A lot of breathless attention has been trained on a study released earlier this week by the craft brewers about their own success – and how much their business could benefit Texas if we would just throw out the three-tier system and let them distribute their own beers and sell from their own breweries.
Everybody in the industry who are not affiliated with foreign owned mega-brewers are pulling for the success of craft brewers in Texas. Texas is the proud home of Shiner, St. Arnold’s and Celis, some of the best craft success stories in the country.
My concern regarding the report published by the craft brewers is the premise that the craft brewers will benefit from deregulation of the three-tier system. In fact, a lot of the coverage takes the study at face value and declines to address what assumptions are being made by this study, what the realities might be, what the motives are and what the Other Side of the Story is.
The study, by the Texas Craft Brewers Guild, claims tens of billions in revenue to the state by 2020 and is based on the idea that craft brewers will go from having .7 percent of the market share to 6.4% of the market share. (Editor’s note: The market share has been corrected from an earlier assertion here that was inaccurate. Apologies and thanks to Metzger for pointing it out.)
The adjunct econ professor who did the number crunching, Scott Metzger, is owner of San Antonio-based Freetail Brewing Co. and used member-provided data.
Here are my thoughts:
Industry sources remember last year when Metzger testified before the Texas Legislature that the brew pub bill – which would have thrown out that three-tier system, basically – would have generated “$57 million dollars of new tax revenue per year” for the state. Out of brewery sales. That’s more than ALL THE CURRENT BEER EXCISE TAXES COMBINED. That’s a big assumption, and potentially overly optimistic.
The study (focused on small brewers) aims, clearly, to set the stage for a hefty argument before the Lege when it convenes next January. The brewers have been champing at the bit to do their own thing, without the distribution and retailing tiers, and argue that the three-tier system is holding them down. At the same time, the number of craft breweries operating in Texas has more than doubled in the past five years – from 35 to 78 – with another 61 ramping up their efforts to open their doors.
The craft brewery industry is actually thriving under the current three-tier system and very likely would not be viable without it. I appreciate craft brews and the people who make their living from them as much as any beer drinker and small-business supporter. I want to see them flourish. I enjoy a good tasting beer that doesn’t need horses in its ad campaigns or cater to low budgets and low standards. But there’s a big problem here that the craft brewers aren’t seeing, or aren’t believing, when it comes to this distribution issue.
Moving toward deregulation could destroy the incredible success of the craft brewers in Texas, where an independent distribution system gives them a unique access to the market that occurs nowhere else in the world. Anheuser-Busch and Miller/Coors are now owned by foreign conglomerates that believe they can export monopolies they have in other markets to the U.S. They will try to use the craft brewers as fronts to deregulate the system, and then force the craft brewers out of the market after they take control of the distribution tier (which they will). This is what they do all over the world.
Are there some things the state can do to help craft breweries get off the ground? Absolutely. Does allowing breweries to be all three tiers of the system without any limits at all help craft brewers? Probably not.