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The microbreweries aren’t done with the Legislature

Microbreweries took a big step forward in 2013, but there’s still more to be done.

The 2013 legislative session, which featured the largest overhaul of the beer industry since 1993, was viewed by many observers as a watershed moment for craft brewers in Texas. But in testimony before the House Economic and Small Business Development Committee on Thursday, Scott Metzger, who sits on the board of the Texas Craft Brewers Guild, said the state can still do more for the industry.

At a hearing on how to make Texas more attractive to venture capital investment, Metzger predicted that over next 10 years, the brewing industry could be the most dynamic growth sector of the Texas economy. That potential is limited, he said, because of remaining restrictions on brewers that make it difficult to attract investors.

“The restrictions the state of Texas places on our businesses dictate that it often makes better economic sense to deploy capital in a different state,” Metzger, a former economics professor, told lawmakers.

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Asserting that New York, Washington, Colorado and even California had more brewer-friendly environments than Texas, Metzger said Thursday that the industry is encumbered locally by “restrictive franchise statutes” and “a regulatory scheme that restricts our ability to sell and market our products and, in one particularly egregious instance, to realize any of the actual value of the brands that we have created.”

In addition to approving a slate of bills in 2013 that opened up the industry in ways his group appreciated, including allowing brewpubs to distribute their beer off-site via third-party distributors, Metzger said lawmakers also passed a bill that they were less enthusiastic about that prevented brewers from receiving compensation from wholesalers for their distribution rights. He also raised objections to rules that he said essentially lock in distribution agreements “for life.”

Metzger encouraged lawmakers to think of the three-tiered system as “a living, breathing thing that needs to evolve with the changing marketplace.”

I pointed this out last July, via a post from the Jester King brewery. Here’s a quote:

While the new laws represent major progress for Texas beer, there are some realities that we are not pleased with. There still exist exorbitant licensing fees in Texas that keep beer from small, artisan brewers out of our state. We still will not be seeing beer from Cantillon or Fantome on Texas store shelves anytime soon. We feel strongly that in order for Texas to become a truly world-class beer state, it must eliminate the massive licensing fees that keep out beer from small, artisan producers. We have written extensively on this topic before, which you can read here.

We are also not pleased with the passage of SB 639, which makes it expressly illegal for breweries to sell the right to distribute their products to wholesalers, while making it expressly legal for wholesalers to sell those same rights to one another. This law is tantamount to legalized theft, and we will join future efforts to see it overturned. For our complete commentary on SB 639, please follow this link.

See here and here for the background. The situation is unquestionably better, but it’s also unquestionably not what one would call a free market. I personally don’t see the value in the existing three-tier system, but as long as the political will to dismantle it doesn’t exist, we should push to loosen it as much as possible. I presume the craft brewers will have a wish list of specific legislation they’d like to pass by the time the session starts. It won’t be any easier this time around, because the big breweries will do everything they can to protect their legally mandated piece of the pie. I won’t be terribly surprised if they have one of their toadies introduce a bill to scale back in some way the gains the craft brewers won. We’ll need to keep an eye out for that.

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