North Carolina businessman can’t sell his own beer in his own restaurants

posted at 10:01 pm on May 22, 2014 by Mary Katharine Ham

Two years ago, Greensboro businessman Marty Kotis had an idea. He’d start a brewery to complement his handful of restaurant properties in town. The Pig Pounder Brewery (named for a beloved beer from a now-defunct restaurant he set out to recreate) now occupies a 3,700 sq-ft building and is ready to produce five microbrews for local customers.

But those people will not be customers at Kotis’ restaurants, as he envisioned. Because of a post-Prohibition law, the state’s Alcoholic Beverage Control (ABC) says it cannot issue him the necessary permits to serve his own beer at his own restaurants.

Marty Kotis tells FOX8 the Pig Pounder Brewery has been in the works for two years. When they recently went to finalize permits, the NC Alcoholic Beverage Control Commission could not issue the paperwork.

“We’re scheduled to open the Pig Pounder the first week of June, and right now we can’t get a permit,” Kotis said simply.

ABC Commission Director of Public Affairs Agnes Stevens said the law dates back to post-prohibition. The goal was to prevent big alcohol manufacturers from becoming corrupt or forcing retailers to only sell certain alcoholic brands and products.

In North Carolina, as the ABC spokesperson explains it, there’s a three-tiered permitting system that keeps manufacturers, distributors and retailers separate to prevent them from colluding to keep out competition. It obviously wasn’t meant to keep a boutique, local brewery from supplementing the restaurant selection at restaurants owned by the brewer himself.

Here are Kotis’ options, one of which requires him to completely forgo one of his restaurant properties to be able to use the brewery, which he built with a $1.5 million investment:

“One option is to agree not to sell any of our beer in any of our restaurants ever. However, we could sell it other places. And to do that we would have to have a special exemption from the ABC Commission,” he said.

“The other option would be to transfer our assets over from the other companies, the other restaurant companies, into one entity and we would have to limit ourselves to only three restaurants plus the brewery.”

That would mean closing YoDaddy Desert bar in Greensboro, he said.

And, if they don’t figure it out with the state?

He said they would be forced to take future plans for restaurant and brewery endeavors outside the state if they can’t resolve this issue.

Heckuvajob, regulators.

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Hollow points and full autos.

WryTrvllr on May 22, 2014 at 10:05 PM

Freedom

RickB on May 22, 2014 at 10:05 PM

This is just a shakedown. If Kotis simply hires a sinecure or two from the families of someone high up at the ABC this will all go away.

Reuben Hick on May 22, 2014 at 10:07 PM

Open a Food Truck!

Or relocate to Nikki Haley’s state.

22044 on May 22, 2014 at 10:09 PM

Zima is legal.

SparkPlug on May 22, 2014 at 10:09 PM

Zima is legal.

SparkPlug on May 22, 2014 at 10:09 PM

So is Bartle and Jaymes but nobody drinks them.

RickB on May 22, 2014 at 10:11 PM

RickB on May 22, 2014 at 10:11 PM

Don’t harsh Sparky’s mellow.

cozmo on May 22, 2014 at 10:13 PM

Zima is legal.

SparkPlug on May 22, 2014 at 10:09 PM

They stopped making Zima four years ago, luckily I stock piled…I have a case in my car I will grab you one (+5 if anyone gets the reference).

Fett on May 22, 2014 at 10:15 PM

Not to sway too far OT, but in 1912 Teddy Roosevelt said the following:
There once was a time in history when the limitation of governmental power meant increasing liberty for the people. In the present day the limitation of governmental power, of governmental actions, means the enslavement of the people by the great corporations.

What you have is the government taking on a role…a partial role.
And it has been done in such a way that private companies/corporations are still the primary engines and beneficiaries.

rogerb on May 22, 2014 at 10:18 PM

Are they suggesting that liberal do-gooder laws can have unintended consequences?

alchemist19 on May 22, 2014 at 10:19 PM

This is why I left NC after a brief 1.5 year stay, too many stupid rules and regulations. Guilford county had a 1.5% personal property tax. I called it the underwear tax. I still find it amusing that my favorite adult beverage, Jack Daniels is made in a dry county here in TN.

