The United States Brewers Association defines a craft brewer as small, independent and traditional. Craft brewers include brewpubs, microbreweries, regional craft breweries and contract brewing companies. The United States Brewers Association emphasizes “innovation” as being a separator between small-scale craft breweries and large-scale operations such as Anheuser-Busch.
North Carolina is one of 34 states that allow microbreweries, small-scale malt beverage breweries, to self-distribute their products to retailers, but this privilege doesn’t come without limitations.
The 21st Amendment in the United States Constitution allows each state to regulate the extent to which microbreweries are allowed to self-distribute. This includes the amount of beer that can be sold directly to retailers without the contracting of a wholesaler, or a “middleman.” The wholesaler is responsible for the transportation of the beer, including the conditions that it is transported in.
These three components, the brewery, wholesaler and retailer, make up what is known as the three-tier system. The system was devised by early 20th century industrialist pioneer John D. Rockefeller, who commissioned the report “Toward Liquor Control” in 1933 to provide guidance for lawmakers concerning the re-implementation of alcohol consumption after the repeal of the 18th Amendment.
This new system caused the success of small breweries to decline, so Beer Franchise Laws were created by states in the 1970s to protect the economical interest of microbreweries and brewpubs, but the three-tier-system remained.
These laws allowed for the self-distribution of beer, but the amount was left up to the individual state. For example, California has no limit to how much small breweries can distribute, whereas Illinois has a 7,500-barrel limit. North Carolina has a 25,000-barrel limit, a limit that the Red Oak Brewery in Whitsett, NC is not content with. If the local microbrewery exceeds this limit, it will be forced to hand over all distribution operations to a wholesaler, blemishing what the brewery has designed to be a very deliberate and controlled process.
Oh, How It Has Come So Far
1991 was the year that it all started. The old Red Oak Brew Pub restaurant in Greensboro, formally known as Franklin’s off Friendly, was remodeled and reopened with brewing equipment installed. The operation was originally sustained by only six brew tanks, but was soon upgraded to 13 tanks; more space was added on to the restaurant in order to support the extra equipment.
After 16 years of brewing out of the restaurant, the beer’s popularity continued to grow, and the restaurant was unable to support such high demand. Before the construction of the new microbrewery facility began, nearly 500 retailers had requested to serve Red Oak beer. Bill Sherrill, the founder of the brewery, decided it was time to expand.
The construction of the Red Oak microbrewery off of Interstate 85 began in 2005, and by the summer of 2007 it was ready to begin brewing. The new brewery cost over $5 million, and is made entirely of Bavarian brewing parts, aside from the bottling machine that was shipped to the US from northern Italy. The brewery also came equipped with a state-of-the-art computerized brewing system that has allowed the entire production process to be completed by only four people.
The brewery also manages to be environmentally friendly. The section of the brewery that is responsible for separating the sugar from the barley to produce “sugar water” sports a pneumatic valve. This condenses any vapor that is released during the brewing process, minimizing the amount of air pollutants that would otherwise be released. The brewery manages to support a 4 to 1 ratio of water to beer as well, putting it on par with, or even better than some of the US’s most recognized brewers, such as Anheuser-Busch and MillerCoors.
Ground In German Tradition
Red Oak Brewery abides by the Bavarian Law of Purity, meaning that only three ingredients are used to brew its beer, the ingredients being malted barley, hops and water (Red Oak also uses yeast with the other three ingredients, but only because the purity law was later amended to recognize yeast as a viable ingredient). This law is also known as the Rheinheitsgebot and was established in 1516 by Duke Wilhelm IV. The purpose of the law was to discourage brewers from using cereal grains that were used for making bread to brew the beer, in order to prevent famine.
In order to obtain the flavor of traditional German lagers, the brewery also buys all of the raw materials used to brew from Bavaria. Hops are usually bought two or three years in advance in order to ensure availability and retain stock.
Although Red Oak brews strictly lagers, it is more common for American microbreweries to brew ales, because whereas lagers take four to eight weeks to ferment, ales only take three to 10 days. Brewing lagers also allows the beer to carbonate naturally. “We do not filter, pasteurize and (we) naturally carbonate the beer. This separates us from most other modern beers,” said Buckley, he likes to think of it as putting “capital investment in fermentation.”
