Beer is big business in Texas. Independent breweries in the Lone Star State accounted for $3.7 billion in economic impact in 2014, according to the trade group Brewers Association. That number has surely grown, as evidenced by the dozens of new microbreweries that have sprouted like wild hops over the last few years.
However, many in the craft beer industry fear that proposed legislation could jeopardize some of that growth. House Bill 3287 would require breweries that produce more than 225,000 barrels annually to contract with a distributor to sell craft suds to the public through onsite taprooms. (A barrel contains 31 gallons.) In other words, some breweries would have to buy their own beer from a distributor to sell it at taproom tours. Proponents of the bill, including its author, Rep. Craig Goldman of Fort Worth, said the bill is intended to protect small beer producers by clarifying what types of businesses are considered craft breweries while requiring breweries purchased by large corporations like MillerCoors to use distributors.
“There has been major misunderstanding about what the bill does,” Goldman said in a phone interview. “It does not affect what any craft brewery is doing today. My goal is to protect every craft brewer in the state.”
Charles Vallhonrat, executive director of Texas Craft Brewers Guild, said he doesn’t buy that argument. The true motivation for the bill, he said, is to alleviate concerns some distributors have for taprooms. Distributors like Ben E. Keith Company and Andrews Distributing traditionally contract with breweries to buy craft beer at a set price. The companies then sell the suds at a higher cost to retailers like supermarkets, pubs, and bars. On the surface, taprooms bypass that lucrative setup.
Distributors “see the taproom as circumventing the three-tier system, but that’s not an accurate description,” Vallhonrat continued. “There can only be one taproom per license in Texas. That [doesn’t amount to] a proliferation of retail locations that has undue influence.” The notion that distributors can tax beer they never touch, he said, suggests that this “is motivated by money more than protection.”
Speaking on behalf of himself and his brewery, Cody Martin with Martin House Brewing Company said the bill does “not have an immediate impact on our business, but it [could] greatly impede our ability to grow. It creates ambiguity and unnecessary risk for outside investment into Martin House and other small Texas breweries. It would limit Texas brewery growth and investment. It is not small business-friendly, and it is not small government-friendly. Martin House strongly opposes the bill.”
Goldman said there has been false information spread stating that the bill will shut down taprooms. The bill does clarify that a small brewery bought by a large macrobrewery will no longer be considered a craft brewery. For independent breweries, the bill will not impact them for the foreseeable future, he said.
“The magic mark is 225,000 barrels of production,” he said. “The largest [craft brewery in Texas produces] 90,000. No one is close to the limit.”
As for the concerns raised by Texas Craft Brewers Guild, Goldman said he reached out to stakeholders early on, but the guild voiced their concerns “very late in the process.”
Texas Craft Brewers Guild, with more than 200 brewery members, has growing clout in legislative negotiations. Guild staff and volunteers spent the last few weeks calling and emailing state representatives and senators to advise that the bill be amended or dropped. Vallhonrat said his group has made progress, but the distributors had a head start in the political debate.
Legislation like HB 3287 sends the wrong signal to potential investors and breweries that might consider opening a location in Texas, Vallhonrat said.
“People are watching,” he said. “I work with guild members across the nation. This battle suggests that we could be taking a step back. We are definitely behind the curve nationally.”
The Texas House passed HB 3287 last week, and the bill is currently under review by the Business and Commerce Committee. Goldman said he predicts the bill will reach the Senate floor next week, where it could be revised before returning to the House late next week or the following week before reaching the governor’s desk.
