Written by Jennifer Fitzgerald
The Western North Carolina alcohol industry is currently undergoing significant growth alongside myriad changes—with no end in sight.
It has been a busy year for the alcohol industry in Western North Carolina. State legislators have continued to debate and pass laws that affect the industry. Growth has continued throughout the region with new breweries opening—a few even in locations where breweries recently closed their doors. And a new flavored malt beverage trend is sweeping through the region. As we have done each September since 2015 in the magazine, let’s take a closer look at the straight-up on local spirits.
Reached Your Limit:How Many Are Too Many?
A beer enthusiast could literally visit a different brewery every day for over a month in Asheville—there are that many to choose from. Even more in the outlying areas of Buncombe County, and still more throughout Western North Carolina. How many are too many? Has the region reached the saturation point for breweries?
Leah Ashburn, family owner and president of Highland Brewing Company, agrees that we have a lot of breweries, but that the saturation point is ultimately affected by quality and quantity.
“With constant pursuit of quality, the saturation point increases,” says Ashburn. “Fortunately, as the number of breweries grew, so have the opportunities for education. Organizations like the Asheville Brewers Alliance and A-B Tech’s brewing curriculum support workforce development.”
There is no room for subpar breweries in this town—brewers have to be devoted to their product if they want to succeed and survive.
“In my opinion there is still room for more breweries, but they better be really good right out of the gate,” says Mike Rangel, president of Asheville Brewing Co. and interim executive director of the Asheville Brewers Alliance. “And they have to be passionate about what they brew. Asheville’s brew community has a high ‘Beer IQ’ and equally high standards for their micro-brews.”
“Asheville’s beer scene is so great because we have so many breweries,” adds Sally Tanner, marketing director of Archetype Brewing. “The competition, collaboration, and resources that come out of having so many here in a city with less than 100,000 people all contribute to the quality of beer and beer-drinking experiences that we’re producing. Breweries have to offer something different, stay ahead of the curve, and be innovators if they want to excel. It’s a whirlwind sometimes, of course, and it’s certainly a challenge, but this is what has put Asheville on the map as a beer city to visit.
“A rising tide floats all boats, as they say! Never a dull moment!”
The Millennial Drink of Choice?
The millennial generation, born between 1981 and 1996, is over 75 million strong and makes up nearly a quarter of the total United States population. This group should be the alcohol industry’s answer to everything—brew it and they will come, right? Nationwide, though, the millennials are drinking more wine and mixed drinks than beer—far less beer, in fact, than their parent’s generation.
The good news for local breweries, though, is that when millennials drink beer, they really like craft beer. And where better to find great craft beer than Asheville?
Ashburn explains that millennials want to support brands that resonate with their values. While they want a diversity of beverage choices, millennials are more constant in their motivation for purchase. Highland Brewing Company’s approach offers a variety of beers and a foundation of values that align with their consumers’ values. Deep community roots and a love of the great outdoors are central to Highland. Their annual Night Flight event is a great example. Now in its sixth year, the 4.5-mile race has raised over $40,000 to support local greenway initiatives. And Highland will offer some new beers along with perennial favorites on race day.
At Asheville Brewing Co., Rangel says they are fortunate to have a great young staff, and they include them in beer tastings, take their suggestions, and, of course, watch the overall trends.
“Millennials support local, support companies that are getting greener, and support innovation—all characteristics of successful craft breweries,” says Rangel.
“First of all, make no mistake, it’s not just millennials,” says Archetype’s Tanner. “We live in a ‘check-in’ culture, where we’re always looking to check-in somewhere new, exciting, and different, and we love to be the first ones there. It drives innovation, and keeps breweries on our toes with new beers, new marketing, and new business strategies. We try to strike a fair balance between pushing the envelope with new beers and having some ‘ole standbys’ on tap. However, our beers at Archetype Brewing are experimental by nature and design, so being afraid of change isn’t an option. The key is to see through trends and keep a focus on quality.”
This year found a few breweries moving out and another brewery taking over the space. This was the case with the LAB, aka Lexington Avenue Brewery, which sold to CANarchy Craft Brewery Collective, now open as The Collaboratory. Similarly, Archetype Brewing opened a second location in the space vacated by Habitat Brewing Company.
Archetype’s main goal was to have another way to serve the consumer directly. They call it “more pints across the bar”—simply, more conversations with their neighbors.