Mini-14 on May 22, 2014 at 10:19 PM

Welcome to Barky O’Barkbak’s Communist/Marxist America, where you will do what the Government tells you to do.

oscarwilde on May 22, 2014 at 10:21 PM

…I’m sure Eric Holder will interject…or some federal judge can help over turn some thing something!…isn’t that what they do?

KOOLAID2 on May 22, 2014 at 10:25 PM

Don’t harsh Sparky’s mellow.

cozmo on May 22, 2014 at 10:13 PM

Yeah, we can’t have that

22044 on May 22, 2014 at 10:30 PM

Um, while I hope he can get his permit, & understand laws can be stifling…

Didn’t he talk to a lawyer or look into permitting rules BEFORE spending significant $ on his “idea?”

cs89 on May 22, 2014 at 10:31 PM

Um, while I hope he can get his permit, & understand laws can be stifling…

Didn’t he talk to a lawyer or look into permitting rules BEFORE spending significant $ on his “idea?”

cs89 on May 22, 2014 at 10:31 PM

Most likely he did, and some bureaucrat assured him it would be no problem.

oscarwilde on May 22, 2014 at 10:33 PM

Um, while I hope he can get his permit, & understand laws can be stifling…

Didn’t he talk to a lawyer or look into permitting rules BEFORE spending significant $ on his “idea?”

cs89 on May 22, 2014 at 10:31 PM

Most likely he did, and some bureaucrat assured him it would be no problem.

oscarwilde on May 22, 2014 at 10:33 PM

In fact, I would be willing to bet the real problem here, is that he failed to make the appropriate charitable donation to the correct officials favorite charity.

oscarwilde on May 22, 2014 at 10:35 PM

Heckuvajob, regulators.

.
You could say the same thing to his legal advisers, as cs89 suggests, for that matter.

ExpressoBold on May 22, 2014 at 10:38 PM

A problem more government will fix.

real talk

Murphy9 on May 22, 2014 at 10:39 PM

I’m kinda confused by this, and think there might be more to the story. I know of multiple micro-breweries here in Raleigh alone that server their own beer, along with food.

William Teach on May 22, 2014 at 10:39 PM

I’m kinda confused by this, and think there might be more to the story. I know of multiple micro-breweries here in Raleigh alone that server their own beer, along with food.

William Teach on May 22, 2014 at 10:39 PM

It’s simple: Start a business with 3 people, but each actually owns and operates a separate business. One is a manufacturer. One is a distributor. And one is a seller of the goods. Problem solved! Now ask me why so many companies in France have fewer than 50 employees.

http://www.businessweek.com/articles/2012-05-03/why-france-has-so-many-49-employee-companies

There are creative ways around just about all regulations.

NotCoach on May 22, 2014 at 10:47 PM

There is probably some federal law that states he couldnt sell homemade lemonade, either.

jaywemm on May 22, 2014 at 10:49 PM

William Teach on May 22, 2014 at 10:39 PM

Guilford County. I live in it. Lots of junk like this in our county statutes.

lineholder on May 22, 2014 at 10:49 PM

It’s been a while since I lived in Greensboro, but I remember the Spring Garden Bar & Grille, with multiple locations, serving their own Red Oak brand (and Hummin’ Bird, and Blackbeard Bock). On a more recent visit to NC, but not near Greensboro, I saw that Red Oak is now in bottles on grocery store shelves. So are they out of the restaurant business? More importantly, can they sell Red Oak outside of NC…within a mile radius of my house?

86 on May 22, 2014 at 10:54 PM

Not sure about this. There are lots of microbrewery pubs and restaurants in Nags Head that serve their own beer. The Weeping Radish was my favorite.

Oldnuke on May 22, 2014 at 11:05 PM

Blame the Baptists and related parties for laws like this, just like the restrictive laws in Utah. The law dates from pre-prohibition times. This is a state law, not a federal law, so the federal government has nothing to do with this.

jim56 on May 22, 2014 at 11:27 PM

Welcome to my world.

