ICYMI: Twin Peaks: In-house brewery could be key to success

Credit: Charlie L. Harper III

We love to see restaurants taking advantages of the new freedom craft beers have thanks to the laws passed last session by the Texas Lege with the support of the craft brew industry, the wholesalers and the retailers.

This report in the National Restaurant News discusses how this restaurant chain, which also owns the Ojos Locos restaurant/bars, believes its new craft beer option will help it capitalize on what it sells the most of – craft beer.  The article describes the chain as “a casual-dining chain, which is known for its all-female waitstaff and 29-degree-Fahrenheit tap beers” (treats for the eyes as well as the gut, in other words) and says this:

“There are very few breweries that can open up and inside of a year reach their max capacity without any selling costs. We don’t have to hire salesmen or brokers or anybody to go out and find us customers, … and we don’t have to incentivize retailers to carry our beer. It will really add to the profitability of our concept, both for our corporate stores and our franchisees in the market.”

The goal is to have the beer in all 21 of its properties across Texas – we’ll be waiting!

Study: The three-tier system helps good craft beer thrive

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A fascinating and insightful analysis recently released by The Boston Consulting Group unequivocally states what many of us have argued for a long time: Good craft beer survives on its merits, and thrives in an open-distribution system such as the three-tier system that exists in Texas.

It is a great explainer for those who can’t see past the noise in the very passionate but highly political (and not, in my opinion, very well informed) debate over the regulatory system and the craft brews.

A big THANKS to BCG for doing the study.

From the analysis titled “For Small and Large Brewers, the U.S. Market Is Open:”

“The economics of the U.S. beer business conveys significant advantages to those with scale. But, as it turns out, subscale small brewers are also (unexpectedly) the beneficiaries of the advantages afforded major domestic brewers. The reason: they can leverage an effective route-to-market distribution system that was built by distributors and larger brewers over the decades. This open distribution system enables small brewers to avoid significant, if not prohibitive, costs to entry, while also gaining deep access to large and small retailers.”

 ”Small brewers seeking to break into the market must recognize that they ultimately depend on consumer loyalty and that the distribution costs are not the impediment they seem to think they are,” states the intro. In fact, thanks to piggybacking on independent distribution networks supported largely by the economics of large domestic and import brewers, small brewers avoid much higher distribution costs. And regulators need not worry about the barriers to entry for market newcomers given their recent success and ability to leverage the industry distribution system.”

The article makes three major points:

  • Demand for craft beers, and the rise of small brewers, is fundamentally driven by consumer preference.
  • The open distribution system for beer in the U.S. has helped small brewers gain access to the market because they do not have to build their own networks.
  • Given the open distribution system, both small and large brewers must compete for consumers in order to survive.

Our view is that success in the beer industry still rests fundamentally with consumer demand. Further, the current open structure of the three-tier distribution system has been a fundamental enabler in the craft beer segment,” the article reads.

For anyone who is truly interested in why we should fight hard for the open-distribution system if we want to fight for craft brews, take a minute to get past the hype and really educate yourself – this is a great article for those who wonder why all the fuss.

Chron: For brewer, emphasizing tradition, community pays

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We’re kind of in the summer doldrums, not much going on with people on vacation and such, but one of my favorite beer writers, Ronnie Crocker, hit another homer with this great profile of St. Arnold’s and their pioneering spirit when it comes to making great beer and changing the way Americans drink it.

From the piece:

“Wagner and Stephen Rawlings, a 28-year-old Saint Arnold brewer, were on Day 4 of a weeklong buying trip through two of the most storied regions in the world of brewing — the Bavarian Hallertau of Germany and now the Saaz in the Czech Republic, not far from the birthplace of pilsner beer.

Hallertau and Saaz hops have been prized by generations of brewers across the globe as well. The Japanese and, increasingly, the Chinese have become major customers.

But it’s American craft brewers like Wagner, a relatively new breed in beer’s millennia-long history, who have made the biggest mark on the European hops business, elevating hops to their most exalted status while using them in creative new ways and radically altering the perception of American beer around the world.

Wagner, now celebrating 20 years in business, is among the veterans in that transformation.

