Who gets to sell the suds in light of new brew laws?

by Exsar Arguello and Moses Leos III

Overregulation concerns follow a new state law requiring large-scale craft breweries to go through third-party distributors to sell their suds.

But proponents of House Bill 3287, which was signed into law by Texas Gov. Greg Abbott in 2017, believed the law closes a loophole that might have benefitted corporate brew companies.

HB 3287, authored by State Rep. Craig Goldman (R-Fort Worth), requires breweries that produce more than 225,000 barrels per year to go through a third-party distributor to sell their alcohol.

The legislation came as a result of laws passed in 2013 that opened the market to craft breweries in Texas. Under the 2013 laws, brewers can sell up to 5,000 barrels per year in their own taprooms and beer gardens, provided they obtain a brewpub license from the Texas Alcoholic Beverage Commission (TABC).

In addition, Senate Bills 515, 516, 518 and 639 allowed small breweries to distribute their own product directly to retailers.

Proponents of the bill, however, cite instances where large brewing companies purchased smaller ones, allowing them to become sellers and retailers, while saving money.

In 2015, Ballast Point Brewing Company was bought for $1 billion by Constellation Brands, which owns Corona. Since 2011, Good Island has been a beer branded by Anheuser-Busch InBev, which is owned by Budweiser. These were independently owned craft breweries before being bought out by big alcohol.

In Texas, these larger beer distributors could save by buying smaller breweries to stay within the confinement of 5,000 barrels a year.

Rick Donley, president of the Beer Alliance of Texas, said in a Texas Tribune article that once local brewers grow to a certain point, they are no longer the new tenants in the marketplace.

“When you get to a certain point, you’re no longer the little guy that needs the incentives,” Donley said.

In Hays County, which has seen growth in the alcohol industry in the past decade, none of the seven small breweries produce enough at this point to be directly affected by HB 3237.

But brewery and brewpub owners worry the new legislation could start a slippery slope for more regulation.

Greg Plummer, owner of Suds Monkey in Dripping Springs, said self-distribution allows small breweries to protect themselves by saving money not having to go through a distributor.

“It’s dirty politics. If you produce that much beer, you shouldn’t have to sell to a distributor if its coming back to your own taproom,” Plummer said. “We have time before this could affect us, and we’re just grateful we have protection from other brewers.”

Plummer said he is afraid the Texas Legislature could potentially lower the limit from 225,000 barrels to whatever they want, which could impact growth for smaller brewers.

“I can’t speak for other brewers but it is universally seen as a money grab,” said Jeffrey Stuffings, owner and founder of Jester King Brewery. “But these big distributors have the political capital to make it happen.”

Marc Woffenden, owner of Two Wheel Brewing in Buda, said HB 3237 could hurt the margins for larger independent brewers who want the capability to sell directly to customers.

Woffenden also worries the new law could lead to tighter regulations down the road.

“If you’re going to have to pay a distributor for that, it’s going to affect those guys. Ultimately, it could affect all of us,” Woffenden said. “It could start trickling down and that number (of barrels) could become smaller and smaller.”

Despite regulation concerns, Woffenden said the craft brew industry continues to thrive in Central Texas. Woffenden cites a “go local” mentality that’s transferred from Austin into the beer industry.

“More people are wanting to buy their beer in town or right down the street from them,” Woffenden said.

 

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