among the sponsors of the most recent bills.

S.B. 290 would allow N.C. distilleries to sell malt beverages and unfortified and fortified wine, as well to sell mixed beverages. It also would allow distilleries to sell spirits directly to consumers and would allow liquor tastings at state Alcoholic Beverage Control Commission stores.

The bill would, maybe most important, allow distillers to, much like ABC stores, sell to consumers without facing the current five-bottle restriction, according to state and local laws.

A sticking point in the process came with a provision allowing distillers to distribute their own state-approved spirits to customers such as bars and restaurants, via local ABC stores. The issue, in fact, led to a proposed committee substitute for the bill, which Gunn presented during the committee meeting.

Opponents of the measure, namely the N.C. ABC and the local boards, were worried about losing control of state alcohol sales and about collecting the appropriate taxes. Now, all liquor that is made in and comes into North Carolina goes through the N.C. ABC and is stored in a warehouse in Raleigh, to be distributed to some 170 local boards throughout the state. The local boards aren’t compelled to carry any particular product, so a restaurant that may want to sell, say, an N.C-made whiskey, may be unable to procure it from the local board, which operates independently.

“We are not going to direct distribute,” Gunn said. “That was very, very critical to our ABC boards and to our ABC commission, and even to some of the other stakeholders. … We have come up with a plan that will, in fact, help us get the product to the permittee so that they have a chance to compete.”

With the bill, Gunn said, a permit holder (restaurant or bar) can order a single bottle, which would be delivered to their local ABC store. If the local store is unable to deliver the product, for whatever reason, the store will notify the commission within 48 hours, and the commission will allow the distiller to deliver an approved product to the ABC store for pickup, Gunn said.

N.C. craft distillers say the state’s ultra-restrictive rules governing spirituous liquor have hurt and even thwarted moves to grow and prosper. The state, they say, is much more lenient on sales of beer and wine, and those industries in recent years have grown exponentially. What they want is the proverbial level playing field.

“This incredibly inefficient system — created when nobody dreamed that there would be legal distilleries in N.C. — harms the North Carolina economy by chilling potential investment which would create jobs and taxes,” stated the Distillers Association of N.C. “It harms the consumers who would enjoy a wider range of choice; and it harms the entrepreneurs currently in the industry by severely hampering their ability to sell to willing consumers.”

The N.C. Alcoholic Beverage Control Commission and groups such as the Christian Action League have vehemently opposed most attempts at reform, although distillers did make some headway last year, when the numbers of bottles they could sell to an individual customer rose to five per year, from the previous one.

The state, the distillers say, sells $12 billion in liquor each year, and N.C. distillers account for less than 1% of those sales.

“As a comparison, the N.C. craft brewing industry, which enjoys limited rights to self-distribute and the right to sell directly to consumers, has grown into a $2 billion industry in less than 30 years with over a 10% market share of the overall beer market.”

Pete Barger, DANC president and owner of Southern Distilling Co. in Statesville, said S.B. 290 is about supporting an industry and employing people in North Carolina.

“It’s really a common-sense provision,” he said.

“We’re just looking to the same access to consumers and markets that our friends in beer and wine have enjoyed. Look at these industries 15 years ago. They were just like we are today — small, fledgling Industries. Today … they’re economic drivers in many communities that desperately need that income. We want to be a part of that growth. …”

The state, which had just a handful of distilleries 10 years ago, now has close to 80.

Patrick Ballantine, who represents the state’s distillers, said this bill and others like it aren’t about drinking or getting drunk. “As Senator Gunn has said, this is not about consumption,” Ballantine said. “It’s not about more people getting intoxicated. It’s about jobs. It’s about growing an industry.”