Texas distributors and craft breweries tangle over beer legislation

No one seems to be happy with Texas’ three-tier beer distribution system. Texas beer distributors want more controlled distribution, and Texas craft breweries want more flexible laws. Under Texas’ three-tier distribution system, a majority of craft brewers cannot sell directly to retailers or consumers but must enter exclusive contracts with wholesalers to sell their beer brands to retailers in designated territories. For obvious reasons, Texas craft breweries don’t like the law, but it could get even worse. According to a recent article in the Houston Chronic:

“Texas brewers would lose a potential source of capital and some flexibility in negotiating sales under a bill before the state Senate … The bill authored by state Sen. John Carona, R-Dallas, chairman of the Senate Business and Commerce Committee, would prohibit brewery owners from selling distribution rights for their beer and it would restrict them from selling beer at different prices in different geographic areas.”

The Wholesale Beer Distributors of Texas is supporting the bill, as they by law have exclusive rights to sell beer from most Texas breweries to retailers. Currently, distributors can pay breweries for distributing rights (that’s not required), but it’s often a great way for craft breweries to earn extra capital. This bill would take away that right, as well as make a one-price-fits-all sales model for Texas’ many regions.

Luckily, there is other legislation being considered. The Texas Craft Brewers Guild has been busy promoting the best interests of its members with some excellent and innovative bills of its own. On February 12, Senator Kevin Eltife (R-District 1) introduced bi-partisan legislation to modernize the state’s alcohol regulatory system, making Texas small craft brewers more competitive. The legislation’s joint authors include Senators Brian Birdwell (R-District 22), John Carona (R-District 16), Eddie Lucio (D-District 27), Leticia Van de Putte (D-District 26), Kirk Watson (D-District 14) and John Whitmire (D-District 15).

The Texas Craft Brewers Guild has been directly involved with the Senate in the crafting of these bills. Should these bills pass, said the guild, they would allow Texas small craft breweries to grow and thrive in an open and competitive market place, resulting in increased job creation, capital investment and tax revenues. Here’s a summary directly from the Texas Craft Brewers Guild website:

SB 515

• Increases the production limit for a brewpub from 5,000 to 12,500 barrels (bbls) annually.
• Authorizes a brewpub to sell their products to the wholesale tier for re-sale.
• Authorizes a brewpub to self-distribute up to 1,000 barrels annual to the retail tier for re-sale.

SB 518

• Authorizes a production brewery under 225,000 bbls of annual production to sell up to 5,000 bbls annually of beer produced by the brewery to ultimate consumers for consumption on the premise of the brewery.

SB 516 & 517

• Authorizes a production brewery under 125,000 bbls of annual production to self-distribute up to 40,000 bbls annual of beer, ale and malt-liquor to retailers. (Note: this right currently exists but is being adjusted. Currently, a brewery under 75,000 bbls of annual production may self-distribute up to 75,000 bbls . These bills increase the size of a brewery that may self-distribute while reducing the amount they may self-distribute. There are two bills because it affects both the “Manufacturer” license — Ch. 62 of the code — and the “Brewer” permit — Ch. 12 of the code.)
• Eliminates discrimination against out-of-state suppliers.