We reported last week on some Houston bars banding together to boycott Silver Eagle Distributors over an unexpected price increase on keg rentals that was never discussed. It simply showed up on invoices. Essentially, when bars buy draft beer, it comes in metal kegs valued at more than $100 each. The deposit from Silver Eagle has gone up several times over the last few years. It is currently at $60 per keg—less than the value, but a substantial capital investment for bars that often “float” many kegs at a time.
Caught in the middle were several craft beer brands whose kegs were suddenly no longer being sold by some of the highest volume bars in Houston. These included local Houston beers Saint Arnold, Karbach and 8th Wonder and out-of-town beers like Sierra Nevada, Firestone Walker and Freetail.
The Hay Merchant made the decision yesterday to resume purchases from Silver Eagle of Firestone Walker, Saint Arnold, Karbach and Sierra Nevada. According to a post on its Facebook page, it’s not because Silver Eagle has reduced the keg deposit. It has more to do with continuing to support those craft beer brands. Visit The Hay Merchant’s Facebook page for the full letter.
UPDATED, 6/23/15, 11:40 a.m. The Petrol Station, another bar involved in the boycott, says they have also resumed purchases from Silver Eagle in a statement on its Facebook page. The message included their reasons for the boycott:
Our 2 biggest issues withe the distributor were and still are:
1. No warning or notice of a deposit increase.
2. The reason. Budweiser raised their deposits to $70. Most craft breweries only charge Silver Eagle $35 keg deposits, which means they make a $25 profit every time they drop a keg at a retail account.
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There are several interesting aspects of the three-tier distribution system that have come to light as part of the controversy. The three tiers are brewery, distributor and retailer and that system is required by Texas law.
It is not a perfect system. First of all, when a brewery selects a distributor, that distributor has lifetime rights to act as the sole distributor for the brands it sells. Silver Eagle is the largest distributor in the United States of Anheuser-Busch products—a Goliath competitor to the Davids of craft beer. The periodic price increases have been driven by Anheuser-Busch’s own increases on its keg deposits, according to Floyd.
Will this be the last boycott or are there more to come? Are reforms needed to ensure that business can continue for all three tiers in a peaceful manner? While this tense situation is over, there may be other hurdles for craft beer to surmount down the road.
For now though, beer lovers can once again find some of their favorite brews on tap at Houston’s most popular watering holes.