The state laws are hideous. We sell our mead online, and it’s nothign but incessant, stupid paperwork – none of the states, including my own, are set up to file excise taxes online. The forms all require … handwriting. Agh. It’s like the 1980s.

And the laws for where you can sell wine are all to benefit the wealthiest wineries, at least in Virginia.

LibertyJane on May 22, 2014 at 11:31 PM

Every law passed — without exception, municipal, state, or federal — should have a mandatory sunset (5, 10, 15 depending on the subject matter, perhaps).

Nothing gets renewed without review.

Of course, a lot will just get waved through, but maybe some of the idiocy can be wrung out on the way.

And then again, NC may have a good rationale on this one; we’ve only heard one side of the case.

AesopFan on May 22, 2014 at 11:44 PM

I’m kinda confused by this, and think there might be more to the story. I know of multiple micro-breweries here in Raleigh alone that server their own beer, along with food.

William Teach on May 22, 2014 at 10:39 PM

Do they have more than three restaurants?

Ronnie on May 22, 2014 at 11:46 PM

Blame the Baptists and related parties for laws like this

jim56 on May 22, 2014 at 11:27 PM

It was an anti-corruption law – not a morality law, Idiot.

blink on May 22, 2014 at 11:56 PM

LOL. I have a bridge to sell you, too.

jim56 on May 23, 2014 at 12:06 AM

The three-tier system is common in lots of states. (And is found in some federal “tied house” laws and regulations, too.) Manufacturers, distributors, and retailers are purposefully prevented from cross-ownership (absent specific and generally narrow statutory exemptions). Its purpose is to promote temperance, orderly markets, and efficient collection of taxes. The system has been in place a very long time, has been found “unquestionably legitimate” by the Supreme Court, and (unlike a lot of other potential government over-reach) is expressly authorized by the Constitution.

acasilaco on May 23, 2014 at 12:41 AM

Blame the Baptists and related parties for laws like this, just like the restrictive laws in Utah. The law dates from pre-prohibition times. This is a state law, not a federal law, so the federal government has nothing to do with this.

jim56 on May 22, 2014 at 11:27 PM

Yes, the so-Con interference which has bore us so much fruit in the way of Liberty and economic prosperity all these years. Just as bad as the Communists in my book.

I think drugs and booze are destructive, too, but people will choose to be idiots and smoke and guzzle as much as they can get their hands on one way or another. You have a right as an American to self-destruct. Then of course, you become our problem when you endanger others or can no longer take care of yourself.

But laws don’t change human behavior in any meaningful way.

In North Carolina, as the ABC spokesperson explains it, there’s a three-tiered permitting system that keeps manufacturers, distributors and retailers separate to prevent them from colluding to keep out competition.

Which I’m sure means “make sure the big breweries and distributors who grease our palms don’t have to deal with real competition from upstarts or outsiders.”

Dr. ZhivBlago on May 23, 2014 at 12:49 AM

Id be nice if the governor could just ignore the law like President Obama does.

MoreLiberty on May 23, 2014 at 5:01 AM

This nation MUST reduce government interference in commerce.

TX-96 on May 23, 2014 at 6:21 AM

Move to Texas?

Sherman1864 on May 23, 2014 at 6:57 AM

LOL. I have a bridge to sell you, too.
jim56 on May 23, 2014 at 12:06 AM

Point of order. Would like to see people using that inane “laugh out loud” acronym
banned.

Sherman1864 on May 23, 2014 at 7:01 AM

People who use the word “idiot” to describe other commenters on HA should be banned as well.

Low stuff.

Sherman1864 on May 23, 2014 at 7:04 AM

This is one of those deals where federalism is at play.

If you don’t like your State’s laws either work to change them or move to a State that has laws you do like. You want better State laws? Contact your State legislators that cover your district. And if he or she won’t listen to you, then start organizing around the issue and find a legislator who DOES agree with you and work with him or her to find more like-minded individuals. You want better government? Stop bitching and start the hard work of GETTING better government.

ajacksonian on May 23, 2014 at 7:07 AM

Living in NC, a great state, but the ABC is a joke, an absolute joke. The loss of revenue, the foolish laws (can’t buy beer or wine till after noon on Sunday, and no spirits on Sunday at all).