It’s people like Buckley that are responsible for ensuring that Red Oak beer remains ground in traditional German brewing principles.
Buckley spent the first 25 years of his life in Germany, where he completed a four-year program in Munich to become a certified brewer. Over the years, Chris developed a high level of interest and respect for German brewing. “Growing up in Germany had a huge influence on me regarding alcohol consumption, as responsible drinking is taught and beer is considered a food,” said Buckley. This sense of responsibility inspired him to uphold traditional brewing practices when he came to the United States.
Al Wolf, the assistant brew master, also came to Red Oak from Germany. He started working at the brewery two years ago after finishing a three-year apprenticeship at the Binding Brewery in Frankfurt, Germany. Wolf described Red Oak’s brewing practices as “intense,” and he claimed that it was “more of the old-school way.”
Red Oak is focused on retaining its German influence, but the current self-distribution laws in NC will eventually hinder its ability to continue producing beer at the high level of quality that consumers have come to expect.
For 18 years, Red Oak beer was sold exclusively as a draft beer and has been being sold in bottles for the past two years. Red Oak self-distributes all of its beer, whether it be bottled or barreled, across central NC. The brewery distributes as far East as Garner, NC, and as far West as Charlotte, NC, Greensboro being the furthest point North it distributes. In only two years, over 100 retailers have started selling bottled Red Oak amber lager off the shelf. Red Oak’s Helles, Hummin’ Bird, can be found on tap at nearly 80 retailers and Red Oak’s least popular brew, Battlefield Bock, is on tap at close to 50 retailers all over the Piedmont. The bottling expansion has created tremendous growth for the brewery, pushing them further toward the 25,000-barrel limit.
Bill Sherrill has been fighting this limit for the past nine years, a year before brew master Buckely was hired. The brewery has proposed bills, such as having the limit raised to 60,000 barrels like in New York, in hopes that the bill would gain sponsorship and be assessed by NC legislature. The brewery has yet to have any success.
Agnes Steven, the Public Affairs Director at the NC Alcohol Beverage Control Commission, said that the legal cap “creates a niche that gives smaller breweries space to mature as they develop products and a following.” The NCABC is one of 19 members of the National Alcohol Beverage Control Association. Its job is to maintain control over the sale, purchase, transportation, manufacture, consumption, and possession of alcohol beverages in the state.
When asked about the ongoing dispute between the ABC and the Red Oak Brewery, Tim Kent, the Executive Director of the NC Beer and Wine Wholesalers Association, stated that “it’s not a dispute, it’s the law.” Ken alluded to information about the benefits of the three-tier system that included “healthy competition and a robust marketplace” and “tremendous variety for consumers.”
In fact, Oscar Wong, the owner of the Highland Brewing Company in Asheville, NC, claims that self-distributing over 10,000 barrels annually is no longer economically efficient; the brewery is actually losing money at that point.
But in a journal published in NC Law Review, Andrew Tamayo makes the point, that “although Red Oak would have to more than double its current sales volume to exceed the legal cap, there remains a valid question of whether there is any justification for not changing the law.” If competition hasn’t already been threatened, why would raising the legal cap pose a threat?
It’s About the Beer. It’s Always Been About The Beer!
Regardless of the limitations of the three-tier system, Buckley said that this isn’t about money; it’s about control. Red Oak beer is shipped cold, and kept cold until it reaches retailers. The brewery has its own cold storage at the brewery, and they even make sure that beer that’s not on store shelves is still kept cold while in the hands of retailers. Buckley also said that whereas a distributor may take up to five or six weeks to distribute what they pick up, the brewery has beer to retailers in less than five days.
The brewery is concerned about surrendering distribution operations over to a wholesaler because it will no longer have complete control over the quality of its beer. Regardless of price efficiency, Red Oak wants control of its beer from the time it orders the ingredients to the time it reaches retailers. “By selling it ourselves, we can sell a lot of beer in a small area” says Buckley, “it’s not brewed for shelf life, it’s not brewed for shipping; it’s brewed for taste.”