Proposed Beer Legislation Seeks To Loosen the Reins on Texas Brewers
Freetail for retail sale? Supporters of HB 660 hope so.
Hey, I love Texas as much as the next girl, but when it comes to laws the Lone Star State has a reputation for being a bit outdated. And when it comes to alcohol laws, we're downright hard-core. The regulations are particularly restrictive when it comes to beer.
If you head on down to Fredericksburg you can tour a whole slew of wineries, participate in tastings (some free, some paid), and purchase wine to be opened and enjoyed on location or taken home to be uncorked at a later date. The same must be true for breweries, right? Wrong. Under the current legislation a brewery can give tours and serve beer, but beer can only be served on a tour if no admission fee is charged. Even more puzzling is the fact that Texas law explicitly prohibits breweries from selling beer directly to customers, whether it's a pint, a six-pack, or a keg.
If that sounds illogical, consider the brewpub situation in Texas. Brewpubs (sometimes referred to as microbreweries) usually begin as small operations, many with a kitchen to serve food, where beer is brewed, packaged, and sold on site (now-closed Two Rows was a local example). While many other states afford their brewpubs the right to self-distribute or sell their product to a distribution company for resale at retail locations such as bars and grocery stores, the state of Texas only permits a brewpub license holder to sell beer directly to consumers on location - and total annual sales are limited to 5,000 barrels. To put this in perspective, consider the fact that California brewpub Stone Brewing Co. sold over 98,500 barrels in 2009. Sierra Nevada, based out of Colorado, did roughly 800,000 barrels.
What this means is that Texans can walk into Spec's and purchase brewpub beer from almost every state in the union - except Texas. I know. It doesn't make a lick of sense. Luckily, we aren't the only ones who feel it's time for a change. State Representatives Mike Villarreal and Houston's own Jessica Farrar are looking to alleviate some of the restrictions placed on Texas beer with two important bills, filed this session: HB 660 and HB 602.
A brief synopsis of each:
HB 660 - Brewpubs (Mike Villarreal, D, San Antonio)
- Would amend the current 5,000-barrel sales restriction to apply only to beer consumed at the location or goods sold directly to the consumer by the brewpub.
- Would enable brewpub license holders to sell their beer to distribution companies for resale at retail locations, up to 75,000 barrels.
- Would allow licensed brewpubs to directly self-distribute up to 10,000 barrels annually.
HB 602 - Breweries (Jessica Farrar, D, Houston)
- Would enable breweries to charge an admission fee for brewery tours and provide beer in the form of pints to drink on location or bottles to take home after the tour. However, no additional charge over the admission fee can be applied to beer.
- The bill would NOT authorize a brewery to sell beer directly to the consumer on-site for on- or off- premise consumption.
The proposed legislation is nothing new - similar versions have been floating around for years, only to be thwarted by powerful distribution lobbies and old-school ideals. Kevin Floyd, co-owner of Anvil Bar & Refuge, provided some insight into the matter. "Of the three-tier system - production, distribution, and retail - distribution is the most powerful," he explains, adding, "Consumers are led to believe that they have a choice when it comes to beer, when in reality the brands on the shelf are largely decided by the state and distributors." According to Floyd, the key to passing these measures is getting the distribution companies on board.
This sentiment is echoed by Brock Wagner, founder of Saint Arnold Brewing Company, who has partnered with distributors in the past to come up with a version of HB 602 that appeals to both parties. On average, more than 1,500 people tour Saint Arnold each week, and roughly 50 percent are visiting from out of town - but under the current laws Saint Arnold can't charge admission or give them beer to take back home. Wagner says, "My goal is for people to visit the brewery, find a beer they like, and I'll send them home with a six-pack in the hopes that the next time they're in the grocery store, that's what they'll buy," adding, "It's marketing, really."
So what do the distribution companies think about the bills? John Nau, President and CEO of Houston-based Silver Eagle Distributors (currently the largest distributor in Texas, and the second- largest in the nation) told us, "Silver Eagle supports HB 602," stating, "We've even worked directly with Brock [Wagner] to perfect the language in past versions of the current bill." HB 660? Eh, not so much. When asked if Silver Eagle was in favor, Nau responded with a decisive "No."
The belief held by many opponents of the bill is that a brewpub impedes upon a system put in place for good reason. In states with laws similar to HB 660 on the books, a brewpub essentially acts as both producer and retailer, and is not required to sell to a distributor - bypassing the traditional three-tier system altogether. And when it comes to the law, Texans don't take to kindly to breaking tradition. Nau explains, "To fully understand the three-tier system you have to look back to the days of Prohibition, when certain persons were participating in bootlegging and other unsavory acts," adding, "You don't want to penetrate that."
It seemed to us that the distribution companies would be all for this bill -- after all, wouldn't it lead to more brands and increased business? It's often cost-prohibitive for brewpubs to distribute themselves, leading many to seek out a major distribution company to get their beer onto store shelves. But to this, Nau said, "At the end of the day, brewpubs are not the instrument to gain distribution in the market." That being said, he did inform us that he had meetings booked in the near future to discuss the matter with the San Antonio brewpubs behind the bill.
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