BREAKING: Texas House approves sweeping changes for craft beer industry

A modern brewery

In a major victory for the craft brew industry, independent wholesalers, and beer aficionados across the Lone Star State, the Texas House on Friday passed a package of craft brew legislation that supporters say will help small business and increase the quality of beer available to Texans. Congratulations to all of us!

In under a minute, the House gave its preliminary approval on a voice vote to five pieces of legislation that would, among other things, allow brewpubs to sell beer to go and allow brewers to have tap rooms. And all this while preserving the important three-tier system that has allowed them to flourish.

The bills passed with no objections, no arguments, and no amendments. Because the bills have already been passed by the Senate, and because the sponsors have clearly worked the heck out of the Texas House members to keep amendments off the bill, sponsors have paved the way for the bills to get on the fast track to the governor’s desk.

All that’s left is a final, procedural vote by the House on the next legislative day – be that today or Monday, whichever they decide.

After that, it’s on to Gov. Rick Perry. And, I might add, the bills will be immediately effective as they won well over two-thirds support in both chambers. Like, 100 percent support.

Of course we reserve our official celebration until it’s all the way done, with final passage and all, because we are smart superheroes over at TBIJ and we have experience in legislative craziness.

But meanwhile, we’d like to say a huge thanks to all the stakeholders who worked so hard to come to an agreement – and the lawmakers who pushed everyone to do it.

It’s not an easy deal to broker. Special thanks to Sen. Kevin Eltife, Sen. John Carona, Sen. Leticia Van De Putte, Sen. Kirk Watson, Rep. Charlie Geren and Rep. Wayne Smith for shepherding this through to passage. In particular, for getting it through the feisty House – no small thing in this crazy, raucous chamber. (And certainly not today, when they’re bent on annoying the Senate. But I digress.)

We also congratulate the independent distributors and the craft brewers.

Shout out to Scott Metzger of Freetail Brewing Co. in San Antonio, who worked with stakeholders on behalf of the breweries.

(And, more importantly, who got some applause from the House floor as he and his buddies sat in the House gallery at the beginning of his bachelor party weekend. Congrats for that, too, Scott!)

UPDATE: Craft beer bills officially set for House floor debate this Friday

By Charlie L. Harper III

The craft brew legislation has officially been set on the Texas House floor calendar for Friday, May 17.

This is great news, and just in time for American Craft Beer Week!

If the House can keep the amendments off it, a favorable vote on Friday and another on Saturday will send it directly to the governor. If there are amendments, it goes into a conference committee – which is not the end of the world, but hey, any delay is a nail-biter at this point in the session.

Either way, this is a huge step because, as many of us know, we have less than two weeks to go before the legislative session ends here in Austin.

Even less than that to pass Senate bills – deadline for that is in one week – so we want to give a huge thanks to House Calendars Chairman Todd Hunter for pushing this through before it could get bogged down in slightly bigger things like, you know, THE BUDGET.

We know you have many priorities this session, so you have our gratitude for moving on these bills that are so important to small business and their customers.

Looking forward to enjoying broad support on the House floor for these bills, which you can read all about right here.

And happy American Craft Beer Week!

 

Movement on craft bills in Texas

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The package of four bills dealing with the craft beer industry were passed out of the House Licensing and Administrative Procedures Committee today, paving the way for a floor vote in the near future.

The bills will allow craft beers to flourish without threatening the state’s successful three-tier system - you can read all about them here.

A little procedure now. When the bills don’t come to the floor right away, don’t panic. The House has until May 9 to pass its own bills, and typically doesn’t spend a TON of time on Senate Bills until then -though it’s not unheard of, the priority on the House side is to get their own bills through first.

The risk you take when you wait is, of course, the clock running out. But as these bills are so popular and so well rounded, it’s highly unlikely they’ll be held up in the end. When you’ve got wholesalers, retailers and manufacturers all pulling for the same thing, it’s a juggernaut that’s hard to stop.

Cheers! We’ll keep you posted here.

UPDATE: Two craft beer bills unanimously pass Senate

By Charlie L. Harper III

Two of five craft brew bills floating around the Pink Dome won unanimous passage on the Senate floor. They now head to the House.

