Brewers Lobby at the Capitol

Beermakers hopeful that deal has been worked out with distributors

Chip McElroy of Austin's Live Oak Brewing chats with Houston Rep. Jessica Farrar, author of HB 602, at Saengerrunde Hall Wednesday night.
Chip McElroy of Austin's Live Oak Brewing chats with Houston Rep. Jessica Farrar, author of HB 602, at Saengerrunde Hall Wednesday night. (photo by Lee Nichols)

I just got back from a meet-and-greet event at historic Saengerrunde Hall hosted by the Texas Brewers’ Institute intended to promote beermakers’ interests to state legislators and their staffs – in particular, House Bills 602 and 660 – and came away with two major news items:

• One, HB 660 will most likely be amended to take away the self-distribution clause, and
• Two, the lobbyist for the brewers is still hoping to get a true on-site sales bill, and is currently shopping for a legislator to sponsor it.

HB 660 is the bill that would allow Texas brewpubs (restaurants that brew their own beer) to sell their product to distributors and thus get on retail store shelves, something which is currently not allowed. This creates the maddening situation whereby out-of-state brewpubs (such as California’s Bear Republic) can get their beer in Texas stores, but Texas brewpubs cannot.

As it is currently worded, HB 660 (by San Antonio Rep. Mike Villarreal) would allow brewpubs to sell to distributors, but with an important catch: If a brewpub’s production does not exceed 10,000 barrels per year (and currently, that would be every brewpub in the state), it may self-distribute.

Distributors don’t like that clause, and Scott Metzger of San Antonio’s Freetail Brewing and Davis Tucker of Austin’s North by Northwest Brewing said they were told as much in a meeting today with a distributor representative (Rick Donley of the Beer Alliance). So they said they may have worked out a deal with Donley – the brewers will allow the self-distribution part to be amended out of the bill if the Beer Alliance will drop its opposition. (I still need to confirm this with Donley.)

“I think we’ve come to an agreement on what will make them comfortable,” said Metzger. “They were concerned that brewpubs would be open to all three tiers,” he said, referring to the “three-tier system,” created after Prohibition, that mandates separation between the production, distribution, and sales portions of the business. “As a way for us to get to market, if we have to give up distribution, we don’t want to, but we will. They [the Beer Alliance] deserve credit for saying, ‘Let’s talk and work together.’”

“You play the game you’re in,” added NXNW’s Tucker. “Would self-distribution be better? Sure, we could build our brand on our own.”

But there’s still an elephant in the room: Another major lobbying group, the Wholesale Beer Distributors of Texas, is apparently still opposed to HB 660 and won’t abide any changes to three-tier at all. (I say “apparently” because I’ve never had a chance to talk with WBDT. To my knowledge, WBDT’s director, Mike McKinney, has never return a reporter’s phone call, ever. He certainly has never returned mine.)

Tucker said the situation that allows out-of-state brewpubs to sell in Texas when he cannot is frustrating. He said he’s visited Bear Republic’s brewpub in Healdsburg, Calif., and liked it, but when they started distributing bottles of their brews to Texas, “It bothered me so much that I refused to buy any. I felt I should support Texas brewers. So I don’t buy from any brewpub that’s not in Texas, unless I’m actually there at the brewpub.”

According to Tucker, Greg Koch of San Diego’s Stone Brewing said (another quote I’ll have to confirm), “I love Texas’ brewpub laws – they make my job so much easier.” And both Tucker and Metzger lamented that they could more easier sell their beer in Texas if they moved their businesses out of the state.

As for allowing on-site sales by microbreweries (small brewers that only produce beer): Houston Rep. Jessica Farrar’s HB 602 would kinda-sorta allow that, by letting brewers give away beer after a paid-admission tour. Microbrewers such as Brock Wagner of Houston’s Saint Arnold Brewing are optimistic that 602 will pass, but the lobbyist for the bills, Trey Blocker, said he still won’t be satisfied until he can get a bill that allows sales directly to the ultimate consumer of the bill, without going through the distributor. Such bills have failed the past two sessions. (The Texas Legislature meets every other year.) Blocker says he has a bill ready to go, but needs a legislator to sign on as an author.

“At the end of the day, it’s an economic development tool,” said Blocker. “It’s not going to hurt distributors. People will leave the brewery with a six-pack, but they won’t keep going back to the brewery for more.” Instead, he said, they’ll go to their local stores looking for that beer they brought home, and “it increases the fan base. I think we’ve convinced the distributors that it will increase sales, but they fear chipping away at the three-tier system.”

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