Just 185 U.S. craft breweries and brewpubs in business today opened before Saint Arnold did, records show. The most recent Brewers Association count shows there now are 2,866 in operation, which means the Houston brewery has been around longer than 93 percent of its contemporaries. It survived the boom times of the 1990s and the shakeout that followed.”

Crocker’s piece takes us to Bavaria and beyond – click here to settle in for a great read! 

 

 

Congrats to East Texas cities for voting in beer and wine sales

Bumper sticker by Two Brothers brewing in Aurora, IL.

Some exciting politics happening in East Texas over the weekend, with four cities voting down antiquated dry laws and allowing beer and wine sales.

Soon the folks in Van, Grand Saline, Gilmer and Quitman will be able to not only enjoy a tasty beverage without driving far and wide to get it, but they’ll also be able to enjoy the economic development benefits that elude dry counties, such as increased retail and restaurant action.

Canton rejected both of the ballot measures, the same in all five cities, that would have allowed sales of beer and wine for off-site consumption and the sale of mixed drinks by restaurants, respectively.

From the Tyler Telegraph:

It’s very clear that all over East Texas, voters are overwhelmingly approving alcohol sales, and we are really excited about it,” said John Hatch, with Texas Petition Strategies, the company that assisted in getting the propositions on the ballots.

“These elections rarely fail on facts,” he said. “If they fail, they fail on rumor, innuendo and misinformation.”

 

 

 

 

 

What’s the meaning of craft beer these days? Thanks in part to Big Beer, who knows?

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I like the treatment of this issue by the brilliant people over at Texas Public Radio, who ask the question that will get any non-hipster kicked off Rainey Street in Austin in a matter of seconds: What exactly IS craft beer anymore?

We know what craft beer used to be. We think we know it when we taste it. And of course, as I’m sure my detractors will point out in the comments, everybody who’s anybody knows what craft beer is, duh.

Except really? TPR makes two excellent points with the following comment in their story about the issue:

Small breweries are transforming into big ones, while big breweries are masquerading as small brands, selling “crafty” knockoff beers in an attempt to lure customers from the craft beer market.

Part of the confusion over what craft beer means has come from within the craft beer community itself. The Brewers Association, a Colorado industry group that serves as a voice for craft brewers, has changed its definition multiple times.

Good discussion points here, but I’d like to highlight here the widely recognized tendency of Big Beer to try and cash in on the craft brew population by thoroughly confusing the people who don’t have time to study the fine print – well-meaning craft beer drinkers who may get fooled by brands like Shock Top used to do before everybody figured out they were AB.

Anyway. Read and learn. Good stuff.

 

Jester King wins prestigious small-brew industry activism award

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Congratulations to Texas’ own Jester King Brewery, which this week received the F. X. Matt Defense of the Small Brewing Industry award at the huge Brewers Association’s Craft Brewers Conference happening right now in Denver.

Just about 9,000 people are attending this conference, and the award to Jester King is the burgeoning industry’s nod to the brewery’s “efforts to overturn antiquated beer laws and create a level playing field for small brewers in Texas,” according to a release posted on the brewery’s website.

The award is named for the late F. X. Matt, president of the F.X. Matt Brewing Co. in Utica, N.Y., from 1980-1989, “a tireless and outspoken champion for the small brewing industry,” reads the BA website.

“Nominations are open to individuals who have given aid and support to the causes of small, independent brewers, and by doing so have supported the Brewers Association’s goal of vigorously defending the craft beer industry.”

Below is the transcript of the acceptance speech given by Ron Extract of Jester King:

“Thank you very much to everyone at the Brewers Association. The award came as a complete surprise, and we’re extremely humbled and honored to accept it. We’d like to thank our attorneys who represented us in our lawsuit against the Texas Alcoholic Beverage Commission — Jim Houchins of The Law Office of James O. Houchins and Pete Kennedy of Graves, Dougherty, Hearon & Moody, P.C., as well as our co-plaintiffs Authentic Beverages Co. and Zax Restaurant and Bar. It was Jim Houchin’s idea to challenge some of the unjust, antiquated laws under which we were being forced to operate. He and Pete Kennedy not only helped to change these laws, they also paved the way for further legislative change that would follow, as a result of the continued efforts of the Texas Craft Brewers Guild and its leaders, to whom we owe a tremendous debt of gratitude.