They are:

SB 515 allowing brewpubs to distribute through distributors

SB 518 allowing some breweries to have tap rooms

Also, this bill passed unanimously on reachback pricing and territorial assignments:

SB 639 banning reach back pricing and brand-selling (which as we know is NOT the same thing as banning distributors from distributing craft beer – though lots of people think it is).

Our original report said SB 639 passed 30-1 but I’m told that was an administrative error and that the senator actually did vote for the bill.

We spoke with Scott Metzger, CEO and founder of Freetail Brewing Company in SATX and board member of Texas Craft Brewers Guild. Here’s what he said:
“I’m amazed. Four years ago when we started working on this, it was hard to get anyone to chat with us. And to go from that to 31-0  in the Senate is pretty amazing. I know our victory is a little clouded by some of the internal debate in the industry over SB 639, but I think we’re all really excited that we’re moving forward and we continue to be a part of the discussions with how the industry is shaped going forward.”

Over at the Wholesale Beer Distributors of Texas, executive vp Tom Spilman says: “We are delighted that three of the five bill package has cleared the Senate and expect the last two bills to follow in the next couple of days. There has been a lot of time, effort and compromise by all the stakeholders involved and I look forward to these bills moving through the House in the weeks to come.”

A few thoughts on brand selling and The Beer Deal

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When we talk about someone’s livelihood – beer-related or otherwise – passions run high and opinions strong.

When the discussion does involve the vast and varied beer industry, with its thousands of players in all three tiers of the Texas system, it’s understandable and to be expected that not everyone will agree on every single decision that affects the industry.

Consensus building is difficult, even in the easiest of times. I get that.

That’s why it comes as no surprise that the brewers are not all in favor of part of an agreement reached this week by the stakeholders in legislation that would affect the industry on various fronts.

The negotiations did include reps for the Texas Craft Brewers Guild, such as the hard-working Scott Metzger of Freetail Brewing who has put in countless hours on behalf of breweries and brew pubs, and a cross-section of Texas distributors who believe, without question, that their own success rises with the success of the craft brews as well. And that adherence to the three-tier system that protects them from monopolies has to be an underpinning of any law affecting the alcoholic beverage industry.

No one with a stake in beer legislation was left out of the room, but they emerged believing that everyone got something, and everyone gave up something in order to get it.

With that in mind, I have a few thoughts on the issue they’re splitting over – the selling of particular brands to distributors.

There has been confusion in the industry over whether it’s acceptable or legal, in the spirit of the law if not the letter, for a brewer to sell a particular brand to a distributor.

Many of them have, in fact, been told previously by the Texas Alcoholic Beverage Commission that such transactions likely violate tied-house statutes, and so they didn’t do it. Now some breweries want to do it, which could cause a market imbalance because a distributor has “invested” in one brand and not another.

Craft brewers benefit from an independent distribution tier which has not invested in one brand over another. Because of this, they stand on equal footing with big beers like Budweiser and Miller, enjoying the exact same access to the market without the influence of money and power muddying that water.

Getting that access right out of the gate is a cost-efficiency advantage available to no other “start up” commodities.

Having said all that, again, it’s not unexpected that some brewers take issue with the part of the agreement reached earlier this week that includes codifying a ban on payment for brands.

However, this shouldn’t overshadow the major victories achieved by the brewers in the negotiations – concessions made by independent distributors in an effort to support the crafts in their success, which in turn benefits everyone.

When these pass, it will be a new day in the Texas beer industry, major changes ahead for a lot of brewers, and they should be celebrated.

  1. The ability to have on-premise sales or “tap rooms” at a brewery, meaning you can go to your favorite brewery, watch the beer being made, take a tour and then hang out and buy some brews in their tap room on site.
  2. The brand new ability of brewpubs to introduce their beer to a wider market by making their beers available to retailers through distributors.

Was it everything they wanted? Of course not. Nobody in the negotiations got 100 percent of what they wanted – that’s the darker side of compromise, the part that allows everyone to get a little of what they need without anyone being thrown under the bus.

As Sen. John Carona put it at the conclusion of the testimony a couple weeks ago, every change to the law affects the entire industry, and everyone who has a stake in the industry has done their part, over the decades, to build it into the successful one in Texas.

They all should benefit.

