HB 3287 & How It Could Affect Beer in Texas

House Bill 3287, passed during the Regular Legislative session, became one of many new laws to go into effect in September.

It says breweries, licensed as of September 1st, producing more than two-hundred-twenty-five-thousand barrels of beer per year cannot operate in-house taprooms, and must pay an alcohol distributor for the delivery of their beer – even if it’s to the breweries own in-house taproom.

Supporters say it closed a loophole which allowed some national and multinational beer companies, who had purchased smaller breweries in the state, skirt the current, regulated distribution system.

Rick Donley is president of The Beer Alliance of Texas, a trade association representing distributors across the state which supported the new law – He says, nobody envisioned major global brewers buying up craft breweries and operating taprooms because the law doesn’t allow those entities to have taprooms and sell to the general public.

Donley added when that started occurring it started registering some concerns about where this was headed in the future

Those taprooms, as Donley explained, could cause harm the state’s current distribution system attempts to prevent – like a brewery having a competitive advantage over a restaurant or bar since they don’t have to pay distributor fees – Opponents say no loophole is being closed, and legislators should have seen the writing on the wall, as there was no lack of expectation of the capability of large companies to buy out smaller breweries.

Some have even called the law an attack on the free market – Donley doesn’t agree – He said, “all this bluster about this being somehow a slap at the free market industry in Texas is just I don’t think very sensible or prudent.”

Donley added he doesn’t think legislators buy that argument.

Two-hundred-twenty-five-thousand barrels is calculated to include not only the amount of barrels brewed in the state, but all beer produced from any affiliate brewery with a 25 percent or more stake in a company – Currently only one brewery is affected by the law – Oskar Blues has affiliations in multiple locations across the U.S. so they technically brew over the new limit, according to the law.

Breweries producing over the limit before the law went into effect, have been grandfathered in and will be able to keep their taprooms, but they now must pay a distributor for the beer sold in those taprooms – One example of this is Karbach Brewing, which started as an independent brewery in Houston, but was acquired by Anheuser Busch in 2016.

The Texas Craft Brewers Guild, which represents the interest of craft breweries across the state, disagree heavily with the law.

Charles Vallhonrat is their Executive Director, he believes taprooms are a tangible asset for a brewery and putting a cap on that tangible asset, removes a way for breweries to support themselves – He thinks this is being done at the whim of the middle tier of the three tier system – That Middle Tier is where distributors sit in the state’s regulated three tier system

Currently, manufacturers contract with distributors to pick-up, warehouse, market, and distribute their products. Distributors are also responsible for delivering the product to retail outlets for consumer purchase – The Guild is concerned the law will make craft breweries give money to distributors when it’s is not necessary.

Vallhonrat thinks this a way for the distributors to flex their proverbial muscles, adding, “The reason that this bill was pushed was simply to show the strength that the distribution tier has in the legislature in the state of Texas.”

Smaller brewers can legally sell and self-distribute their beer in Texas, but only if they brew under a cap of forty-thousand barrels per year across all locations – Meaning they can only expand so much if they wish to keep their independence from the wholesale side of distribution – One of those is Austin’s Jester King Brewery – who in the past have raised funds in support of Texas beer law reform – most of it going to the Craft Brewers Guild  

Jeffrey Stuffings is the brewery’s Founder, like Vallhonrat, he doesn’t support the new law, but thinks the resiliency of brewers will keep the industry at a growing pace – He says that Despite Texas having some of the, “worst [beer] laws in the country,” brewers are still pressing ahead as a craft beer community.

There are currently over two-hundred-fifty breweries of all shapes and sizes in state, and new ones are opening up on a seemingly regular basis – so at this point in time, if one thing is clear, it’s that craft beer in Texas isn’t going anywhere.

 

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