North Carolina

North Carolina Lawmakers Seek a Bevy of Reforms to ABC System

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North Carolina is one of about a dozen remaining states in which the government controls the retail sales of alcohol. The state’s ABC system has been mired in scandal recently after a state audit uncovered millions in waste, which has spurred calls for reforming the state’s antiquated alcohol laws. According to the Greenville Daily Reflector, several lawmakers have introduced an omnibus reform bill with numerous proposed changes:

A bill filed in the N.C. House would dramatically revamp how the state governs liquor sales and distribution, including a provision allowing for Sunday sales. Distillers, brewers, and consumers would be among the beneficiaries of the expansive measure, modernizing a system entangled in arcane laws dating back to the end of Prohibition.

Reps. Chuck McGrady, R-Henderson; James Boles, R-Moore; Susan Fisher, D-Buncombe; and Jon Hardister, R-Guilford, are primary sponsors.

Lawmakers have already introduced several items presented in Tuesday's bill, such as a move - House Bill 389 - to authorize public colleges and universities to allow the sale of alcohol at stadiums, athletic facilities, and arenas on school property, as well as a move paving the way for Sunday sales - Senate Bill 87.

The omnibus measure introduced Tuesday, H.B. 536, ABC Omnibus Regulatory Reform, would, for example, allow distillers to sell spirituous liquor directly to consumers in other states and removes a limit on sales to customers visiting one of the nearly 60 craft distilleries in the state. As it stands, customers can buy five bottles from a distillery per year. All sales now are recorded and tracked.

The bill also would allow tastings in state-run ABC stores and provides a local option for cities and counties to adjust store hours, including for Sunday sales…”

Read the rest here.

Agreement Reached to Lift North Carolina's Self-Distribution Cap

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As our team has previously covered, North Carolina caps the number of barrels that breweries in the state can self-distribute at 25,000 annually. This means that once a brewery exceeds that barrel limit, it is forced to work with middlemen distributors in order to sell its beer in stores and restaurants in the state. Unsurprisingly, this creates a whole host of problems for growing breweries. While previous attempts to lift the self-distribution cap have failed in the state legislature, the AP reports that a deal to lift the cap has been reached (although the cap still remains in place at a higher level, rather than being scrapped entirely):

Small North Carolina brewers and alcohol wholesalers raised glasses on Thursday to what they call a legislative compromise that allows the breweries to keep control of their products longer as they grow.

Legislators from both political parties and industry representatives announced an agreement in General Assembly bills filed this week to let these craft breweries sell double the amount of their beer annually on their own compared to what current law allows…

The legislation would allow the creation of a new classification of brewers that can self-distribute up to 50,000 barrels a year. While these mid-sized brewers would still be able to sell up to 100,000 barrels, distributions above the first 50,000 barrels would have to be performed by a wholesaler.

Read the rest here.

New Report on North Carolina's Alcohol Control System

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North Carolina is one of roughly a dozen states in which government still controls liquor sales at the retail level, and the state has recently endured a series of scandals and episodes of mismanagement involving its ABC system. Stemming from this, the John Locke Foundation has released a new report calling for the system to be privatized moving forward:

North Carolina opened the 20th century as the nation’s leader in legal distilleries. The state ABC system was devised to control liquor sales, and now North Carolina is one of just 17 states with control over wholesale distribution of liquor, one of only 13 states with government control over retail distribution of liquor, and the only one in the country with local government control of retail sales.

Other states let licensed private businesses handle wholesale and retail sales of liquor. That’s also what North Carolina does for beer and wine sales. Local breweries and wineries are flourishing under a relatively freer distribution system.

North Carolina’s budding distilleries could be doing the same if given the chance…

The whole report is well worth a read.

Key N.C. Legislator Signals Openness to Liquor Store Privatization

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North Carolina is one of 13 states that still utilizes government-run liquor stores at the retail level. While privatization is often a difficult battle in control states, a key state legislator recently signaled an openness to the idea, although he expressed concern about potential lost revenue. The Citizen Times reports:

Republican N.C. Sen. Chuck Edwards told a conservative business group Friday he was open to privatizing government-controlled liquor sales and that a committee he is chairing has some sway over the issue.