“As hard as many of us are working to modernize our legal and regulatory structures, there are also those, often with a good deal more resources at their disposal, who are working equally hard to hold us back.

“Last year, Texas breweries gained the right to sell beer directly to consumers and Texas brewpubs gained the right to distribute off site. But, thanks to the efforts of a powerful distributors lobby, we also lost the legal right to receive compensation for one of our most valuable business assets, our territorial distribution rights — an asset that distributors routinely and legally sell to one another for millions of dollars. Distributors often speak about investing in our brands, yet the distributors who were behind this effort seem to feel that the investments that brewers make in their own brands are literally worthless. What’s perhaps even more astounding, though, is that even as these distributors lobby against our interests, other craft brewers continue to sign on with them.

“For those of you who have distributors that you like, and whom you feel genuinely support your interests — and there are definitely some very good ones out there — please encourage them to work together with us to bring about the change we need, and to speak out against those that would hold us back. If you have distributors who do not support our collective interests, or even actively lobby against them, call them out, and hold them accountable. Remind them that the money from selling your brand is helping to pay their bills. And when seeking new distribution, please consider where your prospective distributors stand, what sort of lobbying efforts the money from your brand would support, and what recourse you would have, should that relationship ever go awry.”

Congratulations to Jester King!

Here are the winners at past conferences:

2014 – Jester King Brewery, Austin, Texas
2013 – David Katleski, New York State Craft Brewers Guild/Empire Brewing Co
2012 – Tom McCormick, California Craft Brewers Association
2011 – Dan Kopman, St. Louis Brewery/Schlafly Beer
2010 – Steve Hindy, The Brooklyn Brewery
2009 – Eric Wallace, Left Hand Brewing Company
2008 – John Carlson, Colorado Brewers Guild
2007 – George Hancock, Pyramid Brewing Co.
2006 – Daniel Bradford, past BAA President
2005 – Marc Sorini, McDermott Will & Emery
2004 – Marc Sorini, BAA Counsel
2003 – Jim Parker, Oregon Brewers Guild
2002 – Mike McKinney, Texas Wholesalers Association
2001 – David Edgar, Past Institute for Brewing Studies Director
2000 – Fred Bowman, Portland Brewing Co.

Flip-flop by Texas craft brewers ignores one thing: They’re fighting the laws that help them

A modern brewery

Texas has one of the strongest craft brew environments in the country, made even stronger by a package of laws that crafts and distributors hammered out and agreed to during the last legislative session.

Less than a year after those laws took effect, however, the legislative director of the state’s craft brewers group is backpedaling on one of the laws his group originally supported in order to get their wish list passed – and the law’s House sponsor, Rep. Charlie Geren, R-Fort Worth, is not AT ALL pleased about the switch.

“I’m very disappointed that he’s bringing this up, and I’m not going to go into the next session with a very good taste in my mouth with him starting this crap this early,” Geren, a restaurant owner and House chairman, told the Texas Beverage Industry Journal on Friday. “It is the law, and I’m going to fight to keep it the law.”

The law in question codified a ban on brewers being able to sell their distribution rights – a practice that forces distributors to pay the brewers to distribute their brands, something that was already illegal anyway.

The law was part of a historic overhaul of the craft brew laws, a package touted as some of the best pro-craft legislation in the country, allowing them to self distribute and serve their own beer on site and a host of other things that craft brewers have been wanting for years but were stymied on by Big Beer, which didn’t want the competition it would create. In short, it was a huge win.

The problem now is that the craft brewers are apparently, as Geren says, “changing spouses” and backing off on their support – now that the distributors helped get them the hookup during the session (convenient!).

On Thursday, Scott Metzger, who sits on the board of the Texas Craft Brewers Guild, told members of the House Economic Development committee that while some of the laws passed during the session were good, the franchise law that was part of the package is bad for them – even though they signed off on it last year.

His complaints are that craft beers want to charge distributors for the privilege of promoting their beers, and they want to be able to fire distributors at will and sell their brands’ distributing rights to another distributor for no reason.  The franchise law prevents both of these things, which are already prohibited anyway.

