Worthless Opinions on Texas Beer Legislation – The Good, The Bad and the Ugly

Two years ago The Church of Zymurology was very involved in the effort to pass HB 660 which would have put brewpubs on equal footing with those in other progressive states by allowing them to distribute. In Austin and San Antonio several brewpubs envisioned opening new locations if the bill passed. Sadly, that effort disintegrated fairly quickly and a few scrapped expansion plans or watched as investments that partially hinged on those plans slowly went under. Freetail ended its efforts to open a new location in Houston and Uncle Billys at the Oasis found they had built a huge brewery that was relegated to running at half of capacity and it eventually closed. Unfortunately while HB 660 had an enormous following and great grass roots support, it also lacked organization, legislative and legal expertise, and the backing of key decision makers as well as many microbreweries. Two bills were offered up by microbreweries rather late in the game that effectively muddied the water while industry experts at the regulatory hearing rambled on without presenting a solid case. Special interests with big pockets that contribute to campaigns also made the result a foregone conclusion. At the time Texas craft breweries were split into factions (and they still are to some degree). Brewpubs want the same rights to distribute microbreweries have and microbreweries want to be able to sell their beer on site and essentially create brewpubs. Both want to level the playing field, but not at the expense of giving up more than they get in return. Some microbreweries are particularly sensitive about the prospect of allowing for more competition in an increasingly crowded market, although that seems to be less of an issue these days as a lawsuit that changed labeling laws subsequently opened the floodgates and out of state brands are arriving in tsunami-like waves. In progressive states such as Colorado many craft breweries begin as brewpubs and grow organically to become microbrew distribution powerhouses like Oskar Blues. In Texas the warped interpretation of the three tiered system created a more favorable environment for those that started microbreweries thereby fostering a contentious factional structure.  Perhaps a dark puppet master envisioned this when brewpub regulations were first established in the 1990s. Perhaps I am just paranoid.

So what about this new round of initiatives? First, let me go off on a tangent. It was frustrating to see how secretive craft breweries were this time. Instead of brewpubs and microbreweries at odds over legislation, we witnessed both sides trying to unite while at the same time closing the doors on anyone outside of the industry…literally. At a Texas Brewers Guild Meeting in Fort Worth recently all non-brewers and allied trade members were asked to leave the room as the brewery members met to hear about legislative updates at a session included in the schedule that day that was given to everyone in attendance.  Information trickled out, mainly through cherry picked news sources including Ronnie Crocker at the Houston Chronicle, but the craft beer community was essentially under a gag order. While that dynamic has changes somewhat since the legislation gained momentum, it remains a disconcerting aspect to many following these new initiatives and could impact grass roots support in the long term. Without pontificating further I hope the industry can unite its own members and be more forthcoming with the large base of Texas craft beer consumers that supports them. I hope there will be a day when this industry doesn’t have to walk on eggshells or maintain a veil of secrecy.

Alright, back to the update. A good portion of the legislation has passed the first most difficult hurdle, but proponents caution more changes are possible. At its essence those that follow it claim some established microbreweries and brewpubs will benefit the most. Without having delved into the legislation much of this is taken from second hand accounts. Brewpubs can sell through a distributor but would not be able to self distribute unless they sell no other alcohol at their location (or at a second location according to one source). At this time I cannot think of a single Texas brewpub that sells only the beer they produce. On the other hand there are a good number of small distributors looking for brands so it should not be difficult to sign on with one. While the compromise would seem to prohibit brewpubs with beer/wine or mixed drink licenses from moving beer to a second location, my guess is that special arrangements with distributors could be made to allow for a work around. It appears opening up a “tap room” that sells no other alcohol would also be allowed.  Microbreweries will be able to sell up to 5,000 bbls onsite, essentially allowing them to operate a brewpub. That’s great news for Saint Arnolds which has already hired a chef and started serving lunch. On the other hand new microbreweries that have self distributed and built up a string of accounts are not so happy with a compromise that essentially rescinds their ability to sell those distribution rights once they are large enough to contract with a distributor. Again, my guess is that those new microbreweries will find a way to recoup the inherent value of a distribution network when making a deal with a distributor. If they can’t they need to take some business classes.

So at its essence this is all good news if it makes it through and is signed into law, but much can happen between now and then.

About Brother Spargealot

Cloistered with a bubbly personality.
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2 Responses to Worthless Opinions on Texas Beer Legislation – The Good, The Bad and the Ugly

  1. beermeister says:

    Great post. 2 questions: In your opinion are the primary opponents of this kind of legislation the macro brewers or the distributors? Also, in a small Texas community (30,000), what do you think of the idea of a craft beer bar that specializes in Texas micros, and perhaps Texas wines–can it win or will it be overwhelmed by efforts by the macros to sink it?

    • The opposition has been distributors, its all about $. As to a beer bar concentrating on Texas beers, there is one in Austin called Craft Pride that is a huge success. The breadth of different beer styles in Texas now will allow anyone to cater to all tastes, even within smaller communities. For an example as to how craft beer is received in small towns see Bastrop Brewing.