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10/21/2014
Austin, TX
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Brew Talks: Legislative Efforts Made and Those to Come in Texas

In 2013, Texas enacted a number of laws pertinent to the state’s beer industry that effectively eased certain regulations on how breweries and brewpubs of all different sizes do business.

How exactly were the state’s beer manufacturers able to mobilize its advocacy effort? According to Charles Vallhonrat, executive director of the Texas Craft Brewers Guild, it was all about creating a unified front across the three tiers.

Speaking to a group of beer industry professionals at Tuesday evening’s Brew Talks event, which was held at the offices of The Chive in Austin, Texas, Vallhonrat explained the efforts.

“Before 2013, we had some breweries work together to try get legislation passed. The brewpubs worked together to try to get legislation passed. There were separate distributor groups, and large breweries, but none of these groups were working together,” he said. “Having all the stakeholders together made it a little bit easier to swallow and [for legislators to] say, ‘Yep, this is a package of bills that the full set of stakeholders like. Let’s get it passed.’”

Vallhonrat, who was joined by Ron Extract and Amy Cartwright, the co-founders of Austin’s Jester King Brewery and Independence Brewing, respectively, also discussed a number of other legislative issues in the state during Tuesday’s talk.

Among the positive changes, according to Vallhonrat:

  • The annual production cap for brewpubs doubled to 10,000 barrels a year.
  • Brewpubs can now sell beer into distribution arrangements, whereas prior they could only sell on-premises.
  • The right to self-distribute was afforded to larger breweries.
  • Packaging breweries can now sell beer on-premise.

That last update was of particular relevance to Independence, which opened the doors to its brewery and tasting room in 2004, in hopes of one day being able to legally use it.

“We put in the tasting room with the idea that maybe someday we would be able to operate like a true tasting room,” said Cartwright. “So it was a nice change to be able to actually, when we choose to, charge for a beer… it’s actually proven to be an increasingly valuable new revenue stream for the brewery.”

But not all changes were welcomed by the state’s craft brewers. Amid the desired legislative updates, one particular statute viewed as less amiable by those on the panel also made its way into law in 2013. The law is one in which brewers making less than 125,000 barrels annually can self-distribute up to 40,000 barrels per year but are forbidden from selling their territorial distribution rights. Wholesalers, however, can sell those rights to other distributors in the state.

Extract decried the rule, explaining that many breweries used the influx of cash from such deals to fund expansions.

“If a brewery reaches the self-distribution cap and is forced to turn over some of their business to third party distributors, they have no choice except to either stop selling some beer in Texas, to start expanding out of state, or just limit their growth, or to give away business for free,” he said. “The distributor who ends up with that business could then literally walk out of the room, walk into another room, pick up the phone, and sell it to one of their fellow distributors for tens of millions of dollars.”

Cartwright continued on that train of thought, adding that the business brewers work to build on their own has a “clear and unmitigated value.”

“You should be able as brewery to say, ‘This is the value that I hold at this time and I operate as a class B wholesaler, as self-distribution,’” she said. “I am actually acting like a distributor and so therefore should have the same rights as another distributor to sell those rights.”

Vallhonrat pointed to another big issue for the guild’s members, one that’s particularly important to manufacturing breweries in the state.

“The real issue for our manufacturing breweries like Independence, they just last year won the right to sell beer on the premise for consumption on the premise right? But unfortunately I can’t go over to [Independence], pick up a 6-pack of Power and Light and take it home with me,” he said. “So how do we address that capability for off site sales for our manufacturing breweries, be it a growler or a 6-pack or a bomber or whatever the package may be? If you poll our membership, especially our manufacturing breweries in the guild, they’ll tell you that’s a real big priority for them.”

Cartwright then presented the issue in terms of its practical effect.

“I think that based on our random location in a random warehouse park, we are not going to be be interrupting major retail sales in the state of Texas,” he said.

The full talk, which addressed a number of other issues as well, can be viewed above.