To understand the current state of our legislative system as it pertains to alcohol and craft beer in North Carolina, it’s important to look back and reflect on where N.C. Craft has grown from and what progress has been made thus far. This is the first blog of three that will walk you through the history of our beer legislation here in N.C.
Prohibition and its Effects on our Current State of Beer
The story truly starts far before the craft breweries we know and love opened their doors, as the effects of national Prohibition and the Post-Prohibition Era still shape our beer distribution and legislation system in this state today. In 1908, N.C. leads the Southern Charge into Prohibition as the first state in the South to implement statewide Prohibition – the rest of the country catches up in 1920 when national Prohibition is instituted through the 18th Amendment. A decade later, North Carolina and South Carolina refuse to ratify the 21st Amendment – it’s signed into law without their buy-in and the alcohol industry emerges from behind closed doors once again with some precautions put in place to help regulate the industry.
The 21st Amendment, after its expulsion of the 18th Amendment and Prohibition, states:
“The transportation or importation [of alcohol] into any State…in violation of the laws thereof, is hereby prohibited.”
This has since been interpreted to mean that every state has the right to regulate alcohol as it sees fit – and since its ratification, state alcohol legislation has become extremely intricate and varied across the United States.
So what has today’s North Carolina inherited from these days gone past? The Temperance Movement was layered with societal, economic, and political motivations, as is most of history, but the institution of tied houses is the piece that has lead to the three-tier-system today. A tied house was a pub or bar that was “tied” or bound to a brewery (or alcohol provider) in return for space for their bar and guaranteed supply of alcohol as long as the bar only served the brewery’s beer. In this moment in history, the brewery held the power – leaving the bars and pubs trapped, and consumer choice neglected.
One system that many states adopted in response to the tiered house system was the three-tier system. A three-tiered system inserts a middle man into the path to consumer, preventing breweries from taking advantage of bars and pubs and from limiting consumer choice. The distributor’s role is to maintain relationships with both bar and brewer and to sell and deliver the product from one to the other.
It’s important to note that this legislative change was put in place in order to protect smaller businesses, who had no alternative to working with these oppressive companies, from being taken advantage of by larger, more powerful businesses. In today’s world, the power has shifted and the tables have turned – now smaller breweries are faced with a system that “ties” them to distributors at an arbitrary (and low) level of production, and it is nearly impossible to exit these relationships due to the systems in place that empower the distributor. Now smaller breweries are in the same position in which the bars and pubs were trapped in the early 1900’s. Will the Legislature realize the need to adjust again in order to promote better business, protect smaller companies and champion consumer choice?
Craft Freedom is NOT about abolishing the three-tiered system – as you can see when you look to the past, it solved a problem and continues to facilitate the brewing industry. We don’t want history to repeat itself – and as small businesses, craft breweries don’t want to be tied into a business relationship when it is forced, and when it’s impossible to end the relationship when it becomes parasitic.
In the following blog posts on N.C.’s beer legislation history, we’ll reflect on the state laws that helped grow, not stunt, the brewing industry – and the early days of growing self-distribution through legislative change.
North Carolina’s official website outlines the timeline of our Beer Story – and includes important legislative moments that have helped the Beer Industry grow: https://media.visitnc.com/news/timeline-dates-that-frame-nc-s-beer-story
This piece explores the three-tier system and its legislative history in depth – a good read for a more robust review : http://www.nclawreview.org/documents/88/6/tamayo.pdf