The Olde Mecklenburg Brewery, an up-and-coming craft brewery based in Charlotte, announced earlier this month that it was pulling out of a large investment in the Triad area — not because of bad business outlooks, but because government regulations forced its hand.
Under North Carolina law, breweries producing more than 25,000 barrels of beer a year must contract with a third-party distributor, meaning that they cannot market and sell their products directly to purchasers.
This imposes a substantial financial cost on smaller breweries looking to expand, and it places them at a huge disadvantage: Startup breweries need leeway in marketing and distributing their brand to establish name recognition and compete with large, established competitors — and most small brewhouses are better able to devote resources to marketing their own product than a large distributor with dozens of clients could do for them. As a result, successful small breweries are prevented from expanding and better serving their consumers, and many are forced to sell out to large national conglomerates.
North Carolina should strike these onerous restrictions and create a true, free market in beer production and distribution. Everyone loses when entrepreneurs are hampered from being able to freely satisfy consumer demand. Small breweries are effectively penalized for success and prevented from growing. Restricted competition means consumers have fewer beer choices and pay higher prices. Potential startup breweries eschew North Carolina for other locales, costing the state jobs and investment.
Well, almost everyone loses — there are a few winners. Crony beer wholesalers and their lobbyists, in bed with government, extort craft breweries and the beer consumer to ensure their own profits.
Due to their upstart competitors being hamstrung, large, established beer makers can afford to sit pretty and need not compete with upstarts by innovating or cutting costs. Politicians who go along with the racket get kickbacks for their re-election campaigns.
It doesn’t have to be this way — North Carolina has already relaxed its limits on the alcohol percentages allowed in beer, giving life to the blossoming craft brew industry seen today.
With an overwhelmingly conservative legislature, North Carolina Republicans, unless they really are a bunch of phonies and crony capitalists, should demonstrate their free market credentials, loosen up and relax their interference with beer producers — perhaps while enjoying a frosty craft brew.
