State Distribution Laws
North Carolina
License Needed to Self-Distribute: Yes
Statute: N.C. Gen. Stat. § 18B-1104
In North Carolina, brewers holding a brewery permit may also obtain a malt beverage wholesale permit which allows them to self-distribute up to 50,000 barrels of beer to licensed retailers.
Additionally, brewers that use wholesalers must enter into a written distribution agreement with such wholesalers and file copies of those agreements with the state. These agreements must provide wholesalers with an exclusive territory for the brands they are distributing and cannot set resale prices for those products. Additionally, brewers cannot:
- Condition the continuance of the distribution agreement upon the sale, transfer or merger of the wholesaler’s business
- Condition the continuance of the distribution agreement upon wholesaler agreeing to an amendment to the distribution agreement
- Restrict the transfer of the wholesaler’s business without reasonable grounds for doing so
- Require or restrict a wholesaler’s change in management without good cause
- Discriminate between North Carolina wholesalers
- Prohibit a wholesaler from selling another supplier’s product unless it has reasonable grounds to do so and if the wholesaler taking on that supplier would result in more than 80% of its beer sales coming from that supplier
Along with those restrictions, brewers cannot terminate or not renew a distribution agreement without good cause and without first providing the wholesaler with 90 days’ notice of the proposed termination or non-renewal and the opportunity to cure the problem (45 days). Good cause is the wholesaler failing to comply with a provision of the distribution agreement, which is reasonable, material, not unconscionable, and is not discriminatory when compared to standards used for the brewer’s other wholesalers. Additionally, a brewer can terminate a distribution agreement without advance notice if:
- The wholesaler becomes insolvent or files for bankruptcy
- The wholesaler’s license is revoked or suspended for more than 30 days
- A 10% or more owner is convicted of a felony which might reasonably be expected to adversely affect the goodwill of the wholesaler or brewer, and the owner’s interest is not transferred within 30 days of such conviction
- The wholesaler attempts to transfer its interests without the brewer’s consent
- The wholesaler fails to pay the brewer for product
- The wholesaler engages in fraudulent conduct in its dealings with the brewer
Wholesalers may seek injunctive as well as monetary relief from a brewer that breaches these provisions. Small brewers that brew less than 25,000 barrels per year have the option to terminate a distribution agreement upon 5 business days’ notice and paying the wholesaler the fair market value for the affected distribution rights.
