Rountree Losee’s attorneys include craft brewers who recognize that the alcoholic beverage and craft brewing industry is thriving in North Carolina. Our North Carolina craft beer attorneys have experience with the complex laws, rules and regulations enforced by federal and state agencies on this industry. Drawing from the practice of our business and corporate law attorneys, as well as those who practice in the intellectual property arena, our attorneys can capably provide comprehensive representation to entrepreneurs establishing themselves in the alcoholic beverage and craft brewing industry.
Alcohol and Beverage Industry
The craft brewery, winery, and distillery industry is booming in North Carolina and nationwide. Growth in these areas is not only good for the industry, but for the economy as a whole. Nonetheless, its rise brings its own host of potential legal hurdles and pitfalls, especially for retailers and small businesses that serve alcoholic beverages.
If you have questions about how the law specifically applies to your business, you should always reach out to an attorney who is well-versed in the specifics of alcohol and beverage law.
What is Alcohol and Beverage Law?
The broad area of law generally referred to as “alcohol and beverage” law is actually a complex network of state, federal, and local laws and regulations that govern the craft brewery, winery, and distilled spirits industries. There are multiple governing bodies that implement and enforce these laws. A few of the key players on both the state and national level include:
- The Alcohol Tobacco Tax and Trade Bureau (TTB)
- The Federal Trade Commission (FTC)
- The Internal Revenue Service (IRS)
- The Federal Food and Drug Administration (FDA)
- The North Carolina Alcoholic Beverage Control Commission
- The North Carolina Alcohol Law Enforcement (ALE)
- The North Carolina Department of Revenue (DOR)
These organizations regulate the operation of any businesses that serve alcohol, specifically, items like brewing and distilling operations, packaging and distribution, sales, and permitting requirements.
Do these Laws Apply to Craft Breweries, Wineries, and Distilleries? Yes: these laws and regulations apply to craft breweries, wineries, and distilleries. However, they also apply to any business or establishment that serves alcoholic beverages.
What is the North Carolina ABC Commission?
The North Carolina Alcoholic Beverage Control Commission (ABC) is an independent agency housed within the North Carolina Department of Public Safety and which reports directly to the Governor’s Office. The ABC controls the sale, purchase, transport, manufacture, consumption, and possession of any alcoholic beverage throughout North Carolina. The ABC meets monthly to hear and act upon issues like permit violations, requests for approval of new ABC stores, and other alcohol-related matters.
What other legal considerations should breweries, wineries and distilleries be aware of?
Distribution can cause sticky situations for businesses that serve craft beverages. For instance, generally, in-state manufacturers can sell directly to consumers. However, out-of-state breweries cannot sell directly to consumers. Rather, they must obtain a permit from the State, and register their products with both the ABC and the TTB. They must then work with a licensed North Carolina wholesaler, who will then sell the products to a retailer.
Another complexity is that once a brewery enters an agreement with a distributor, it is obligated to work with that distributor in perpetuity – with few exceptions (for instance, if the distributor goes bankrupt). These laws were crafted to protect the rights of wholesalers, who often substantially invest in warehouse space and transportation fleets only to be abandoned by the businesses. This arrangement carries far less financial risk for distributors, but can be limiting for retailers.
When it comes to distributing liquor (as opposed to beer or wine), the rules become even more complicated. North Carolina is one of a few “control” states, meaning the State controls the distribution and sale of liquor. To distill liquor, in-state distilleries need to obtain certain necessary federal and state permits. And to sell products in ABC stores, manufacturers must seek product approval before the ABC. Once liquor is approved for sale, it is subject to an 86% markup. Items that do not sell well are at the mercy of the State’s discretion and can be removed from the market.
While in the past, the only place to purchase a bottle of liquor was at a State-run ABC store, now, distilleries can sell bottles of any products they distill to consumers on-site. Pricing is managed like it is at the ABC stores. Also, distilleries can now obtain retail permits to sell mixed drinks along with beer and wine. This is good for small businesses as well as tourism in the State.
In short, our State’s regulatory schema is dated – but in recent years, legislation has loosened the strictures binding retailers. Still, the regulations can feel rigid, challenging, and unforgiving for many small businesses seeking to expand their product offerings and encourage growth.
How can an alcohol and beverage attorney help?
An attorney who is well-versed in alcohol and beverage law can help small businesses and retailers navigate the complex federal, state, and local regulations. In particular, they can help with:
- Brewing and/or distilling operations;
- Entity formation, operating agreements, and mergers and acquisitions;
- Purchasing and leasing equipment;
- Compliance with labeling and advertising;
- Intellectual property protection
- Local zoning, permitting, and licensing; and
- Sales, packaging, and distribution.
The laws are complex and the penalties unforgiving, so it is highly useful to engage an experienced attorney to help you navigate the often unsettled waters of alcoholic beverage regulation. If you have questions about how the law specifically applies to your business, reach out to an attorney who is well-versed in the specifics of alcohol and beverage law to ensure you are in compliance.