“North Carolina beer jobs are under attack! Now, if you’ll just sign this petition, we promise to continue misleading you.”
That’s a fair summation of a website I was recently steered toward, the proactive-sounding NCBeerJobs.com. Look, the domain even contains things I’m for: North Carolina, beer and jobs! How could this possibly be a bad thing? It warns about two bills moving through the N.C. General Assembly that are “threatening the livelihood of 1000’s of North Carolina workers.” When I view this site on a mobile device, the petition is conveniently at the top, so I don’t even have to read through a bunch of troublesome words to blindly commit to a cause.
Seriously, go check this website out; I’ll wait. All I ask is that you finish this piece before you sign. I’ll try to entertain you with the truth as I expose this website for the deceitful, misleading, fear-mongering piece of skewed garbage that it is.
Cui bono is a Latin phrase we still use. Directly translated, it means “to whose benefit.” So, who’s behind this seemingly well-intentioned website, who’s benefiting from the petition? Well, they want you to assume that North Carolina breweries benefit; after all, their website has NC, Beer, and Jobs in the domain name.
So what exactly are these folks fighting? “House Bills 625 and 278” doesn’t really provide much of a description. If you want it straight from the horse’s mouth, these bills “create an unfair, competitive advantage for a select few who want to do an end-around of the state’s regulatory system which promotes effective tax compliance, product safety and a wide variety of consumer choice.” You’re right, website; these bills are clearly evil and must be stopped. But curiosity gets the best of me, as it usually does, so I’m inclined to look these bills up before I sign the petition. It’s an odd practice, I know.
Let’s start with House Bill 625. It allows for Contract Brewing to occur in the state of North Carolina. Really quick version of what “contract brewing” is: Brewery A signs a contract with Brewery B for Brewery B to produce beer for Brewery A to sell. Right now, one North Carolina brewery can’t do that for another; this law would allow that to happen. Why would this practice occur, you ask? Well, let’s say Brewery A is expanding its production setup, but doesn’t want to run out of liquid stock while the work is being completed, so Brewery B steps in to help them keep up with demand. Clearly this concept of camaraderie in industry is evil, and is “threatening the livelihood of 1000’s of North Carolina workers.”
Alright, on to House Bill 278. It’s all about revising existing self-distribution laws in North Carolina, and if you blink you may miss the minuscule change being proposed. Right now, North Carolina breweries are legally forced to turn over distribution rights of their products over to distributors once they produce over 25,000 barrels of beer annually (or, as this website says, 8.26 million bottles). If that seems like a lot of production, just keep in mind that Anheuser-Busch makes literally Five Thousand Times that every year. I know, that’s a bit of a straw-man argument; it shouldn’t matter what macrobreweries make annually. This is about NC, Beer and Jobs. Sorry for getting off-subject.
This bill raises the limit, allowing N.C. breweries to self-distribute up to 100,000 barrels of beer annually, before they’re legally mandated to turn over the rights to their very own products to a third-party.
Seriously, name me another industry that is forced to turn over rights to market and sell what they make. I’ll be honest, self-distribution is inefficient. It’s much easier for one “independent beer distributor” to deliver four different brands from one truck than it is for four independent beer makers to independently make four deliveries. But here’s the rub: this inherent inefficiency means more jobs for more delivery drivers, cellermen and so forth. But hey, you should fight against House Bill 278, because this jobs-creating, salary-generating, industry-expanding inefficiency is “threatening the livelihood of 1000’s of North Carolina workers.”
Look, I’m all for NC, Beer and Jobs. The folks behind this website want you to believe they are as well. To help me understand the issues at hand a little better, I consulted a local brewery owner, who gave me the two options they face when they hit this legally mandated production ceiling: “One: Stop growing and remain at 24,999 bbls. This after spending millions of dollars in upgrading our system and facility. Or two: Turn over all our distribution to a distributor and lay off nine-plus employees.”
Wait, so you mean to tell me that supporting this petition actually hurts NC, Beer and Jobs? I thought these were the very things we were helping with this petition?
So there you have it. These two bills do nothing but allow cooperation between competitors (seriously, how can you be against cooperation?), and let breweries have more choice with when they want to sign the rights of their products over to a third party.
Don’t believe this NCBeerJobs baloney. If they have their way, they’ll hurt the very things they pretend to protect.
This article appears in Apr 22-28, 2015.
So, if the local breweries aren’t behind the petition/website — and you rightly point out how that is unlikely — who *is* behind the petition/website? My money is on either (1) AB Inbev and its fellow macrobrewers, and/or (2) the large, non-craft distributors.
Silly me, I should have actually looked at the petition’s website. It’s clear who is behind it —
“544 of those workers are employed at the state’s largest brewery—the MillerCoors plant in Eden where fulltime wages and benefits average $85,000. Another 5,600 N.C. workers are directly employed by independent beer distributors. The distributor employees have fulltime jobs with highly competitive wages and benefits averaging $71,000.”
