The craft beer industry in Texas has grown exponentially in the past decade, and the Lone Star State (I’m talking about the flag, not that Russian-owned lite beer) is currently among the top states leading the nation in brewing jobs and beer revenue. But it’s taken a lot of time, effort, and elbow grease to reform Texas’ outdated beer laws, and that fight isn’t over yet.
A quick re-cap: Last legislative session, Sen. John Carona formed a working group to evaluate how Texas should address the growing craft brewing industry. Organizations like the Texas Craft Brewers Guild and Open the Taps assisted in drafting bills that would give brewers more flexibility to sell their own beer on premises and have greater access to the market. Previously, microbreweries could serve their beer inside their taprooms, but they had to give it away—a great deal for those of us who love free beer, but ultimately bad for brewers in the long term.
The package of bills that the Legislature passed was a huge win for the craft beer industry, as well as for beer lovers who want to see their favorite breweries expand and have more flexibility to experiment.
But it wasn’t all smooth sailing and hand-holding for the bipartisan craft beer working group. Without consulting the brewers advising him, Carona authored, filed, and passed another bill—one that stripped breweries of the ability to sell their distribution rights.
To understand what the bill means for breweries, it’s important to have some basic knowledge of how Texas beer travels from brewery to consumer. Since Prohibition ended, Texas, along with most other states, has utilized a three-tiered system for the beer industry. Tier one is the brewery, which makes the beer. Tier two is the distributor, which transports the beer. Tier three is the retailer, the bar or restaurant or store that sells the beer. Prior to the 2013 legislative session, breweries could enter into agreements in which the distributor paid the brewery for the rights to be the exclusive distributor of their beer. Breweries often funneled that extra revenue back into the brewery, to grow their business and hire more staff.
But some Texas distributors (who, by the way, contributed to Carona’s previous campaigns) weren’t too happy with the idea that craft breweries could now sell pints without the distributor getting involved. Carona’s bill forced brewers to give away their distribution rights for free, even though distributors can still turn around and sell those rights to other distributors for a profit. Collectively, breweries must give away millions of dollars of potential revenue.
And that brings us today: Three Texas breweries (Live Oak, Peticolas, and Revolver) are suing the state of Texas for the ability to sell their distribution rights. Specifically, the breweries are suing the TABC, claiming that the regulation is a violation of the Texas Constitution.
According to Michael Peticolas of Peticolas Brewing Company, the breweries are not seeking financial compensation. “I’m just seeking out the rights I lost,” he told Bitch Beer.
It puts the state in a tough spot. The distributors’ law is anti-small business and only serves the interests of big distributors. We’ll keep you updated on where the case goes.