The ABC workers, clerks, are just what you would expect from a bureaucratic owned business. Nice, sometimes, helpful, sometimes, never miss a break, and if they are busy, they just bring in more help, forget the “work harder” concept.

The idea of “promotions” is way beyond their ability to market…inept, inefficient, corrupt, are just a few words to describe NC ABC…

right2bright on May 23, 2014 at 7:09 AM

Heckuvajob, regulators.

And huckuvajob entrepreneur for not doing your homework before investing a large sum of money.

ButterflyDragon on May 23, 2014 at 7:29 AM

Eataly in NYC had the same problem with wine. They sold their own wine. I work in the winery biz and things are so dcked up with laws.

blatantblue on May 23, 2014 at 7:32 AM

come on down to arizona….

cmsinaz on May 23, 2014 at 7:49 AM

The big breweries LOVE the three tier system, because it enables them to essentially control the percentage of their beer that is distributed, compared to the percentage of micros and other startups. Anyone who thinks this system is not subject to, and rife with corruption is simply unfamiliar with the way it is actually implemented.

SteveThomas on May 23, 2014 at 7:52 AM

Hey, here’s a crazy idea… CHANGE THE F’ING LAW

deadrody on May 23, 2014 at 8:16 AM

And huckuvajob entrepreneur for not doing your homework before investing a large sum of money.

ButterflyDragon on May 23, 2014 at 7:29 AM

Really ? REALLY ? Its HIS fault when the government is over-run with regulations ?

I’m glad you are so enamored with the regulatory state. Heckuva job

deadrody on May 23, 2014 at 8:17 AM

Zima is legal.

SparkPlug on May 22, 2014 at 10:09 PM

Yeah, but he’s not planning on just serving girls.

CurtZHP on May 23, 2014 at 8:22 AM

Just serve your own beer in the place but put it in fake packaging with made up names. Customers will know it’s all the same stuff.

“Bishop’s Amber Enema”
“Schadenfreude’s Shandy”
“ConstantineIXXX”
“Allahpundit Lite”
“Rogerb’s Repeater (burp)”
“Morrisey Malt”
“everdiso’s Recycled Kentucky Mule Piss”

CurtZHP on May 23, 2014 at 8:27 AM

Sometimes I don’t know which is worse, the progressives’ law to ban alcohol or the insane bullshit created after its repeal.

In Dallas, wet/dry decisions are by precinct so you can sell beer and wine in one neighborhood but not the other.

Occams Stubble on May 23, 2014 at 8:51 AM

Blame the Baptists and related parties for laws like this, just like the restrictive laws in Utah. The law dates from pre-prohibition times. This is a state law, not a federal law, so the federal government has nothing to do with this.

jim56 on May 22, 2014 at 11:27 PM

Who the hell claimed this was a federal law, idiot?

People who use the word “idiot” to describe other commenters on HA should be banned as well.

Low stuff.

Sherman1864 on May 23, 2014 at 7:04 AM

Any other words you’d like banned? How about “moron”?

runawayyyy on May 23, 2014 at 9:10 AM

The photo you’ve got with the article is from the Chicago area, probably Indiana. Not North Carolina.

And I have no problem saying that the ridiculous laws we have on the books when it comes to beer are the result of two things: Temperance ordinances relating back to prohibition, and corporatist protection of the big macro-breweries purposefully trying to make life harder for their local, small business competition.

And temperance laws are worse in the deep south. Alabama, Mississippi and Louisiana are not friendly for craft breweries. Texas with TABC certainly has its problems (sometimes it takes months for beers released elsewhere in the country to finally get released in Texas), but we still have a great craft beer scene here.

vegconservative on May 23, 2014 at 9:12 AM

I’m kinda confused by this, and think there might be more to the story. I know of multiple micro-breweries here in Raleigh alone that server their own beer, along with food.

William Teach on May 22, 2014 at 10:39 PM

Based on one of his available options, it appears that doing this with more than three restaurants involved becomes an issue of “distribution” which is where that law comes in.

