Self-Distribution, Franchise Reform Bill on North Carolina Governor’s Desk

After 12 years of debating North Carolina’s self-distribution and franchise laws, brewers and wholesalers are one step away from their compromise being written into law.

On Monday, the North Carolina Senate voted 38-3 to approve the Craft Beer Distribution and Modernization Act (House Bill 363), which the House approved in mid-April. The legislation now advances to Gov. Roy Cooper, who has 10 days to sign the bill. Even if Cooper decides not to sign the measure, however, it would automatically go into effect.

As the law is currently written, North Carolina permits breweries that produce 25,000 barrels or fewer to self-distribute. However, companies that exceed that cap are forced to forfeit self-distribution rights and sign with a wholesaler.

Under the Craft Beer Distribution and Modernization Act, North Carolina breweries producing more than 25,000 barrels annually would no longer be required to sign with a wholesaler. The measure creates an additional brewer classification for “mid-sized independent breweries” selling fewer than 100,000 barrels annually.

The Craft Beer Distribution & Modernization Act was born out of a compromise reached in March between Craft Freedom LLC — a trade group consisting of Olde Mecklenburg Brewery and NoDa Brewing Co. — and the North Carolina Beer & Wine Wholesalers Association.

NoDa Brewing Company co-founder Suzie Ford and North Carolina Beer & Wine Wholesalers Association executive director Tim Kent released a joint statement praising the passage of the measure:

“The overwhelming majority support of the passage of the Craft Beer Distribution & Modernization Act is an important step forward for the beer industry adding to existing opportunities for brewers in North Carolina. HB363 provides greatly-expanded legislative support for the state’s Beer Franchise Law and the three-tier system. As North Carolina’s breweries continue to grow, we welcome today’s regulatory achievement.”

If the measure is signed into law, the annual 25,000-barrel cap would increase to 50,000 barrels. Beer companies that exceed the 50,000-barrel limit, but sell fewer than 100,000 barrels annually, would be allowed to self-distribute the first 50,000 barrels. However, those companies would be required to work with a wholesaler to sell the remaining 50,000 barrels.

In order to terminate a distribution agreement, North Carolina breweries that distribute more than 25,000 barrels annually would be required to show “good cause.” However, breweries that distribute up to 25,000 barrels annually would be allowed to exit their distribution contracts without proving “good cause.” Those companies would still need to provide five day’s notice and pay “fair market value.”

The passage of the Craft Beer Distribution and Modernization Act would also end Craft Freedom’s 2-year-old lawsuit challenging the constitutionality of North Carolina’s self-distribution cap and franchise laws, which bind breweries into nearly unbreakable contracts with their wholesalers.

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