Legislative Update: Texas Lawmakers Tackle Taprooms; North Carolina Caves on Cap Increase

Texas Bill Could Force Oskar Blues, Karbach, and Revolver to Close Taprooms

Everything is supposedly bigger in Texas, but the state’s lawmakers are considering legislation that would prevent large beer companies from operating taprooms in the state.

House Bill 3287 (and sister bill SB 2083), backed by the state’s wholesalers, would significantly alter a Texas law that currently gives beer manufacturers who produce less than 225,000 barrels of beer annually the right to sell as much as 5,000 barrels directly to consumers via their taprooms, according to Austin 360.

According to the outlet, the proposed language change would count production occurring at facilities “owned directly or indirectly by the license holder or an affiliate or subsidiary” toward the 225,000-barrel limit, meaning several breweries would have to shutter their taprooms.

Those affected would include: The Austin outpost for Oskar Blues, which has several brewery and taproom locations in Colorado and North Carolina; MillerCoors-owned Revolver in Dallas-Fort Worth; Anheuser-Busch InBev-owned Karbach Brewing in Houston; and potentially Independence Brewing, which received an investment from Lagunitas (itself owned 50 percent by Heineken International) last summer.

It’s worth noting that Shiner, owned by Gambrinus, which produced more than 679,000 barrels in 2015, is currently is the only in-state beer company not allowed to sell directly to consumers due to the existing barrelage cap.

The Wholesale Beer Distributors of Texas and the Beer Alliance of Texas are both in support of the bill and have expressed concerns that large brewery-owned craft entities like Revolver and Karbach are allowed to sell directly to consumers.

However, the bill is finding opposition from the Texas Craft Brewers Guild, which argues that every production brewery should count their tasting room as “a major asset of their business.”

“Independent of any outside interest from a larger brewery to acquire one of our members, the fact that it could, and has, happened means tap rooms have distinct value,” Texas Craft Brewers Guild executive director Charles Vallhonrat told the outlet. “That value can be used in seeking other lines of funding or credit, despite being quite intangible. By eliminating that asset from even a theoretical transaction, something of value is being taken away from our members.”

Meanwhile, Oskar Blues founder Dale Katechis reportedly told lawmakers that he wouldn’t have opened a brewery in the state had he known the bill was in the works.

“Taprooms have become an integral part of brewery culture, but most importantly, they’re the most effective, direct and hands-on way that we can market our product,” Katechis reportedly said during a committee meeting. “If [HB 3287] passed, I have to think we’d be forced to lay off at least some of the employees that work there. I don’t understand how that’s even conscionable.”

Karbach Brewing co-founder Ken Goodman echoed those sentiments in a Houston Chronicle editorial as well as at a hearing where he invoked the United Airlines incident in which the airline had a passenger forcibly removed from a plane.

“I don’t know what United Airlines passenger felt like, but I know what I feel like getting punched by this legislation,” Goodman reportedly said. “This bill puts me out of business immediately.”

UPDATE: Karbach co-founder Ken Goodman offered the following statement to Brewbound:

“Along with many large and small Texas brewers, we strongly oppose HB 3287 because it is anti-business and anti-beer. This bill would put Karbach’s restaurant and biergarten out of business, an operation that provides 100 good local jobs. In addition, the neighborhood revitalization we have spearheaded would cease, Houston would lose a popular tourist attraction, and the Texas craft beer industry would be crippled.”

The bill is currently pending in committee.

North Carolina Lawmakers Kill Off Barrel Cap Increase

North Carolina appears to be headed for a legal battle after lawmakers killed a provision in House Bill 500 that would raise the self-distribution production cap from 25,000 barrels annually to 200,000 barrels, The Charlotte Observer reported.

The state of North Carolina currently requires all brewers producing more than 25,000 barrels annually to contract with a wholesaler.

Now, Olde Mecklenburg and NoDa breweries are reportedly considering suing the state after the bill was gutted yesterday.

“At the end of the day,” Olde Mecklenburg owner John Marrino told the outlet, “you have to ask yourself, ‘Who’s running the show? The legislators or the wholesalers.’”

The breweries are reportedly consulting with former N.C. Supreme Court Justice Bob Orr, who told the outlet that a case could be made for the production restrictions being “unconstitutional.”

“It’s a very strong case under our state constitution of just pure economic protectionism for our wholesalers,” Orr told the Observer.

Also stripped out of the bill was a provision that would have allowed smaller brewers to more easily break their contracts with their wholesale partners. The dissection of the bill is a clear victory for the state’s wholesalers, who have donated about $1.5 million to political campaigns over the last four years.

So what’s left of HB 500? A change to the alcoholic beverage control code that would allow breweries to sell alcoholic beverages, produced by other manufacturers, in their taprooms, was included. Also, passage of the bill would include commissioning a study of the state’s alcohol laws and enable brewers with multiple locations to more easily sell, store and transfer their products, according to the News & Observer.

“The question for me as a legislator is: do I allow the bill to die with those in it, or do I go ahead and pass a bunch of common-sense stuff?” Rep. Chuck McGrady told the New & Observer.