Craft brew legislation: We have a deal

By Charlie L. Harper III

Craft brewers in Texas and the state’s wholesale beer distributors have reached a deal on legislation designed to help small breweries grow while maintaining the three-tier system, in accordance with the Monday deadline set by Senate Business and Industry Committee Chairman John Carona, R-Dallas.

It’s not one of those deals where everybody wins everything they wanted, and there are sure to be some brewers and some distributors not happy with the deal. But the stakeholders did reach an agreement, thereby avoiding the shuttling of legislation to the back burner that would affect everyone.

Along with Carona, who set the deadline for the negotiation, Sen. Leticia Van de Putte was instrumental in the negotiating, as were Sens. Kevin Eltife and Kirk Watson.  Reps. Charlie Geren and Wayne Smith, the new chairman of the House Licensing and Admin committee, also let all the parties know that the House wanted this deal to get done and backed Carona strongly in pushing it through.

Now, the Lege Council is still memorializing the deal, which could be drafted this week. But here are the highlights:

1. The craft brewers will get a tap room (no current details on what that would look like yet, exactly).

2. The brewpubs will be able to get their beer to retailers through distributors.

3. There will be a codification of past TABC guidance on reach-back pricing, and legislation addressing how territorial assignments are made.

Sorry I don’t have any more details. You know I’ll give them to you when I do!

Carona urges fairness, thoughtfulness in Texas bill hearings

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Bills that would affect the craft beer industry and the state’s three-tier system of alcohol distribution had their hearings in a Senate committee this week.

After an hour’s worth of testimony and back-and-forth on the various legislation in the Senate Business and Commerce Committee, Chairman John Carona left the slate of five bills pending and told the opposing parties on the issue to come together on legislation that would benefit everyone, or all bills would move to the back burner for the session.

“We’re going to ask all parties to get together on this starting immediately, and I want a deal on this one way or the other by 5 p.m. Monday,” Carona said at the close of the testimony. “So all of you need to understand that’s the deadline. If we don’t meet that deadline, I’m pushing this legislation to very end of the session. So you’ve got a week to work on it. Thank you.”

Carona’s bill would bar manufacturers from discriminatory pricing practices that interfere with independent distributors’ right and ability to set their beer prices. It also includes other measures that protect the marketplace from situations leading to exclusive manufacturing/distribution arrangements that could force craft breweries out of the Texas market.

From the outset of the meeting, Carona emphasized that all parties have a stake in the preserving the three-tier system and that each side is important in the debate over expanding self-distribution rights for breweries.

Here was his opening statement:

“To our friends in the craft beer industry, we recognize this is an important issue for the industry, and certainly if you are a new entrant in the industry, it’s important to get this right because it really deals with the ability to grow your business.

“And there are some competing bills and issues that we’ll be discussing today. Some of you have great concerns over one of the bills filed that has my name on it. Let me just say that the bill has been filed to make sure that we get all interests at the table to discuss this. When you deal with anything that involves the three-tier system, you really have to take a look at the whole picture. And that’s what we’re trying to do as a committee. I think you’ve seen that in the past, we’re pretty deliberate up here, and we don’t take these issues lightly.

“Those of you in the craft brew industry, I would say, ‘Take a deep breath.’ We’re going to do our very best to get you a product that works. I think this committee has proven in the past to be a friend to your industry and will do its best to continue that. But we’re going to do so within the confines of the three-tier system.

“So I would ask that you be patient and listen, and respectful of the fact that while your interests are important today to you, there are other interests that are also aligned with the alcohol industry that we have to look after as well if we’re going to preserve a system that has worked well in this state for many, many years.”

UPDATE: Craft beer bills officially set for Texas Senate hearing

By Charlie L. Harper III

An official notice has been posted for a Senate hearing on a package of legislation dealing with the craft beer industry. The hearing in the Texas Senate Business and Commerce committee happens at 8 a.m. next Tuesday, March 5.

The committee is chaired by Sen. John Carona of Dallas.

Here’s that public notice.

The committee meets in Room E1.016

According to a news release on the Senate bills, the legislation would authorize craft brewers who brew beer as a production brewer to sell limited amounts of beer to customers at their breweries. It would also allow craft brewers who brew beer as a brew pub to sell a limited amount of their beer to wholesalers for distribution to grocery stores and licensed alcohol retailers. It would also adjust the amount of beer a craft brewer may sell directly to retailers.

