North Carolina General Assembly Adopts Legislation to Further Regulate Wine Distribution

by Kristopher B. Gardner, Tharrington Smith, LLP

Legislation regulating the way wine is distributed in North Carolina became effective on May 12, 2011 (S.L. 2011-73).  This legislation was supported by all North Carolina industry members, including distributors, retailers and wineries.  S.L. 2011-73 does essentially two things.

First, the new law prohibits a wine wholesaler from distributing wine beyond the territory designated by the winery.  Existing law already required each winery to designate only one wholesaler per territory.  However, there was nothing that prohibited a wholesaler from distributing wine beyond its designated territory.  Prior to the adoption of the new law, virtually all wine distributed in the state was provided by a wholesaler within its own territory.  S.L. 2011-73, therefore, codifies existing wine distibution practices by prohibiting cross-territory wine distribution.  This legislation promotes business development and job growth by providing wholesalers some reasonable level of security in wine franchise investments.  The law also requires wine wholesalers to service retailers without discrimination and to make a good faith effort to make available any brand of wine it distributes, except for private label brands.  Private label brands are those that are developed and marketed exclusively by a particular retailer and, thus, should be sold only to those retail accounts.

Second, the law authorizes off-premises retail wine permittees (such as grocery stores) to transfer wine from one store location to another up to four times per calendar year.  Among other conditions, the transfer is authorized only if both stores are under common ownership or control and are in the same territory designated between the winery and the wholesaler.  The purpose of this provision is to limit the amount of wine that cannot be sold due to product deterioration.