Didn’t he talk to a lawyer or look into permitting rules BEFORE spending significant $ on his “idea?”

cs89 on May 22, 2014 at 10:31 PM

I’m betting that everyone said “no problem!” because no one thought to look at the fact that he has one more restaurant than is allowed. “Well, all those restaurants do it.” Yep, except each of them is probably under that limit – and probably without even knowing it.

I would split the brewery into two entities, and make certain brews for half the restaurants and certain for the other restaurants. Make a “Fat Boy” and a “Skinny Boy” with the same recipe, but serve them at different restaurants.

GWB on May 23, 2014 at 9:22 AM

The system has been in place a very long time, has been found “unquestionably legitimate” by the Supreme Court, and (unlike a lot of other potential government over-reach) is expressly authorized by the Constitution.

acasilaco on May 23, 2014 at 12:41 AM

Can you clarify? I don’t see anything 1) federal in this, 2) anything interstate commerce related, or 3) anything in the Constitution about this (that wasn’t repealed, that is).

CurtZHP on May 23, 2014 at 8:27 AM

LOL!
(And I hadn’t read your comment before making my 9:22 one.)

GWB on May 23, 2014 at 9:29 AM

My parents used to have a house near Franklin, NC, back in the 70′s and 80′s when the county was dry. We used to drive to the state line with GA to buy our booze so the state lost tax money. After the county went wet, all the grocery stores sold beer and wine. The state opened a liquor store and the drive to replenish was shortened. You’d think by now a state that used to base it’s income tax on how many mules you owned would have figured out this likker thingy.

Kissmygrits on May 23, 2014 at 9:29 AM

Another dumb law that needs to be removed from the books. I guess he his going to have to spread some money around in Raleigh to get the law changed. By the way, North Carolina and Georgia also have dry and wet counties. At least in South Carolina it is not that bad.

However, the wholesalers, which their are few of and very powerful, have spread their money around generously in the state legislator. Liquor stores and bars are required to pay for every last bottle of wine or spirits before the delivery truck leaves. So the the wholesalers never have any accounts receivable or cash flow problems, only their customers do. Also, there are no allowances for returns. They won’t take it back if you happen to over order. You are stuck with it.

SC.Charlie on May 23, 2014 at 9:29 AM

The big breweries LOVE the three tier system, because it enables them to essentially control the percentage of their beer that is distributed, compared to the percentage of micros and other startups. Anyone who thinks this system is not subject to, and rife with corruption is simply unfamiliar with the way it is actually implemented.

SteveThomas on May 23, 2014 at 7:52 AM

What everyone is missing here is these are STATE laws.

California, for example, has no restrictions like these and NO three tier system. Most three tier states are red states and the big brewers lobby well to keep it that way. That’s why a lot of craft breweries are voting with their feet and opening up in states are are friendlier to them (California, Oregon, Washington). You can’t have it both ways with state regulations….

nazo311 on May 23, 2014 at 9:36 AM

SteveThomas on May 23, 2014 at 7:52 AM

nazo311 on May 23, 2014 at 9:36 AM

I’m curious how these laws give the big brewers control? The law is intended to prevent a brewer from monopolizing the market. It would seem that the bigger brewers would benefit from the repeal of this law – they could then own the distributors, and then they could monopolize entirely (or charge exorbitant amounts for distributing the microbrewery’s stuff).

GWB on May 23, 2014 at 9:52 AM

I’m curious how these laws give the big brewers control? The law is intended to prevent a brewer from monopolizing the market. It would seem that the bigger brewers would benefit from the repeal of this law – they could then own the distributors, and then they could monopolize entirely (or charge exorbitant amounts for distributing the microbrewery’s stuff).

GWB on May 23, 2014 at 9:52 AM

Thought they can’t own distributors, they can threaten distributors to go to another one if they also distribute smaller breweries beers. Thus drastically reducing profit for distributors. There is an understanding the big breweries and distributors have. It is a big racket disguised as the “free market” where it is really crony capitalism. You don’t see this in states that have no three tier system. People could then go straight to the breweries for their beer and cut out the middle man.

nazo311 on May 23, 2014 at 10:50 AM

There’s a reason the state’s known as North Cackalacky.

