In the year 2026, the State of North Carolina still holds a complete monopoly over the sale of liquor across the state. Not only does the state’s Alcohol Beverage Control (ABC) Commission set retail prices for every bottle of liquor sold statewide, but it also owns the warehouse through which every bottle must pass and even decides what brands may be sold.* The state government controls virtually every aspect of this industry worth roughly two billion dollars each year.
North Carolina’s 91-year old ABC system is a vestige of the Prohibition Era, and like its contemporaries the Model T and radium-based paint, it no longer serves the state particularly well. As both a philosophical and a practical matter, day-to-day management of a multibillion-dollar private industry is not a job for which state government is well-suited. The ABC system does not manage the industry particularly well; it serves neither consumers, nor state interests, effectively; and it is a ripe target for endemic political corruption.
Yet the ABC system has also made itself foundational to generations of local government finance in North Carolina. As such, outright abolition of the system overnight would likely cause more problems than it would solve. Instead, a reasonable “unwinding” of the system could achieve many of the same goals with much less disruption.
How the ABC works
North Carolina is one of 17 remaining “control states,” which directly operate in their “spiritous liquor” trade rather than simply licensing and taxing private sellers, as the other 33 states do. There has been very little change in that list in recent history. The only state to have ended its liquor monopoly in the last three decades was the state of Washington in 2011; before them, one must look back to 1990, when West Virginia privatized its retail sales. Despite multiple legislative attempts at reform over the years, almost all have failed, and North Carolina’s ABC system continues to operate fundamentally the same today as it did almost a century ago.
The ABC system has multiple overall effects on the liquor industry across the state:
- It is redistributive: the ABC functions as a de facto subsidy system from high-volume urban counties to lower-volume rural ones. Prices are set and uniform statewide: a bottle of Blanton’s or Tito’s at an ABC in Murphy costs the same as at one in Charlotte, even though the cost to provide it is higher. As a result, retail prices are inflated in urban areas to subsidize them in rural ones.
- It restrains consumption: liquor is recognized as a strong intoxicant, and as such, the state has a reasonable interest in regulating distribution.
- It is a large driver of tax revenue: in fiscal years 2024 and 2025, the ABC system distributed $243.9 million directly to county and municipal governments, $29.4 million to local law enforcement, $38.3 million to alcohol education, and $8.4 million to county rehabilitation, on top of roughly $1.1 billion to the state’s General Fund itself.
Upending this system overnight would not only wipe out a major pillar of tax revenue, but also likely raise liquor prices in most rural counties. It would also very likely result in many more liquor stores. (In Washington state, the number of liquor stores quintupled after sudden privatization.)
A smarter path would be to unwind several of the most problematic components of the ABC system by shedding assets and discretionary authority the state doesn’t need, while retaining those elements of state authority that make sense.
Getting out of the logistics business
On the wholesale side, the state should stop operating liquor warehousing and logistics. The state liquor warehouse in Raleigh, built in 1984 and now at capacity, is exactly the kind of fixed infrastructure that it offers the state no obvious advantage to own. (Indeed, that ownership presents nefarious opportunities for political corruption.) Rather than simply re-bidding the contract every few years to operate this warehouse, the state should sell the property and open the liquor wholesale business to the forces of market competition.
One possibility would be to divide the state into territories (mountains, coastal plain, Triad, the Charlotte and Raleigh metros) and let one or different vendors bid for each. Any vendor should be required to serve every local county ABC board in its territory. The ABC Commission’s role would shrink to the more fitting one of a contracting authority instead of an operator.
Product listing should liberalize in the same way. Today, twice-yearly listing meetings of ABC commissioners in Raleigh decide product selection, which often come with strict volume quotas. Introducing demand-led market forces into this system could improve selection and vendor access. A rolling listing process, with open applications and a time-limited review, while still under Commission authority, would preserve the state’s oversight role while eliminating the bottleneck that eliminates central government planners over what makes it on to ABC shelves.
The ABC’s retail business
Across North Carolina, 452 stores operated by county and municipal ABC boards provide not only consumer access to liquor, but also a reliable stream of local tax revenue to their home communities. For generations, this has offered a good balance between consumer access and tax revenue.
Flinging open the doors to full privatization would almost certainly result in a massive expansion of liquor stores (as was the case in Washington). This is an outcome worth avoiding. At the same time, there is also a legitimate argument for allowing more market competition into the liquor business.
The General Assembly could safely open that door just a crack by giving county governments the authority to license a limited number of independent liquor retailers in their county. The number of licenses permitted in each county should be set by formula based on population. Thus, the power to permit more, fewer or no independent liquor stores at all would be kept at the local level, by county commissioners who are directly elected by their community. This approach preserves local control while introducing real competition for counties that want it.
The stakes
North Carolina’s ABC system today was not built with intentionality. The 91-year-old system is an inherited relic of a different era, with compromises, benefits and modifications accreted to it over time. It’s time to reform this system to meet the needs of our modern state. Unwinding the ABC in a measured and deliberate way would better meet the needs of North Carolinians and keep our state government focused on the tasks for which it is better suited.
* - Technically, while the State of North Carolina owns the one main liquor warehouse in Raleigh, LB&B - its contracted vendor - also leases a second distribution warehouse in Clayton, due to overcrowding.
