Texas brewers lose legislative fight over taproom bill, headed to governor’s desk

Tom McCarthy Jr. for American-Statesman. Self-distributing breweries like Austin Beerworks will be affected by HB 3287, which just passed the Senate and now just needs Governor Greg Abbot’s pen to become law.

Texas brewers were dealt a blow this afternoon when House Bill 3287, which seeks to limit breweries that grow beyond a certain size or become owned by a larger beer company, passed the Texas Senate by a 19-10 vote.

The bill will now head to the governor’s desk to be signed into law, but the Texas Craft Brewers Guild, representing the state’s breweries, isn’t ready to give up yet and has announced that it will continue to fight against it in the hopes of a veto from Texas Governor Greg Abbott.

“This bill will put a ceiling on success for the 200+ craft breweries operating in Texas and will slow the future growth of what has become an important burgeoning manufacturing industry in our state,” the guild wrote in a statement published on Facebook shortly after HB 3287 passed.

HB 3287, pushed by wholesalers through the trade groups Beer Alliance of Texas and Wholesale Beer Distributors of Texas, will change the Texas beer code in the following ways.

  • Breweries making 225,000 barrels of beer per year (a calculation that includes the amount of barrels from any affiliate brewery with a 25 percent or more stake in the company) cannot operate a tasting room.
  • There are exceptions to this rule, however. Current breweries over this limit have been grandfathered in and will still be able to keep their taproom doors open, but they and future breweries eligible for exception have to pay their distributor for all beers they sell in their taprooms. Austin’s Oskar Blues Brewery is affected, and any future taproom locations of breweries like Houston’s Karbach Brewing — now owned by Anheuser-Busch — will also have to pay up. They can have up to three tasting rooms.
  • Self-distributing breweries can only self-distribute a total of 40,000 barrels across all locations; anything above that has to be sold through a distributor. In other words, single-premises breweries like Austin Beerworks and Live Oak Brewing can only expand so much if they want to keep their independence from the wholesale tier.

Given that Texas brewers had hoped 2017 would be the year Texas allows its breweries to sell beer directly to customers for off-premise consumption, HB 3287, which they see as taking some of their rights away, has been a big blow.

“To say that today’s outcome was incredibly disheartening would be to put it mildly,” the Texas Craft Brewers Guild said it in its statement on Facebook.

But wholesalers argue that the bill prevents large multinational breweries from “gobbling up” Texas’ small craft breweries and having “access to multiple taprooms across the state,” Rick Donley, representing the Beer Alliance, said at a previous committee hearing. That sort of access would be a violation of the three-tier system.

It’s “a system that “has allowed for an incredibly competitive marketplace and allows smalls breweries to thrive in a way that other commodities can’t do because of the inability to get to market without a distribution tier,” Keith Strama, counsel for the Wholesale Beer Distributors of Texas, later said in the same hearing.

The only hope now for brewers to be able to sell beer to-go from their taprooms is a lawsuit that Dallas-Fort Worth’s Deep Ellum Brewing and others have lodged against the Texas Alcoholic Beverage Commission, a case currently still tied up in the courts. Texas remains the only state in the U.S. that doesn’t permit its breweries to offer packaged beers for off-premise enjoyment.

New definition for Texas craft breweries released on day of MillerCoors purchase

Not long after the Dallas-Fort Worth brewery Revolver Brewing announced that it had been sold to MillerCoors, the Texas Craft Brewers Guild — the organization that represents the state’s small breweries — released a new set of requirements defining what it takes to be a member brewery.

Now, breweries wanting to join the guild, which currently has 205 breweries either in-planning or already operating, have to be independent and not owned or partially controlled “by an alcoholic beverage industry member that does not otherwise qualify under this definition,” as the Texas Craft Brewers Guild noted in a release yesterday.

The update was approved unanimously by the guild’s board members as a direct result of a recent trend in the industry: the purchase of small breweries by beer conglomerates like AB InBev and equity firms like Fireman Capital. Revolver Brewing is far from being one of the first of these beer makers to be scooped up.

“We had seen the acquisition activities really heating up within the last year and anticipated there would be some acquisitions in Texas. We have been working to address our definition, although the acquisitions got ahead of us,” the guild’s executive director, Charles Vallhonrat, said. “The primary reason is that we want to make it clear we’re focused on supporting the smaller independent breweries of Texas. We’re pleased with our members that find financial success and opportunities that suit them, but they don’t need assistance with regulatory and legislative work. It’s those smaller guys we’re trying to help.”

With this update in membership to the Texas Craft Brewers Guild, Revolver Brewing can no longer be one of those breweries. Neither can Austin’s own Independence Brewing, which gave up a minority stake in the business earlier this summer to Lagunitas Brewing in California, 50 percent owned by mega-brewer Heineken. But the guild also announced yesterday that it is creating an associate membership for Texas breweries like them that “wish to be involved with guild activities such as member meetings, educational activities, and promotional work, but do not meet the criteria… to be a voting member,” according to the guild.

Photo by Kyser Lough for American-Statesman. Independence Brewing is one of two Texas breweries that recently gave up stake in the company to another brewery, although Independence's original owners still maintain decision-making power.
Photo by Kyser Lough for American-Statesman. Independence Brewing is one of two Texas breweries that recently gave up stake in the company to another brewery, although Independence’s original owners still maintain decision-making power.

Both breweries have cited a desire for growth as the primary reason for their purchases. In June, Independence noted that “this unique partnership with Lagunitas” would help “expand (our) brewing capacity.” And yesterday, the Dallas Morning News reported that Revolver is looking for statewide growth, with a particular eye on moving into Houston.

One of the primary goals of the guild is to advance the interests of state breweries, in the hope of helping them flourish. In 2013, the Texas Craft Brewers Guild successfully lobbied for changes in Texas law that have since transformed the brewing industry here, including the ability for production breweries to sell their beers on-site. And in 2017, Vallhonrat said, the guild aims to do more of the same — with the decision of what to lobby for resting squarely in the hands of each member brewery.

Before yesterday, the definition of membership in the Texas Craft Brewers Guild was “very nebulous,” Vallhonrat said. The new one dictates that to join, breweries licensed in Texas must also have an “annual production of 2 million barrels of beer or less” and make a majority of beers from “traditional or innovative brewing ingredients and their fermentation.”

The recently opened Oskar Blues Brewery in North Austin, which hails from Colorado, is qualified to be a member of the Texas Craft Brewers Guild because it makes far under 2 million bbls of beer in its Texas facility and isn’t owned by a big brewer with competing interests.

For more information, visit texascraftbrewersguild.com.