Not only is he wrong that the law is bad for craft beers – it’s actually very good for craft beers because it empowers distributors to invest in the success of their brand – but he’s also doing an about-face on his position during negotiations that everyone thought were being done in good faith.

This type of thing does not sit well with anyone who has ever lost blood, sweat and tears during political negotiations, particularly when they’ve gone out on a limb, like the distributors have, in order to pass a package everyone was happy with.

“Their group and their lobbyist all agreed to this,” Geren said. “It was a package deal and everybody signed off on it. It’s awfully fast to be changing spouses here, I think.”

Besides being bad politics, it’s just a bad position to take, period. The franchise law helps the craft brewers by protecting the investment a distributor makes in their brands when they spend their money and infrastructure promoting and selling the brewers’ beer for them, Geren said.

For example, Geren says, Metzger, who owns Freetail Brewing Co. in San Antonio, chooses to avail himself of that system even though he is free to avoid the issue altogether s and distribute his products himself, which even Budweiser and Miller and the other Big Beer guys can’t do. Craft brewers choose the system because it works for them, the way it is.

“He can distribute the beer himself, legally, today, but instead he chooses to use the system,” Geren said. “If he chooses to use the system through the bigger guys (distributors), they have an infrastructure already in place. They spend a lot of money on advertising, on the trucks, on labor, and he’s taking advantage of that when he uses the system. And if he wants to be paid for that, he’s nuts.”

After all, Budweiser doesn’t charge La Mantia distributors every time it rolls out a new beer – what would be the incentive for La Mantia at that point?

Metzger also complained about part of the law that makes it difficult to break contracts with distributors or fire them at will, saying it restricts the craft brewers’ ability to make money off a valuable brand. Big beers can’t just dump a distributor for no good reason, but craft beers want to.

But ask yourself this: Why on EARTH would a distributor even bother to pour its infrastructure into building up a brand, getting it into bars and stores (they’re the ones who send the beer girls to the sports bars, for example, to introduce patrons to their beers), only to have it taken away for no reason and sold to another distributor to enjoy the fruits of the first company’s hard work and valuable resources?

No thanks.

“You don’t want to build up this guy’s market and then have him jerk it out from under you and give it to the competition,” Geren said.

Distributors invest millions of dollars in craft brands and undertake long term commitments in warehouse build-outs, marketing, refrigeration systems, rolling  stock, and employment commitments. Simply put, franchise laws prohibit a brewer from unfairly taking that investment.

The law allows a distributor to invest heavily in new and emerging  brands without risk that the investment will be unfairly taken from them without compensation.

This only HELPS the craft brewers and also shuts down opportunities to game the system unethically – but Metzger and the others don’t seem to realize that.

Geren warned that the guild did very well last session and should be careful about opening up the can of worms again so soon.

“They’ve got a good thing going, and I hope they don’t try to screw it up,” Geren said. “The one thing I’ve learned in my 13 years down there is that you can pass laws that cut either way.”

Pretty clear warning shot across the bow, isn’t it?

I understand that craft brews want to keep growing, and the thing is, the package of laws that was passed in 2013 help them enormously because it bolsters them AND it protects the distribution network that makes the Texas industry one of the strongest in the country.

Putting the screws to that network will only hurt the craft brews, and the sooner they realize that, the better off they’ll be.

Your Turn: Join the TABC biennial strategy session on Tuesday

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It’s your turn to tell the Texas Alcoholic Beverage Commission what their priorities should be – and as a vital part of Texas’ celebrated alcoholic beverage industry, the TABC needs to hear from you.

Clear the decks next Tuesday, March 25, and plan to join the TABC to discuss the agency’s strategic plan for 2013-17  - how the TABC has progressed on those goals so far, and what new strategic and operational goals they should prioritize for the future.

Below I’ve pasted the letter to TABC stakeholders about the meeting. Click here to see the operational goals developed – with your help – in 2012.

Please mark your calendars – hope to see you there! If you can’t make it, we strongly encourage you to send your thoughts to Beck, whose info is posted below.

 

Dear TABC Stakeholders,

As you may know, as part of TABC’s biennial strategic planning process, we invite feedback from agency stakeholders in order to develop long-term priorities as well as operational goals and strategies related to how the agency serves its customers.