ICYMI: A great map on the influence of Big Beer

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Two beer companies, 200-plus beer brands – do you know what you’re drinking?

We send out props this week to NPR for an excellent overview on the incredible growth of two foreign-owned mega-beer corps that, incidentally, have taken great interest in any legislation that would help them build their influence in Texas. Why? Because the craft beer culture here is booming, and they want a part of it. Even thought they’re not craft brewers.

But you knew that already.

From the report:

In the past decade, a few big beer companies went on a buying spree, spending some $195 billion to buy up brewers around the world, according to Bloomberg.

Beer drinkers can be excused for not noticing. Unlike, say, airlines, which fold their acquisitions into one big, global brand, big beer companies tend to keep the brands they buy in the market.

As a result, the two biggest beer companies on the planet — Anheuser-Busch InBev and SABMiller — now own more than 200 brands based in 42 countries (including 18 in the U.S. alone). We’ve put together this handy guide so you can know whose beer you’re really drinking. 

Click here to check out the map and take a look at the far-reaching influence of the world’s biggest beer companies.

 

Texas wholesalers = $5.9 billion economic impact every year. Right now. Today.

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The economic impact of various aspects of the alcoholic beverage industry is the subject of a lot of discussion these days, as Texas lawmakers begin considering legislation aimed at helping out the craft brewers.

Without a doubt, the craft brewers are the success story of beer these days, and I support their continued success. I believe smaller, independent wholesalers can live harmoniously with craft brewers because, simply put, each benefits from the success of the other.

But as we move forward, there are some things to keep in mind in order to stave off unintended consequences.

Much has been written about the Texas craft brewers’ recent estimate of a $600 million economic impact in 2011, along with their assertion that within eight years, that impact could grow to $5.6 billion.

But the economic impact of the wholesalers should not be ignored – particularly the annual  $2.3 billion they generate in wages to Texas workers and the $5.9 billion annual economic impact of Texas wholesalers right now.

Not in eight years. Right now. Today.

The ones who drive the beer to the retailers, put up table tents and take the hit when no one likes the beer they’ve bought from the craft brewers? Those are the distributors, and they have a deep impact on Texas jobs and economy as well.

We have an exciting new report from the National Beer Wholesalers Association, and we’ve done some of our own number crunching as well. What it tells us is that we should protect a segment of the industry that’s already generating enormous benefits for the state.

So as we watch the process grind into action at the state Capitol, let’s keep in mind that any legislation that might tear at the fabric of the three-tier system and the role filled by the independent wholesalers could have the consequence of hurting the second tier – and that will hurt everybody.

As an aside, I’d add that yes, much like the craft brewers did their own economic study to arrive at that eight-year-out projection, the wholesalers commissioned their own fiscal impact study – but this one was done by two researchers who have done studies for several private companies as well as public entities and aren’t actually connected to the beer industry. I’ve pasted their bios at the end of this post.

The numbers in Texas 

Texas distributors have an annual economic impact of $5.9 billion on the Texas economy, directly or indirectly generating more than 36,600 jobs and generating $1.2 billion in tax money for state coffers, according a new 2013 impact report by the National Beer Wholesalers Association.

In addition to that, another $1 billion is generated in federal, state and local excise and consumption taxes on beer consumed in Texas.

Texas workers get paid more than $2.3 billion in wages as a direct or indirect result of Texas wholesale distributors, the report says.

Texas distributors save $1.8 billion in transportation efficiencies for retailers in Texas, amounting to about $141 per retailer per day each year. That’s $51,286 each year the retailer doesn’t have to spend on beer transportation.

That efficiency, by the way, equals 77 million hours of public school instruction and 71,482 miles of highway maintenance each year.

In addition to that, we did our own number crunching at the Texas Workforce commission and found that distributors employed 16,526 people in Q3 of 2012, the most recent numbers of available.

That doesn’t include another 20,000 jobs indirectly generated, today, by the distributors.

By comparison, the TWC numbers also show that breweries – all of them, total – employed 1,785 people in Q3 of 2012 in Texas.

More info if you click on “read more.” Then click here to dig into the report.

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