UPDATE: The controversial Texas bill aiming to regulate the growth of the state’s breweries passed the Texas House of Representatives this weekend and faces a Senate vote later this week.
HB 3287, vehemently opposed by Texas craft brewers and pro-business groups, underwent key changes before being passed overwhelmingly in the House. Now, breweries like Oskar Blues making 225,000 barrels of beer per year or more are able to operate taprooms, but they must sell their beer to a distributor first and then buy it back for sale in their taprooms. The payment is essentially a tax on brewery sales.
The legislator behind the bill, state Rep. Craig Goldman, R-Fort Worth, argued that it prevents mega breweries from gaining too strong a hold in Texas, but the opposition from state brewers believe the bill actually hurts their small businesses.
An amendment to allow sales of beer to-go in the taproom was proposed but ultimately did not pass. Texas winemakers and distillers are able to sell their products directly to customers for off-site consumption, and the state remains the only one in the U.S. that does not allow to-go taproom sales.
EARLIER: Texas brewers have been pushing for a number of beer-related bills to become state law — namely, that production breweries will be able to sell beer to go from their taprooms — but one of the first pieces of legislation up for debate might actually put some of those taprooms in danger of disappearing in their current form.
House Bill 3287, which has the full support of distributors, seeks to change the language of Texas law that allows breweries making no more than 225,000 barrels of beer per year to sell beer directly to consumers in their taprooms. That number is measured based on production at a single location, but the bill and its sister Senate Bill 2083 would now count premises “owned directly or indirectly by the license holder or an affiliate or subsidiary.”
In other words, “if a brewery is financially connected to another brewery (either in or out of state), then the production at all breweries is considered when totaled and compared to the 225,000 barrel cap,” according to Texas Craft Brewers Guild Executive Director Charles Vallhonrat. The organization, created to lobby for the interests of Texas craft brewers, came out against HB 3287 at a committee hearing last night.
The bill immediately affects three Texas breweries, including Austin’s own Oskar Blues, a brewery with additional locations in Colorado and North Carolina. DFW’s Revolver Brewing and Houston’s Karbach Brewing, purchased last year by MillerCoors and Anheuser-Busch InBev, respectively, also don’t make the cut.
Locally run Independence Brewing, which received an undisclosed investment from California’s Lagunitas Brewing last summer, may also feel the sting of the bill if it passes, but the language is too ambiguous, Vallhonrat said, to say for sure.
Authored by Rep. Craig Goldman, R-Fort Worth, HB 3287 appears primarily to benefit distributors in the state. They worry that the purchase of Revolver and Karbach by very large beer conglomerates harms the three-tier system ruling the flow of alcohol from producers to retailers to consumers. Distributors are the middlemen bringing the beer from the breweries to bars and stores, where customers can then purchase it.
With AB InBev scooping up Karbach, which has a restaurant and biergarten serving 2,000 to 3,000 guests per week, distributor trade groups Wholesale Beer Distributors of Texas and the Beer Alliance of Texas argue that the beer behemoth is able to sell beer directly to consumers.
“The main issue is to defend the system from larger breweries entering all three tiers,” Keith Strama, counsel for the Wholesale Beer Distributors of Texas, said at the committee hearing. He added that not doing so could cause a vertical monopoly.
But that’s not how organizations like the Texas Craft Brewers Guild see it.
“This approach is like using a sledgehammer to kill a fly,” Josh Hare, owner of Hops & Grain and board chairman of the guild, said at the committee hearing. “We believe there is a better path for protecting small businesses in Texas without immediately placing a ceiling on their growth potential.”
His brewery — which is opening an additional facility in San Marcos that will still put Hops & Grain well under the 225,000 barrel cap — isn’t directly affected by HB 3287, but Vallhonrat said there’s an intangible downside to the bill as well.
“All manufacturing breweries operating tap rooms can and should consider their tap room as a major asset of their business,” he said. “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. 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.”
The guild is most worried about Oskar Blues Brewery, which chose to open a new facility in Austin last year because of the city’s quirky, irreverent vibe and deep love of live music. Oskar Blues founder Dale Katechis said at the hearing that he wouldn’t have considered the move if this bill had been in the works back then.
Other large craft breweries won’t consider an expansion here in the future, either, Hare said.
“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 said. “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.”
The bill is a similar blow to Karbach Brewing, which co-founder Ken Goodman outlined in both a Houston Chronicle editorial and at the hearing, sparking a slightly combative tone throughout the remainder of it by making a heated comment about the United Airlines controversy last week that resulted in a passenger being 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,” he said. “This bill puts me out of business immediately.”