"Lots of folks already are coming to me and talking about changes to North Carolina's antiquated ABC laws to make things streamlined both for folks who administer that and for business," said Edwards, who represents part of Buncombe County including Asheville and all of Henderson and Transylvania counties…

Privatization proponents, such as Edward's fellow Henderson Republican NC Rep. Chuck McGrady, say ABC scandals are a good argument to get government out of liquor sales.

McGrady chairs the House ABC board and last month said he is "intent" on making the change. 

Edwards chairs the Senate's Commerce and Insurance Board that would also review such a shift. But in comments after the speech Edwards said he would only support the change if revenue lost by local governments could be replaced…

Read more here.

Why Does N.C. Have More Wineries Than Distilleries?

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Despite our nation being in the midst of a craft spirits boom, North Carolina has only 57 active distilleries in the state compared to its 168 wineries and 300-plus breweries. Why? As Jon Sanders for the John Locke Foundation explains, the answer is different regulatory regimes for distilled spirits vs. beer/wine:

At the beginning of the 20th century, North Carolina was the nation’s leader in wine production. North Carolina was also the nation’s leader in legal distilleries (with 745 registered distilleries, 540 that were operating). These legal industries were killed off by statewide prohibition in 1908.

After Prohibition was lifted (federal and state), the North Carolina ABC system was created to keep tight control over liquor. State government controlled wholesale distribution, and local governments controlled retail sales. (Even for a control state, that’s weird.)…

North Carolina didn’t see its first new distillery until 2005. Now there are 57 local distilleries in North Carolina.

In the meantime, wine (which had been placed under the purview of the ABC system in the late 1950s) was regulated under a relatively freer system. My colleague Jon Guze’s report describes many problems with the state’s three-tiered distribution system, but even with its flaws, it’s not nearly as restrictive as how North Carolina regulates liquor…

So wineries began coming back to North Carolina about when Prohibition ended, albeit very slowly at first. Faster growth was seen after reductions in state winery license fees and wine taxes were passed in 1972. By 2000, there were already 21 established local wineries. Now there are 168 local wineriesin North Carolina…

The entire piece is worth a read and can be found here.


NEW: America's Dumbest Drinks Laws

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In honor of Repeal Day, we released a new drinks report! Earlier this year, our DrinksReform team put out a call for readers to send us examples of the craziest, whackiest, most nonsensical alcohol laws they could find. We scoured the Internet, interviewed industry players, and combed through state legal codes to find the “worst of” when it came to booze laws across the country. Today, we debut the culmination of that effort, a new report titled “America’s Dumbest Drinks Laws.”

That’s right, we picked the 12 dumbest drinks laws in America and ranked them. We’ll let you read the report for the full rankings, but we wanted to pass along one happy note: The “winner” of the #1 worst alcohol law—a 1834 federal law that banned Native Americans from distilling on tribal grounds—was recently relegated to the dustbin of history. A bill repealing this outdated and offensive law passed both the U.S. House of Representatives and Senate and is headed to the President’s desk.

R Street’s Kevin Kosar and Jarrett Dieterle wrote the first article in any mainstream outlet about the Native American distilling ban when they penned an op-ed earlier this year in the New York Times calling for the law’s repeal. We like think to think that we get results at the R Street Institute, and we’re proud that the law we targeted as the #1 worst alcohol law in the country has officially been eliminated.

Now, onward to #2 and #3! (Looking at you, North Carolina and Indiana …)

Check out the full report here—and prepare to be outraged! For a more condensed summary of the report, Dieterle wrote a Repeal Day piece for the Washington Examiner about it.