“The space at 174 Broadway became available, and we knew we had to strike while it was hot,” says Tanner. “The aesthetic and setup in the building is a perfect extension for Archetype in the downtown area. It’s a more intimate place to enjoy our beer, and a great spot for us to showcase some of our higher-end and barrel-aged beers. The event space was an additional consideration in our decision. We aren’t as set up to host private events at our West Asheville location, with its open format taproom. The event space at Archetype Broadway fills an ever-growing need we’ve identified for people to have a space where they can gather their friends, families, businesses, and peers.”
Tanner explains that the owners of Habitat made the choice to work specifically with Archetype on the deal; there were several parties interested in the space, and for good reason. Over the past few years, Archetype had developed a great relationship with the Habitat Brewing crew, and they felt that Archetype’s community focus lined up with their legacy that they hoped to continue in the space. They were very helpful in the transition, but the scope was limited, as Archetype had their plans and unique flavor to bring to life.
“Regardless of who or what business was in the space before us, we have a direction for our particular business that we thought would help us grow in an organic and successful way, keeping our roots in Asheville and furthering our mission of community focus,” explains Tanner. “Bringing friends, family, and craft beer together seems like a truly ‘Asheville’ experience, and we can offer that in the space over there. The event room can play host to any kind of private event, as well as some awesome, community-focused special events. We have had story-telling, we host regular improv nights with Asheville Improv Collective, live music, artist markets—the possibilities are endless. Armed with a great team at Archetype, we felt that the timing lined up with our goals and growth.”
FMB & the Hard Bev Phenomenon
A growing trend this year has been the FMB—flavored malt beverage. “Yes, the FMB trend is real,” says Ashburn. “What’s also interesting is seeing the lines that define ‘hard’ drinks and even beer are blurred as we see experimentation both in higher alcohol [content] beverages and in lower and zero alcohol beverages that often blend familiar drinks to create new ones. Also, nationwide, brewing capacity has increased a bit more than consumption. So, for both reasons, some breweries are responding with diversification. Our approach is beer-centric, with an eye toward other beverages as inspiration.
She singles out one popular beverage, Slow Crush, which is a cocktail-inspired beer fusing natural herbal ingredients with traditional malts and hops to create a sessionable, tart botanical ale.
Rangel agrees that, without a doubt, the advent of hard drinks has come on very fast. Hard seltzer in particular is crushing in all 50 states—it has been featured extensively in national media this year—and is here to stay. Ninety calories, low sugar, and easy to drink makes for a great combo.
“The explosion of breweries has seen an equal explosion of craft brews in the market,” he says. “There are at least 20 IPAs made daily in Western North Carolina that are fabulous, but you can’t drink IPAs every day—at least I can’t—so staying ahead or even with trends is important for any craft. At the beginning of this year there were maybe three or four hard seltzers available. By the end of the year, we will have dozens from little brewers and from large. Hard water, ginger beer, all will find room in the marketplace and that means some craft breweries will have more trouble getting onto store shelves, but the consumer drives that train.”
Kombucha is also gaining in popularity. It is a fermented, slightly alcoholic, lightly effervescent, sweetened black or green tea drink commonly intended as a functional beverage for its supposed health benefits. Local producers include Booda Kombucha and Buchi Kombucha. Additionally, there is Jun, an effervescent, fermented health tonic roughly similar to kombucha, but feeding on green tea and raw honey rather than black tea and concentrated cane sugar. It is produced locally by Shanti Elixirs.
The popularity of hemp and CBD is at an all-time “high” in North Carolina, so it only makes sense that it would find its way into the brew scene. Several local breweries offer a hemp beer—including the Derailed Hemp Ale by Wedge Brewing Company, described as “brewed with 2 row Pale Malt, Rye Malt, and a small amount of Black Malt, and hopped with Cascade Hops to bring out the earthy character of the 150 pounds of toasted Hempseeds added in the Mash Tun.” Also, brewing is The Hemperor by New Belgium, described thusly: “With the popularity of hoppy beers, our brewers are always on the lookout for different hop varieties and the complexities and flavors new strains can bring. That’s where hemp comes into the picture. Without getting too nerdy, we found a unique way to recreate hemp terpene flavors in a beer, which complement the inclusion of hop flavors and hemp hearts (seeds) in a brand new, delicious way.”
Asheville’s Ward and Smith, P.A., Attorneys at Law, have both a Hemp Law and Alcoholic Beverage Law practice team available to advise those in the alcohol industry as they work through complex legal and regulatory issues. Attorneys Tyler J. Russell and Hayley R. Wells wrote an immensely helpful article titled “Beer, Hemp, and CBD in North Carolina” earlier this year (www.wardandsmith.com/articles/beer-hemp-and-cbd-in-north-carolina):
“Hemp and hemp-derived CBD were classified as Schedule I controlled substances under the Controlled Substances Act of 1972 (CSA) until the passage of the Agriculture Improvement Act of 2018 (2018 Farm Bill) on December 20, 2018. The 2018 Farm Bill, among other things, decriminalized hemp and hemp-derived CBD. That, coupled with the fast-growing popularity and public interest in CBD, resulted in a rush for breweries (and other industry members) to incorporate CBD in malt beverage products.
