Beer Alliance of Texas Continues Support of Texas Three-Tier Regulatory System

AUSTIN, Texas —  The growth and popularity of craft breweries in Texas in the last decade is nothing short of remarkable. The Texas craft sector produced 45,000 barrels in 2008. Just eight years later, this number had grown to 1.16 million barrels, ranking Texas 7th in production by state, per The Brewers Association’s 2016 analysis. Craft brew’s economic impact in Texas ranked 3rd amongst the states with $4.54 billion in sales and 8th in number of breweries operating at 201 (and probably upwards of 240 breweries today).

“The State of Texas has incented the craft sector by allowing it to operate across all tiers, with unprecedented access, which the Beer Alliance has supported,” said Beer Alliance of Texas President Rick Donley.

This success has led to a number of small Texas craft brewers attracting the attention of interested investors. In fact, the largest craft beer merger or acquisition in the country so far this year is Texas’ own Deep Ellum Brewery.

The Texas “Three-Tier” regulatory structure (manufacturer/distributor/retailer) has long been the cornerstone for regulating the alcoholic beverage market in the state. Over the years the code has seen many changes as the industry and markets have matured. The Texas Three-Tier system has flourished precisely because it has provided a safe, fair, orderly and predictable market for the alcoholic beverage industry in Texas.

“Despite the positively booming success of the State’s craft beer market, certain voices within the craft beer community charge that the Texas regulatory system is a bad environment to start up and grow, yet the economic facts clearly demonstrate that as untrue,” adds Donley.

Frequent criticisms and misrepresentations of the state’s regulatory structure — which is quite favorable to craft brewers and brewpubs alike — should not go unchallenged. State policies allowing crafts to participate in the retail tier exist today.

FACT: More than 92 percent of small Texas craft brewers can sell beer to go if they choose to avail themselves of the brewpub model. Texas law allows craft brewers producing less than 10,000 barrels a year (92 percent of Texas craft brewers) to operate as brewpubs and sell for off-premise consumption. A growing number of crafts are successfully moving from manufacturing brewers to brewpubs to take advantage of these exclusive and very lucrative craft beer carveouts. Regarding sales for off-premise consumption by production craft breweries (non-brewpub), this is an issue that has been discussed amongst stakeholders, overwhelmingly rejected by the Legislature (voted down by a wide margin) and most recently rejected by the courts (Deep Ellum Brewing Co. vs. TABC ruling March 2018).

Retail taproom sales, a carveout granted to small craft brewers by the Legislature have been a concern of “fairness or retail parity” by other market participants, specifically traditional retailers. Why should a licensed manufacturer (craft brewer) be allowed to engage in retail sales outside the regulatory structure while neighboring bars, restaurants, entertainment venues and retail stores comply with the regulations? Stakeholders advocated for the limited craft exemption on taprooms understanding that the carveouts and exclusive benefits would only apply to small Texas craft brewers.

The Texas Three-Tier model was formed to create a safe, fair and transparent regulatory model that encourages responsible consumption.

Donley said, “The Beer Alliance of Texas supports the exclusive legislative carveouts craft brewers currently enjoy. However, further carveouts sought for off-premise consumption (to go beer sales) are unnecessary and serve only to benefit craft brewers at the expense of the traditional retail tier. These restaurants, bars, grocers, and convenience stores are some of our communities most longstanding and cherished employers and economic drivers. While The Beer Alliance has been supportive of assisting small Texas craft brewers in getting better access to market, we must be mindful not to raise just one boat — the craft brewers — at the expense of the other market participants.”

About The Beer Alliance of Texas:

The Beer Alliance of Texas is a trade association representing beer distributors from the coastal region to the panhandle, far West Texas to the Valley. Our members strictly adhere to today’s state-based regulatory model, including maintaining the Three-Tier system, while exploring new technologies and marketing to better serve the interests of Texas retailers and consumers in the malt beverage industry. The Beer Alliance of Texas is united in a mission to ensure that the distribution of our product is well-managed, for the safety of Texas consumers. At the forefront of the membership’s efforts is proactively educating Texans on safe and responsible alcohol consumption. For more information about The Beer Alliance of Texas, visit http://www.beeralliance.com/

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