Additional media coverage for the report:

North Carolina's ABC Limits Product Offerings

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The hits just keep on coming for North Carolina alcohol consumers. After an audit found that the state’s Alcoholic Beverage Control Commission wasted millions in taxpayer money through mismanagement, the commission has now announced that it’s reducing its booze offerings, according to Carolina Journal:

An email to suppliers last week from the N.C. Alcoholic Beverage Commission, in addition to announcing that it’s trimming the number of products it lists, cited the state’s alcohol warehouse operator for its good work.

It’s the same operator, LB&B, which was named in an audit released this past summer that found poor contract administration cost North Carolina taxpayers at least $11.3 million over 13 years. Unused warehouse space potentially cost the state $2.1 million over seven years, and a lack of monitoring left the state underpaid by at least $297,537 over two years…

Read the rest here.

It's time to privatize North Carolina liquor sales

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After a recent audit uncovered millions in wasted money by North Carolina’s government-run liquor stores, new calls for privatizing alcohol sales in the Tarheel State have arisen. The president of the N.C. Retail Merchants Association recently made the case in The News & Observer:

In 1937, after the repeal of prohibition laws, the N.C. General Assembly established a monopoly system for North Carolina and the sale of spiritous liquors. Now, more than 80 years later, the Alcoholic Beverage Control Commission still does exactly that – controls alcoholic beverages in North Carolina.

They not only determine what brands of alcoholic beverages may be sold, maintain the state ABC warehouse for the distribution of liquor, regulate the sale of wine and beer, and issue permits for wineries, breweries, wholesalers, and retailers but they also, with total exclusivity, sell liquor by the bottle.

Simply put, the system hasn’t modernized with the times nor does it meet the needs and wants of today’s consumers.

North Carolina is only one of eight states that controls both the wholesale and retail sale of liquor and the only state where the stores are run by 168 local ABC Boards in individual cities and towns...

Read more here.

Audit uncovers millions wasted by N.C. liquor regulators

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Government regulators are often notorious for mismanaging the public fisc, and a recent audit of North Carolina's Alcoholic Beverage Control Commission shows that N.C.'s liquor regulators wasted almost a million dollars a year over the past decade:

The office in charge of North Carolina’s state-run liquor stores has wasted millions of taxpayer dollars through years of mismanagement, according to an audit released Thursday morning.

The audit found that the Alcoholic Beverage Control Commission lost the state nearly a million dollars a year — specifically, $11.3 million over the course of 13 years — due to poor handling of contracts. ABC officials also wasted $2.1 million by renting warehouse space that they then kept empty for seven years, the audit found.

State Auditor Beth Wood said in an interview Thursday that the waste this audit uncovered was some of the most egregious she has seen in her nine years in office.

“There was just no overview, no oversight,” she said. “There was no monitoring of that contract. You just had a contractor come up and say ‘I want more money,’ ... and whatever the contractor asked for, it was what they got.”...

More here.

 

North Carolina Sued for Alcohol Laws

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R Street's Jarrett Dieterle has previously written about North Carolina's "Raise the Cap" initiative, which has sought to overturn the state's cap on the amount of beer breweries in the Tar Heel State can self-distribute. After legislative efforts to reform the law failed, state brewers brought a lawsuit against the rule. According to the Charlotte Business Journal, the suit has uncovered illegal activity between some beer makers and distributors: 

A lawsuit brought by Charlotte's largest craft brewers has uncovered illegal activity amid efforts to overturn North Carolina's self-distribution laws, according to an attorney representing them.

Initial discovery exposed a "secret agreement" between Anheuser-Busch and distributor R.A. Jeffreys that gives sales of those beers priority over all other products - illegal under a 1989 state law, says Drew Erteschik, co-counsel for The Olde Mecklenburg Brewery, NoDa Brewing Co. and the Craft Freedom initiative.

Those craft brewers are suing North Carolina, alleging the state artificially suppresses economic growth through two unconstitutional laws - the distribution cap and franchise law.

The court's ruling will impact brewers' ability to increase production and continue to distribute their own products. Current law requires brewers to hand over their rights to private distributors if they sell more than 25,000 barrels

Read more here.