So yeah, it is (1) the macrobrewers *AND* (2) the large, non-craft distributors. Something the author would have been wise to point out in his article. And this further calls into question the integrity of the people behind the petition. The bills aren’t about stifling the growth of homegrown breweries, it’s about making life more difficult/expensive for the local breweries in favor of BMC and the distributors. F*** THEM.
Art, I didn’t want to assume who was behind it. So far, no one organization has stepped up and actually claimed credit for that “petition.” I can say which distributor(s) were at the root of the e-mail chain that tipped me off to this story: Caffee out of Greensboro, and Carolina Premium out of Charlotte. I don’t want to say if they’re behind this, because I honestly don’t know yet. But if it quacks like a duck…
Full disclosure: I work for a distributor.
First, whomever may be behind the website is irrelevant. MillerCoors and ABInbev would not really be affected by these bills in the slightest. In fact, they would benefit in the long term if the three-tier system were slowly dismantled. They are too busy fighting over tenths of percentage points in market share.
Second, there is no such thing as a non-craft distributor in the Charlotte market. All beer and wine distributors have some craft breweries in their portfolios, and some more than others.
Next, as usual there is only one side presented. Ask the people at Red Oak, NoDa, or Olde Mecklenburg, and they’ll likely argue that they are being kept out of the market by distributors.*
*Fun Fact: distributors don’t have much say in what goes on the shelves anymore.
Now ask the folks at Foothills, Aviator, Old Hickory, or Highland about their experience working with distributors. I’ll not speak for them, but I will wager you will get two completely different answers from each group.
Iin truth, these bills would be a great detriment to all distributors in the state, so they would have a major stake in this battle. It would gut most companies’ portfolios. Maybe not immediately, but the potential is there.
But why would this be bad for consumers? Most distributors have management-level employees who act as go-betweens for the suppliers (brewers) and the store chains. They work out the weekly deals, make suggestions for new products to go into the cold boxes and warm shelves during resets (but only suggestions. final say is still made by the chains and usually based on existing sales figures for established brands.) Granted, these sorts of things can be handled by the breweries themselves, but it takes time to build the relationships the distributors have already established. If you compare craft six pack prices around the rest of the US with the Charlotte market you’ll quickly see how, at least in our market, distributors are a good thing.
Ask Triple C about how they got into Harris Teeters. I watched this process personally. They had to work really hard at it starting at the store level, and it still it took them about a year just to get on warm shelves in a handful of stores. Longer to get in the cold boxes. Keep in mind they are local and competitively priced.
Now consider the opposite extreme: Ballast Point. Non-local, and their Sculpin IPA is the most expensive six pack in most grocery cold boxes. They signed on to a local distributor and were in the cold boxes within a couple of months.
So there are pros and cons to both distribution models. I am not privy to the cost details for either side. But from my biased point-of-view contracting with a distributor is a good investment. No need for a brewery to build warehousing or order placement and delivery infrastructure. Local marketing and advertising gets handled by the distributor because if it doesn’t sell, they lose money not the brewery (current law prohibits selling product back on any step of the three tiers.) I would argue that the time and money saved and reinvested into actually developing and making product far outweighs the short-term DIY method.
But, as mentioned above, I do have a pony in this race.
I should also note that the contract brewing, and wine sale provisions are not at issue. Only the raising of the barrel limit and the “not counting on-site sales toward barrel count” bits.
Full disclosure: I’m a believer in the Free Market.
Emory: You make a compelling argument for local breweries to use a distributor, but that’s all it is: a sales pitch.
Bottom line: it should be up to the brewery to decide whether or not it uses a distributor. Period. The idea that a company *must* use an intermediary to get its product to market is ridiculous and completely antithetical to the way we do business here in America. (And yes, I played the ‘Mur’ca card).
That said, I’ll go you one further: we should get rid of the cap altogether. Viva la capitalism!
Your article though informative may confusing to the reader who doesn’t live on sarcasm.
Emory, why should a brewery be FORCED to use a distributor at all? Why is there an arbitrary barrel amount, over which, a brewery HAS to use a distributor? This doesn’t exist for any other market. Dairy farmers aren’t forced to use a distributor once they start producing 100,000 gallons of milk. Nor are orange growers forced to use a distributor for their juice.
Why does this law exist at all?
Emory, if contracting with a distributor is as good of a deal for small breweries as you say it is, then why do you need laws to force them to do so?
Why should I care if a distributor’s portifolio is “gutted” over time? Distributors don’t exist simply for the sake of existing, they need to provide value. If it were a legitimately good business model for a business to use distributors, then there would be no gutting portfolios. If they do not provide such a value, then they deserve to have their portfolios diminished.
We aren’t arguing what may be bad or good for consumers. The argument is about fair business practice. As a consumer, I’d love a law which forces a brewery to give me free beer, but the implications of such a law would have a negative impact on the brewing industry. While hyperbole, the concept still applies: a healthy and successful business should be allowed to thrive in a legal and healthy way, without being forced to make bad business decisions.
If a distributor can add value to a brewery (and I believe they can), then it could be a wonderful relationship, perfectly solved in the free-market. Allowing the government to force a business into such a relationship without regard to the needs of that particular business, only serves to undermine the health of an otherwise thriving industry.