Monday, 18 February 2019 12:57

Distillers say state ABC monopoly harms producers, consumers

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Distillers say state ABC monopoly harms producers, consumers Matt Harrelson - Richmond Observer

RALEIGH — The Distillers Association of North Carolina, calling the state’s system of controlling liquor “an 80-year-old regulatory scheme,” is urging lawmakers to reform and modernize the antiquated system.

Such moves, DANC says in a statement, would be to the “benefit of our state and its citizens.”

“The state’s distillers are denied the right to self-distribute and the right to directly sell to consumers. Instead, they are forced to use a cumbersome state monopoly for both distribution and sales,” DANC says.

DANC represents nearly 50 North Carolina-based distilleries.

It’s difficult to profit from liquor in North Carolina when the state severely restricts direct sales from distillers to customers, says Scott Maitland, a brewer, distiller, restaurateur, and DANC vice president.

Liquor sales in North Carolina last year topped more than $1 billion, a record for the state, the N.C. Alcoholic Beverage Control Commission says in its annual report, released last month.

From there the money was distributed to some 50 state entities, including colleges in the UNC System and departments of government, including the state auditor, which, in August found that 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.

“The fiscal year 2018 marks the [ABC commission’s] third consecutive record setting year for 10-digit sales, where retail sales surged and sales to restaurants and other businesses with mixed beverage permits increased over the prior year,” the report says. The billion-dollar ABC revenue resulted in an all-time high transfer of money into the General Fund for use by the N.C. General Assembly.”

The N.C. distilling industry, DANC says, “accounts for less than 1 percent 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 percent market share of the overall beer market.”

“This incredibly inefficient system — created when nobody dreamed that there would be legal distilleries in North Carolina,” DANC says, “harms the North Carolina economy by chilling potential investment which would create jobs and taxes; 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.”

DANC wants to remove limits and onerous record keeping requirements on sales made in a distillery; allow distilleries to sell a limited amount of cocktails; allow distilleries to sell directly to mixed beverage permittees if desired; and allow sales to consumers out of state, if allowed by the destination.

North Carolina is one of 17 remaining alcohol control states in the country, and it may well be the most restrictive. It’s the only state giving local boards control over what’s on the shelves.

Even control states such as neighbors South Carolina and Virginia have loosened alcohol regulations to allow distillers to sell mixed drinks, have enacted lenient sales rules for people to buy directly from distillers, and allow tastings in stores that sell liquor.