The Brazen Evolution of Texas’ Newest Beer Law

Austin Ray

THE GIST
A controversial piece of legislation that Texas craft breweries claim threatens to cap their growth potential officially became law last week. The bill in question—which passed without gubernatorial signature—most notably requires breweries that produce in excess of 225,000 barrels per year to essentially buy their own beer from a distributor for sale at their own on-premise taprooms. Craft brewers have decried this as an “extortion fee.” For their part, wholesalers say the law is necessary to prevent larger multinational beer companies from acquiring small breweries as a way to circumnavigate the state’s three-tier system.

WHY IT MATTERS
The bill actually becoming a law is a bit of a formality, as we’ve known this would be the likely end result of the quarrel since May when it cleared the Senate and was sent to Gov. Greg Abbott’s desk. Earlier this month, the state’s craft brewers tied their last hope of killing the effort to an Abbott veto, but we knew then as well that that was a long shot. As the Texas Tribune noted at the time, passing this bill was a matter “dear to some of [Abbott’s] most generous campaign donors.” All that said, the issue is worthy of a post mortem, because this particular bill underwent a near comically brazen transformation in its scope of restriction.

In fact, the legislation was first introduced as a simple means of clarifying pre-existing law that, as we reported at the time, said “brewers that produce no more than 225,000 barrels annually at a single location are permitted to sell beer directly to consumers at taprooms.. As proposed, that 225,000-BBLs cap would instead apply to ‘all premises owned directly or indirectly’ by the license holder, as well as any affiliate or subsidiary businesses.”

Which is to say: companies like Karbach (owned by Anheuser-Busch InBev) and Revolver (MillerCoors) would have had to shut down successful taprooms due to the output of their parent companies. Oskar Blues, which is headquartered in Colorado, but operates a brewery in Austin, would’ve been affected, too.

This matter was controversial enough. And then, inexplicably, lawmakers turned around and made it worse, rewriting the bill to require any brewery at all, owned by anyone, that makes more than 175,000 BBLs per year to sell that beer to and buy it back from a wholesaler. It also included a provision grandfathering in companies like the above mentioned so as to not force them to shut down taprooms. It's almost like wholesalers have entirely too much power.

So, if you’re playing along at home, the new bill that is now law is essentially derelict of its initial reason for existing at all, having evolved primarily as a means of tightening the leash on independent breweries. Of course, its authors are maintaining it’s still designed to rein in corporate-owned beer. Says State Rep. Craig Goldman (R-Fort Worth)

“No one is even close to the number that the senate amended and put in there. The 175,000 cap. It’s almost unattainable.”

But in that case, why establish it at all? And why apply it to everyone if the goal is to leave independent businesses untouched? This logic relies entirely on lawmakers like Goldman not being able to conceive of a future the industry itself sees on the horizon. Indeed, in its own statement, the Texas Craft Brewers Guild was forceful in its condemnation of the bill’s passage, calling it “an embarrassment to the state of Texas.”

“Craft beer is not a fad,” the organization says. “The jobs, tourism, culture, and economic impact that Texas craft brewers create and support are real and important.”

—Dave Eisenberg