The Old North State, one of the 13 original colonies, and home to the 82nd Airborne, is one of the most proud and patriotic states in the nation. Yet the North Carolina government promotes an economic practice more likely found in Stalin’s Russia than a pro-business right-to-work state, the Alcoholic Beverage Control commission.
The ABC commission is not just a government run monopoly, but an overly-complicated web of embedded government employees making decisions for the public based on their own personal preferences, economic loyalties, and occasionally even bribery. The concept of ABC commissions is a relic of the post-prohibition era, in which the North Carolina government controls every drop of spirit sold in the state. This is to ensure all due taxes are collected and exercise control over a product the government only begrudgingly lets people consume.
The major downsides of this system are what you would expect from any government agency: poor selection, unmotivated staff, high prices, & inconvenient hours. The selection is limited to what the government decides to sell, based on what spirits brands have applied to jump through the government’s hoops. This is why the typical ABC stores consist of only major brands, regardless of quality, simply because they have the means to lobby their way onto the shelves. Lesser known craft and artisanal spirits do not bother with the bureaucracy and avoid North Carolina all together.
Take whisky for example, every March there is a World Whiskies Awards. The winners of this competition are considered to be among the best in world. The winning whisky along with the rest of that particular distilleries line of other whiskies is in very high demand following the awards announcements.
Any spirits entrepreneur with a modicum of business sense would seek out these companies and try to stock some of those products. It is highly likely someone local would be willing to pay a premium price and be happy to do so for chance at something like a rare Japanese Single-Malt or a Rum-Infused Bourbon. But when it’s the government who reaps the rewards, what incentive does anyone have to go through the trouble of procuring these in-demand products? This means the people of North Carolina miss out on the entire market of premium spirits.
The current system forces distillers to come to the state commission hat-in-hand, and try to convince them to allow their products to be sold in the state. Once state approval is granted, the distiller must go to the local boards - all 166 of them - and convince them to order the product from the state’s list of approved spirits. Distilleries must apply separately for each product they wish to sell in the state. Even different sized bottles are considered entirely different products. This process costs a lot of money and can take six months to a year, hence why many distilleries do not even bother.
The state requires every given shelf slot to generate at least $5,000 in sales monthly. A fair number of local boards must agree to order the product for it to remain on the shelves for long. This explains why nearly half of a given ABC store is stocked with name-brand flavored vodkas. It’s not about what tastes good it’s about selling in volume. The ABC commission is actually not even allowed to taste the spirits when making a determination. The products that do make it to the shelves are most often those sold by the vendor who wined and dined the ABC board the best or in some cases, gave them the largest bribe.
The ABC commission is designed to make buying and selling spirits as cumbersome as possible. Since the market has no competition, ABC stores do not have to compete for your business. Without leaving the state, you either buy from them or do not buy at all. Employees, while mostly naturally friendly people, are in no way compelled to provide good service. The Managers and board members get the same amount of money whether the store is busy or empty. Some boards have openly admitted they would like stores empty, it means less work. To dissuade patronage even more, stores often don’t list a correct phone number or mailing address even on the state’s ABC website.
North Carolina has a budding spirits distilling industry, craft moonshines mostly, but it is being strangled by this archaic system. The laws actually stack the deck in the favor of out-of-state distillers. Local distilleries have to compete with worldwide brands for shelf space, without the luxury of a large advertising budget. Sometimes local boards are sympathetic and realize what good local distilleries do for a community, other times they see them as competition.
Local boards have been known to keep out competitors to prop up a distillery within their district. There are 33 distilleries in the state, several making similar products, territorial disputes often happen. Giving the authority over what North Carolinians can buy to a handful of unaccountable bureaucrats is not only dubiously legal it’s harmful to the state’s economy.
The only reason the state sells spirits is apparent - the $300 plus million brought in annually for the North Carolina general fund. With a 62.5 percent markup on all spirits sold in the state, some economists believe taxes this high actually result in less revenue generated than otherwise could be. Once taxes break a 35 percent threshold on most goods and services, a black market often emerges. The higher the taxes above 35 percent the more the black market flourishes, by some estimates there is just as much illegal moonshine sold in North Carolina as legal spirits.
Many North Carolina distillers believe that in a less strict and less taxed environment they could quadruple the size of their operations. Some estimate over $1 billion is left on the table in potential economic activity. A liberated spirits market would mean more jobs, more tourism, and more life breathed into dying communities west of I-77.
North Carolina could begin to fix this foolish system tomorrow, by simply doing what 33 states have already done and let spirits enter the free market. The only people benefiting from this current system are: ABC commission careerists, local boards who extort businesses, and the neo-temperance movement types, who would prefer no alcohol is consumed at all. None of these entities have the popular will of the people, yet exclusively control the North Carolina spirits industry. It is like giving P.E.T.A. control of our meat packing industry. We have in place a system where those in control despise the very product they regulate.
North Carolina can do better. The people of North Carolina deserve better. No state that calls itself ‘free’ nor any politician that proclaims to be ‘pro-business’ can, in any way, logically defend keeping such an inefficient and un-American system in place.