“Decriminalization of hemp and hemp-derived CBD and its addition to malt beverage products subjects the industry to a host of new laws and regulations, including the Federal Food, Drug, and Cosmetic Act (FD&C Act). Since the enactment of the 2018 Farm Bill, the Food and Drug Administration (FDA) has flexed its muscle to regulate the use of CBD in food, drug, and dietary supplement products under the FD&C Act. And, as we have previously reported, the Federal Tax and Trade Bureau (TTB) follows the FDA’s lead as it relates to the regulation of CBD in alcohol under the Federal Alcohol Administration Act. TTB recently issued an Industry Circular to reinforce that point.
“The TTB requires breweries to obtain formula approval before using any hemp ingredients in the production of malt beverage products. This requirement applies whether or not your brewery intends to sell or distribute its beers across state lines (interstate commerce) or keep sales wholly within the borders of your home state (intrastate commerce).
“The North Carolina ABC Commission recently indicated that it is drafting state-level policies and rules for the use of hemp and CBD in alcoholic beverages. There is no indication yet on what the extent or restrictiveness of those policies and rules will be. However, based on our prior experience with the Commission in these matters, and given the status of CBD-related issues before the FDA and TTB, it is safe to assume that the Commission will continue to tightly regulate and prohibit products brewed, produced, or flavored using hemp floral material or that otherwise contain hemp-derived CBD.”
Brent Manning, co-founder of Riverbend Malt House (profiled in the February 2018 issue of this magazine), says they can’t justify the current pricing of hemp, which is 15 times the cost of barley seed per pound. The flavor is earthy and sweet, so it would work well in beer.
“Riverbend has experimented with malting hemp seeds for the brewing industry, but have found it challenging to develop a cost effective product,” says Manning. “Demand is high for seeds, as the industry is in a rapid growth phase. We are also proceeding cautiously, given the instability of the current governmental policy.”
Meanwhile, Over in Raleigh…
Representative Chuck McGrady (NC House District 117) ,of Henderson County, has been consistently active in alcohol reform, chairing the House Alcoholic Beverage Control Committee and introducing a series of alcoholic beverage bills. He recently announced that he will not seek re-election.
“The legislature has passed several laws (in the last year) relating to the ABC industry,” he says. “The most recent and the most comprehensive bill was Senate Bill 290 (SB 290), which was a combination of three bills dealing with alcohol. Essentially, SB 290 is a regulatory reform bill to bring the State’s regulation of alcoholic beverages into the 21st century. As has been done with craft brewing, the legislature moved to modernize the law related to craft distillers.”
SB 290 was presented to Governor Cooper on July 19 and, at presstime, was awaiting his likely approval. The bill will even the playing field for distilleries, offering them many of the same privileges as breweries and wineries in North Carolina. Highlights include allowing distilleries to obtain permits to sell malt beverages, unfortified and fortified wines, and mixed beverages; removing current restrictions on what distilleries can sell at the distillery for off-premises consumption to a visitor who takes a tour (currently limited to five bottles per person in a 12 month period); and allowing in-store spirituous liquor tastings to be conducted in North Carolina’s ABC stores.
“The other notable legislation is House Bill 363, which is now law,” continues McGrady. “It raised the [craft brewing] self-distribution cap up to 50,000 barrels per year. This has been a major issue for craft brewers. Most brewers want to grow, but they don’t really want to distribute outside of their home markets. With the higher cap, that should now be quite possible and will likely lead to more growth of the craft brewing industry. I expect it will allow local breweries, of which we have many, to grow larger in their home markets without having to give up distribution of their product to wholesalers.”
Adds Asheville Brewing Co.’s Rangel, “In a nutshell, a small brewery has to hope that they get a good distributor who ‘gets’ craft beer and trusts your choices and loves your brew. We use Budweiser of Asheville and feel fortunate we selected them.”
Highland’s Ashburn notes that the craft beer industry is decades younger than the laws written around alcohol, and, as with any sector, business practices and markets typically precede changes in the law. The key is that wholesalers and brewers have far more in common than they have in conflict.
A-B-C, easy as 1-2-3?
In our September alcohol industry report for 2018, McGrady told Capital at Play he thought there are problems with the ABC store system, mainly in regard to their overhead costs stemming from too many ABC boards. As this report was being prepared, House Bill 971 [HB 971, aka the Modern Licensure Act] was scheduled to be heard in Raleigh at the House ABC Committee during the week of July 22.
