While 49 other states are scratching their heads figuring out how to promote manufacturing jobs, North Carolina’s General Assembly’s lack of action on prohibition-era laws may actually be destroying manufacturing growth, turning down the opportunity of a lifetime.
The manufacturing jobs I’m referring to here are provided by brewers and distillers whose only crime is deciding to open up shop in the communities they love, but are now being penalized by the state for becoming too successful.
Craft brewers have succeeded because they embark into new frontiers with their products and processes. Some brewers only serve their product on tap, while others find opportunity in expanding and creating manufacturing lines of bottles, cans, and kegs, reaching wider audiences. These entrepreneurial decisions are creating jobs – manufacturing jobs!
Oddly enough, however, the state is sending mixed signals. It willingly subsidizes out-of-state companies to move into North Carolina, but erects barriers restricting the ability of homegrown companies to expand. In just the last few years, beer manufacturers New Belgium and Sierra Nevada were given millions of dollars in corporate welfare by the state to open manufacturing plants in North Carolina, bringing in hundreds of jobs that arguably were not worth the cost. These jobs were paid for by the taxes imposed on North Carolinians, including the competitors of these subsidized companies, like Red Oak, Olde Mecklenburg and NODA.
Local craft brewers on the other hand are creating opportunity and the only investment they are looking for is for North Carolina to eliminate restrictions holding them back.
Currently, breweries can sell their own beer directly to retailers or self-distribute up to 24,999 barrels of beer a year. These mandates greatly hinder manufacturing growth. When a brewery becomes too successful for North Carolina politicians, producing its 25,000th barrel of beer, it has to fire its distribution team and hand over 100 percent of its distribution and branding rights to a third-party distributor. Should a brewery try to self-distribute its own beer above 24,999 barrels a year, the brewery will be breaking the law, be labeled a criminal, and be punished by the state, thereby coercing the brewery against its will.
Such restrictions impose severe disincentives for craft beer businesses to grow and add jobs.
HB 500 (along with HB 67 and HB 313) doesn’t eliminate the distribution cap like Colorado and California systems, but it does increase the self-distribution limit to 200,000 barrels allowing the brewery to self-distribute if it wants, and voluntarily work with a third-party distributor when the right incentives are available. It’s not perfect but it’s a small step in the right direction.
The craft beer industry is an ever-expanding and productively disruptive market. Entrepreneurs are continually changing their models and ideas to offer the highest value product to benefit consumers. This is all true whether the brewery creates 50 barrels a year, decides to produce a few thousand as a neighborhood pub, or expands to produce and manufacture nearly 1 million annual barrels of beer like New Belgium. All these business models are working and all of them are a result of expanded opportunity and eliminating restrictions on the marketplace.
We are seeing a market grow up in the face of the worst odds against it. Multi billion-dollar beer companies and foreign imports control 96 percent of the North Carolina beer market. In addition, wholesaler associations – well entrenched in lobbying efforts long before the craft beer movement came along – are looking to continue the forced use of their services.
Now these powers are trying to stifle local manufacturing potential on a market that only produces 4 percent of the beer consumed in the state of North Carolina by lobbying to keep the distribution cap in place and harm their smaller upstart competitors and customers.
North Carolina craft brewers are in the fight of their life, forming CraftFreedom.org advocating for reform. What’s disturbing about the battle, is brewers are only trying to keep their private property rights in order to grow their businesses and as a result create opportunity for their communities, but are being stymied by large corporations and lobbyists. Some manufacturing jobs will probably never return to the United States or North Carolina after moving. The state of North Carolina is no stranger to this, with multiple industries having left in recent decades.
Its obvious North Carolina’s elected officials are willing to spend millions of taxpayer dollars on corporate welfare to out-of-state companies for the sake of jobs. So why not pass HB 500 and allow for market-driven manufacturing job growth? These jobs won’t cost taxpayers a dime.
First published at the Civitas Institute