JimfromTemecula on May 23, 2014 at 11:06 AM

It is a big racket disguised as the “free market” where it is really crony capitalism.

nazo311 on May 23, 2014 at 10:50 AM

You might be right, but threatening distributors in such a way would be at best collusion, and at worst racketeering. Both would be monopolistic practices, and therefore illegal under current laws. Why would this not be the case here?

I’m not arguing for the law, btw, but your accusation seems unsupported at first blush.

GWB on May 23, 2014 at 11:07 AM

Thought they can’t own distributors, they can threaten distributors to go to another one if they also distribute smaller breweries beers. Thus drastically reducing profit for distributors. There is an understanding the big breweries and distributors have. It is a big racket disguised as the “free market” where it is really crony capitalism. You don’t see this in states that have no three tier system. People could then go straight to the breweries for their beer and cut out the middle man.

nazo311 on May 23, 2014 at 10:50 AM

^ naz0311 has got it.

The big two — Anheuser-Busch InBev and MillerCoors — have cornered about 90% of the beer market. While they don’t own the distributors, they have used their weight to make fully exclusive relationships with the distributors. Thus, for example, smaller markets usually only have two distributors: one for AB InBev and one for MillerCoors. Smaller breweries have to suck up to one or the other; or they simply don’t sell beer.

Of course there’s hundreds of millions of dollars that are spent in Washington by these two companies to protect this three-tiered system. As they explain it … “it’s a system that keeps manufacturers, distributors and retailers separate to prevent them from colluding to keep out competition.

Which is complete and utter BS.

ZachV on May 23, 2014 at 11:19 AM

** Of course there’s hundreds tens of millions of dollars that are spent in Washington by these two companies to protect this three-tiered system.

ZachV on May 23, 2014 at 11:22 AM

Come to Texas. We like beer and restaurants.

neyney on May 23, 2014 at 11:23 AM

Ahh, the wisdom of our elected officials and their forebearers. Let’s pass as many laws as we can so we can sit back and watch our state economy crumble.

koolbob on May 23, 2014 at 11:46 AM

right2bright on May 23, 2014 at 7:09 AM

Though I don’t live there now, I grew up in a small NC town. The laws are crazy, though I still say he may have needed to do more “due diligence” before investing heavily.

I think my hometown has changed in recent decades, but when I was a kid it was in a dry county. We had an ABC store downtown.

You could go into town & buy all the whisky you wanted, but beer at the grocery store? Forget it.

Nuts.

cs89 on May 23, 2014 at 12:40 PM

My advise: 1) Run for office with the intent to change these socialistic laws. 2) leave the state and take your money with you.

Bubba Redneck on May 23, 2014 at 1:03 PM

Our State has similar laws. The legislature immediately exempted micobreweries when it was brought to their attention. Meanwhile, i suggest the corporate shell be utilized.

pat on May 23, 2014 at 1:20 PM

Blame the Baptists and related parties for laws like this
jim56 on May 22, 2014 at 11:27 PM

It was an anti-corruption law – not a morality law, Idiot.

blink on May 22, 2014 at 11:56 PM

LOL. I have a bridge to sell you, too.

jim56 on May 23, 2014 at 12:06 AM

You just beclowned yourself. Your claim didn’t even make any sense. Think before you write things on here, Idiot.

blink on May 23, 2014 at 8:40 AM

You said this laws was an anti-corruption law, not a morality law. Other posters have already disagreed with you, as I did by laughing at your answer. This is primarily a morality law which works to the benefit of the large national brewers to prevent competition. It’s funny that conservatives like the government to be involved in selling liquor in this case.

jim56 on May 23, 2014 at 1:39 PM

Really ? REALLY ? Its HIS fault when the government is over-run with regulations ?

I’m glad you are so enamored with the regulatory state. Heckuva job

deadrody on May 23, 2014 at 8:17 AM

His fault he invested money in something without doing his homework? Of course it is.

His fault there is an inane law on the books? Nope.

There’s all sorts of screwed up laws, but if you’re going to invest over a million dollars in something, you better darn sure check everything to make sure it flies.

ButterflyDragon on May 23, 2014 at 8:53 PM