Since Prohibition ended in 1933, state governments have been individually responsible for regulating the sale and distribution of alcoholic beverages, so systems of regulation vary among states. North Carolina is one of 17 controlled states in the United States and the only state in the nation where local government boards essentially have total control in their jurisdictions over retail liquor sales to consumers and businesses.
What that means is the marketplace is controlled by the state government, and as a result there are 170 local boards in North Carolina. Those boards operate retail stores for North Carolina’s ABC system, each board having the legal authority to operate one ABC store that sells liquor within its jurisdiction, with additional stores getting authorized to operate with the approval of the ABC Commission. In addition to retail liquor sales directly to the general public, some local boards are authorized to supply liquor to mixed beverage businesses such as restaurants and bars.
North Carolina’s liquor monopoly plays an important role in our state’s economy by providing revenue for the state and for local governments that have authorized liquor sales. Total revenue from liquor sales was $1.1 billion in Fiscal Year 2016–17, with 81% of sales coming from purchases by the general public at ABC stores, and 19% of sales coming from purchases by retail businesses for resale as mixed beverages. Since Fiscal Year 2006–07, total revenue from liquor sales has increased 63%.
HB 971 would privatize liquor sales and eliminate local ABC boards.
“I do not expect the House will take action on the bill this year,” says Rep. McGrady. “My view is that the state should not be in the business of selling and distributing alcoholic beverages. Most states regulate alcoholic beverage sales through licenses and, if passed, the bill would structure our law in the same fashion. I’m the sponsor of that legislation, so I don’t see any disadvantages to it. My commitment has been to make sure that monies going to local governments from the sale of distilled spirits would still flow to local governments.”
One such local government is Buncombe County’s Black Mountain. At present, ABC revenues make up approximately 0.5% ($69,000) of the town’s annual budget. “At this point, it’s hard to say how we would make up those lost revenues,” says Town Manager Josh Harrold. “I believe the language in the privatization laws may be subject to change so we really wouldn’t know how we would be affected until that is finalized.”
McGrady says it’s too early to say if there are other issues on his radar regarding alcohol reform that he hopes to see passed before he leaves office.
“I’ve passed major ABC regulatory reform bills. I’d like to pass the Modern Licensure bill, but that isn’t going to happen this year.”
So—What’s the Outlook?
According to research provided by the Asheville Area Chamber of Commerce’s Heidi Reiber, in 2018 Western North Carolina breweries, wineries, and distilleries collectively accounted for an estimated 1,895 jobs in area counties. This employment was 281% above the national average in 2018, with employment representing nearly $91 million in earnings.
Over the last 10 years, employment in this segment grew 887% in Western North Carolina, compared to the nation, which grew 119%. Over the last five years, employment grew by 208% here, compared to the nation’s 76%.
“Brewery employment growth remains an important part of our economic prosperity in the Asheville region,” says Clark S. Duncan, the executive director and senior vice president, of the Asheville-Buncombe Economic Development Coalition. “For example, manufacturing led year-over-year job growth in the Asheville MSA in 2018, outpacing both health care and hospitality sectors. This is good news because the advanced manufacturing sector pays higher wages and attracts greater capital investment than other leading employment sectors in the Asheville Metro. Beverage manufacturing, motor vehicle parts manufacturing, and plastic product manufacturing were driving that growth—and at combined rates [twice that of] the state and nation over the past five years.”
Beyond quality jobs, the craft brewing industry has also made an impact on the local start-up scene, with new innovation coming from related startups like Riverbend Malt, Craftpeak (profiled elsewhere in this issue), and BrewStream.
“We are incredibly proud of our local brewing pioneers and the national reputation and recognition they have earned,” says Duncan. “The industry is certainly growing more competitive by the year. But it’s important to remember that not all local breweries are competing for the same dollar. Business models and beer styles have become more niche, some are well-positioned for locals; others, for visitors; and still others are pursuing ambitious distribution strategies to acquire customers, regionally and nationally.”
What will the upcoming year have in store for the local alcohol industry? No doubt there will be comings and goings, new and innovative products, and legislature votes. Entrepreneurs in the field have found their niche and are following their passions—and the benefactors of all this are their customers.
Highland’s Ashburn succinctly sums up the outlook for the area’s industry through a personal lens.
“As the state of alcohol changes,” she says, “Asheville’s original craft brewery sees an exciting future. No resting on any laurels! We love the evolving balance of tradition and innovation.”
The full article continues below. Click to open in fullscreen…