McGrady told Indy Week that the wholesalers association “made clear they weren’t going to discuss any of these issues” related to the two provisions stripped out of the bill.

“They really haven’t come down willing to talk about the bill, and they haven’t really talked about what they would agree with,” McGrady told the outlet.

Tim Kent, executive director of the N.C. Beer & Wine Wholesalers, told the Observer, that the distributors weren’t given the opportunity to give input on the bill.

“We were sort of put in a position of take it or leave it,” Kent told the Observer. “And we chose to leave it.”

Montana’s Biggest Brewers are a Signature Away from Taprooms Sales

Montana Gov. Steve Bullock is all that stands between the state’s biggest brewers selling beer directly to consumers, according to the Bozeman Daily Chronicle.

House Bill 541 would raise the beer production cap for direct sales from 10,000 barrels annually to 60,000 barrels. Brewers would be allowed to sell up to 2,000 barrels annually in their tasting rooms.

Bullock, a craft beer aficionado, seems likely to sign the bill. The Missoulian reported that the governor is reviewing the legislation and noted that he keeps a personal tap for craft beer at his Helena home and often posts photos on social media of his deliveries.

Nevada Brewers, Wholesalers Compromise on Barrel Cap

Nevada brewers and wholesalers have reached a compromise on Assembly Bill 431, which will raise the brewpub production cap from 15,000 barrels annually to 40,000 barrels, Northern Nevada Business Weekly reported.

Currently, Nevada law allows for two beer manufacturing licenses: a brewpub license with a production cap of 15,000 barrels a year and a brewer’s license with no limit on the level of production.

The compromise bill allows breweries to sell up to 5,000 barrels in cans and bottles as retail products as well as permitting direct sales at farmers markets and other events for 20 days a year. The bill also erased a provision that would have limited brewing companies to only operating two businesses in the state.

“Our distributors who deliver our beer to our accounts will benefit greatly as we will have more interest in investing in equipment and people so that we can grow,” Great Basin Brewing Company CEO Tom Young told the outlet. “We make money by selling our beer in our pubs and taprooms but can enjoy the most growth by selling more beer to our distributors who in turn sell more beer to grocery stores, bars and restaurants. This is how we both make money.”

Pair of Beer Bills on the Docket in Florida

Earlier this week, the the Florida Senate Appropriations Subcommittee on General Government moved forward with SB 554, which will allow small craft breweries the ability to self-distribute their beer, according to Florida Politics.

The bill, filed by state Senator Dana Young (R-Tampa), would allow craft breweries that produce under 7,000 kegs and without distribution deals to deliver beer to other Florida craft breweries, restaurants and bars.

The bill is running into opposition from the state’s wholesalers, however.

The bill will now head to the Senate Appropriations Committee, the final committee to hear the bill.

Florida lawmakers are also considering legislation that would allow the state’s wholesalers to give away glassware engraved with brewery names and logos, according to SaintPetersBlog.

Currently, distributors have to sell the glasses to clients.

House Bill 853 contains this tricky bit of language: “A vendor may only use such glassware to serve the corresponding malt beverage brand advertised on the glassware to consumers located on its licensed premises.”

“To my ears, that equates to trading taps for glassware,” SaintPetersBlog’s Peter Schorsch wrote. “Anheuser-Busch had been pushing this as ‘a brewer-agnostic bill.’”

The Senate’s version of the bill, SB 1040, which lacks the “corresponding malt beverage brand” requirement, is reportedly a committee hearing away from reaching the floor of the Legislature.

Mississippi Direct Sales Start in July

Mississippi’s craft breweries will finally be allowed to sell beer directly to consumers starting in July.

On-site sales had been banned in Mississippi, but House Bill 1322 will permit breweries selling less than 60,000 barrels of beer annually to sell up to two cases of beer, per day, to consumers.

Read the new law here.

Arizona Passes Several Alcohol Law Reforms

Arizona Gov. Doug Ducey has signed a bill that changes several of the state’s liquor laws. According to the Arizona Republic’s report, provisions passed in House Bill 2337 affecting the state’s craft brewers include:

  • “Craft breweries, distilleries and/or farm wineries can share a liquor license. This will allow multiple producers to sell beer or wine inside the same building or share outdoor patio space without needing multiple licenses.”
  • “The state will make more series 7 beer and wine liquor licenses available; these can be used by breweries, bars, wineries and some restaurants to sell beer or wine to go. For example, this will allow more breweries to sell growlers.”
  • “Increased enforcement authority over out-of-state companies selling alcohol to residents of Arizona without an Arizona liquor license.”
  • “Gives producers access to more festival and special-event licenses each year.”

The new laws go into effect this summer.

Kansas Governor Passes Full Strength Beer in Grocery and Convenience Stores Law

Kansas Gov. Sam Brownback signed a bill earlier this week that will allow grocery and convenience stores to begin selling full-strength beer (up to 6 percent ABV) starting in 2019, according to KSNT.com.

Currently, those store can sell beer with 3.2 percent alcohol by weight.

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