Making it through the pandemic was rough for every business. But for North Carolina distilleries, what’s been waiting on the other side is a new world, thanks to changes that people in the industry never thought would happen.
“It’s night and day,” says Pete Barger, the CEO and founder of Southern Distilling Co. in Statesville. “When we started [in 2013], it was illegal to sell a single bottle out of the front door.”
Then the law changed, allowing you to buy one bottle per year if you visited a N.C. craft distillery. In 2015, that climbed to five bottles per year. Now, distillery visitors can buy almost as many bottles as they’d like, up to nine cases at a time — even on Sundays and holidays. They can also get top-notch cocktails in distillery-based cocktail bars or enjoy a tasting at a state-run ABC store.
Starting in 2019, the North Carolina legislature passed a whole slate of changes the industry desperately wanted to bring them closer to what wineries and breweries can do. But at first, the victory was bittersweet. The changes began to go into effect in spring 2020, just as the state was undergoing quarantines to fight COVID-19. Distillers like rum maker Robby Delaney of Muddy River Distillery in Belmont, North Carolina, stayed alive by selling their alcohol as hand sanitizer.
Melissa Katrincic of Durham Distillery, the maker of Conniption Gin, saw her business projections upended. She was planning to expand into five new markets nationwide in 2020. Yes, alcohol sales increased during the shutdown, but consumers mostly stuck with familiar name brands. Her sales growth dropped dramatically, almost to zero. Supply lines became so difficult that she even had to temporarily change the shape of her bottles.
For 2023, however, her business is looking up. Thanks to the new rules, she’s added a cocktail bar and lounge called the Corpse Reviver, which includes a martini menu with a dozen variations. And unlike other states, where distilleries can make cocktails only from spirits they produce, Katrincic can use ingredients like Campari or make you a dirty martini with vodka (if you insist).
Her brand is now in 17 states. In 2022, sales growth was around 40%, and she expects that triple digit growth will return in 2023. Allowing customers at the cocktail bar to buy multiple bottles at the distillery in the same building makes a huge difference for attracting business and attracting fans. “That was a sea change, as far as following breweries as a community place,” she says.
As the former head of the Distillers Association of North Carolina (he’s still on the board), Pete Barger spent almost a decade working with legislators to put the changes into law. In a state that has always had stiff control of alcohol thanks to its history of moonshine and bootlegging during Prohibition, getting legislators to understand why changes were so important took new messaging.
“North Carolina is an agrarian state, and distilling is an agricultural product,” Barger says. His distillery, which makes its own brands and has a contract distilling program, goes through 50,000 pounds of grain a day. Eighty percent of it is grown in North Carolina. “For every person I employ, we’re really employing four to five people, most of those on farms,” he reports. Southern Star is now building a $50 million plant in Statesville that will take its capacity from 20,000 barrels a year to 80,000 barrels. Barger also plans to build up to a dozen warehouses that can each hold 24,000 barrels for aging.
Distillers like Barger emphasize that for small towns, distillery tours bring a steady stream of visitors in the same way that breweries and wineries become community hubs. That’s why Sunday sales are so important, Barger says: Weekend days are the busiest days for visitors. For many craft distilleries, the biggest source of income is bottles bought after tours. Without that, there’s no reason to even open on a Sunday — and that hurts nearby restaurants and shops.
The idea of a tasting room as a community hub is driving Delaney’s next big project for Muddy River Distillery. In June 2020, he bought a building on five acres of land on the edge of Mount Holly that was the oldest cotton mill in Gaston County. When the restoration is finished, it will expand his space from 6,000 square feet to 20,000 square feet. He hopes it will become an important spot in downtown Mount Holly, allowing him to host festivals and possibly a farmers market.
While Delaney is happy about the 2019 changes, he’s also rueful. “Thank you for removing one foot from my face. Thank you for letting me do what every other American business does,” he says. According to Delaney, there’s still a lot that needs to be done, such as having the ability to sell at festivals and special events where people can already buy wine or beer, and the ability to sell online.
Carol Shaw, executive director of the Distillers Association of North Carolina, thinks those changes may come — and that they’ll benefit the state-controlled alcohol system. “Direct-to-consumer sales and being able to sell bottles at special events allows (distilleries) to make the sale, but it also allows folks who like it to go buy it from an ABC store,” she says.
While more remains to be done, Barger is happy with the changes so far. “We are way better off today than we were five years ago,” he insists. “Our plan is to put North Carolina back on the map. Great product doesn’t have to come from Kentucky.”
