Monday, March 18, 2013

Texas Craft Beer Industry Meets Texas Politics, Hilarity Ensues

Ah the politics of beer. Especially in Texas, where deep pocketed distribution companies control the industry and have been (understandably) very reluctant to give up even 1% of that control. Therefore it came as little surprise to political observers that the group of Texas Senate Bills designed to give small businesses the ability to sell and distribute their product (SB 515, 516, 517 and 518) was quickly companioned with SB 639, authored by distributor ally Sen. John Carona, which clearly shifts the balance of power back to the distributors when a small craft-brewer attempts to transition from self-distribution to working with the large distribution companies. In short, a craft brewer cannot accept any lump-sum for their existing distribution network, but the large distributors can now take what they've received and sell it to another distributor for the same lump sum allowing them a huge advantage given the concept of the current value of money.

Because of this provision, the Kum-bai-yah facade of the craft brewers is rapidly deteriorating as many of the smaller brew houses feel they've been sold down the river by some of Texas' established craft brewers.  Of the dissenters the loudest has been Jester King Brewery in Austin who have all but declared their intent to sue over SB 639 and Deep Ellum Brewing Company which seems to be saying they're ready to vote the entire package down. For their part, The Texas Craft Brewers Guild (the Representative lobby for the craft brewers) is putting on a brave face and saying that this is the best result for all involved.

Whether or not any of this is a good thing probably depends on your point of view.  For consumers, it's undoubtedly a good thing because this means that you will now be able to buy some beer at a brewery when you take a tour of if you are just stopping by.  This is the same deal different from the arrangement at local Texas wineries where you can buy a bottle of wine*.  For beer brewers however this must seem like a start-up disaster and a huge give-away in terms of company value, taken in hand by the distributors who will then be seen as profiting on the backs of small businesses.

In short:  It's a mess.  A mess that can be attributed to Texas, distributor backed, three-tier system which only serves to increase the profits of the middle-man when it comes to alcohol sales at the expense of the consumer and the producer. A mess that has ignited a war of words both from the Texas Craft Brewers Guild, some of the brewing companies, and among the craft-beer enthusiast public.

For anyone who's paid attention to Texas politics for years now none of this should come as any surprise. The "free market" in Texas is somewhat of an oxymoron due to the pay-for-play attitude displayed by politicians from both parties.  You can call it "dirty politics" or "crony capitalism" or whatever you want, it's the way the liquor business is done in Texas.  There was no way the big distribution companies were going to spend all of that money, deploy all of those lobbyists and wine and dine all of those politicians and not get a return on their investment.

Despite all of this I see no reason why these laws should not pass.  There's too much support for them to fail. I do think that there will be some legislation that stems from this, certainly on the legality of banning one company from accepting a lump-sum payment from another in what is a private transaction strikes me as questionable, and I'm sure the distributors are going to weigh in as well, them still not wanting craft brewers to be able to sell from their shops.

Still, these are blue laws, and the courts have a history of treating those separately to other commerce related bills so who knows what is going to happen.

*corrected due to the input by the commenter.  I was under the impression that SB 517 gave breweries the ability to sell beer in bottle and growler form. Upon a read of the Texas Alcohol and Beverage code 64.01(2) I was wrong.  Thanks to the commenter for pointing this out.

1 comment:

  1. It won't actually be "the same deal that you will find when you visit a Texas winery" - if you go back and read the proposed bills, one of them would allow for ON PREMISE sales at a brewery, which means you could buy a pint at the brewery. But, you still couldn't take a 6 pack home or fill a growler.


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