Following the agency’s Commission Meeting next week, starting at 1:30 pm, we invite you to join us to discuss the progress made in achieving the operational goals identified two years ago (as listed below). We are asking for your participation and feedback to help identify which goals have been accomplished, which should be continued, and what new goals we should consider.

DATE: Tuesday, March 25, 2014

TIME: 1:30 PM

LOCATION: Commission Meeting Room, 1st Floor, 5806 Mesa Drive, Austin TX 78731

If you are unable to attend the meeting, we would appreciate any input you can provide via e-mail or telephone. My contact information is listed at the bottom of this e-mail.

To view a copy of the agency’s FY 2013-2017 Strategic Plan, please visit our website:

http://www.tabc.state.tx.us/publications/agency_report_archives/strategicPlan13.pdf

Please let me know if you have any questions or would like additional information. I look forward to hearing from each of you with your comments and suggestions, and I hope to see you soon.

Carolyn Beck
Director of Communications and Governmental Relations
Texas Alcoholic Beverage Commission
512-206-3347
Carolyn.Beck@tabc.state.tx.us

 

First round: Time to update the TABC’s operational plan

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On March 25, 2014, stakeholders in Texas’ alcoholic beverage industry will meet to discuss how much progress the Texas Alcoholic Beverage Commission has made on the following goals, set out in March 2012, and what needs updating for the future. Details of the meeting here.

After your input, here’s what they came up with in March 2012. This will be the subject of Tuesday’s meeting. See you there!

(Click Read More to see the March 2012 goals, or scroll below)

Historic milestone for craft brews in Texas – first TX brewpub to distribute keg under new laws

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AUSTIN _ We have ourselves some history in the making tomorrow, when Uncle Billy’s Brewery & Smokehouse in Austin becomes the first Texas brewpub in the history of Texas to have its beer distributed through a third party to bars and restaurants across Texas.

The Friday afternoon event is open to the public and is made possible by a slate of legislation passed in the Texas Legislature last year that expands the reach of craft brews, allowing shipping breweries to serve on site and brewpubs to serve, well, everywhere else, for the most part.

“Never before has a brewpub in Texas been allowed to distribute craft beer outside its own four walls through a third party distributor – the new laws and the collaboration with distributors have made this a reality,” said Uncle Billy’s co-owner Rick Engel. “It’s an amazing time to be a brewpub in Texas, and Uncle Billy’s is proud to take the first step in this exciting new era.”

Engel said, “Now, the great craft beer Uncle Billy’s has always been known for can be enjoyed not just at our pub, but also at other restaurants and bars they may choose to frequent.”

When Uncle Billy’s Green Room beer is tapped at Li’l Woodrow’s on Friday afternoon, it’ll mark the end of a historic journey from hops to taps – a trip made by so many brewpubs from OUT OF STATE, and so many crafters in state, but never by a Texas brewpub.

“This event celebrates the future and vision of an industry expected to contribute $5.6 billion to the state economy annually within the next decade,” said Texas state Sen. Kevin Eltife, who sponsored the new laws. “We congratulate Uncle Billy’s on this day of recognition.”

We at TBIJ could not be happier that this milestone is being reached – not just in Austin, but by Uncle Billy’s, whose owner Rick Engel opened the first brewpub in the entire state back in the day.

Thanks for making history again, Rick, and for allowing us to tell another success story about the new laws, craft beer in Texas, and how well the system works for people who love to create and consume great beer.

Event details below, and read full press release here:

What: Senator Kirk Watson and Mayor Lee Leffingwell will tap and serve up the first distributed authentic craft brewed keg.

When: 3:00 p.m., Friday, February 7th

Where: Little Woodrow’s, 520 West Sixth Street, Austin 78703

Who: Representative Rodriguez, Mayor Leffingwell, Keg 1 COO, Uncle Billy’s co-founder and Little Woodrow’s management & staff, and craft beer lovers.

Rick Engel, Uncle Billy’s co-founder, Welcome

Travis Erwin, president and COO, Keg 1 distributors

State Representative Eddie Rodriguez and Mayor Lee Leffingwell  Tapping of the keg and cheers to the milestone

 

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